Coca-Cola Enterprises (CCE) says its performance in the next six to seven weeks is ‘very important’ as it issued a profit warning yesterday after terrible spring and summer weather hit 2013 sales to date.
Speaking at the Deutsche Bank Global Consumer Conference in Paris, CEO John Brock blamed volume weakness in Q2 to date on incredibly wet spring weather, and summer conditions to date.
“2012 was the coldest, wettest summer in 100 years in Europe, and all of our expert calculations and predictions and projections said there was a 13% or less chance of this summer being worse,” Brock said.
“Well, that’s what’s happened so far,” he added; CCE reports its Q2 2013 results on July 25.
Although she said CCE was performing well, analyst Bonnie Herzog, MD of Beverage, Tobacco and Consumer Research at Wells Fargo Securities, warned investors about continued bad weather.
“Should the weather conditions improve over the next several weeks, we believe that CCE could ultimately deliver on its full year 2013 EPS guidance of 11-12% growth, but encourage investors to continue to track weather closely and remain cautious until there is a material improvement,” she wrote in a note yesterday.
‘We all thought we were geniuses’ in 2003: John Brock
Weather was the biggest issue underpinning “volume weakness” in Q2, Brock added, noting that the competitive environment in Great Britain had improved while CCE benefited from passing through price hikes to key French customers following the January 2012 excise price increase on soft drinks.
Discussing fine summer weather in 2003 that spurred drink sales, Brock said: “I was actually in the beer business…running Interbrew [which merged with AmBev to form InBev in 2004] and we all thought we were geniuses. It was the hottest, driest summer in probably 50 years in Europe.”
“And, of course, Coke benefited from the same situation….We don’t really plan on really bad weather, we just like for a normal summer,” as per 2003, 2004 and 2005, he added.
Discussing the performance of the ‘My Coke’ portfolio in Europe (Coke Zero, Coke Light, Classic Coke), Brock said the portfolio grew consistently in the six years until 2012, until it was hit by bad weather and the French excise tax.
Lucozade and Ribena 'outstanding brands'
The last couple of years had seen a modest shift from on-the-go to future consumption, Brock said, largely because of economics
“The good news for us is that our business model here is, unlike, frankly, the one that we used to have in the United States…here we make a significant amount of profit in future consumption.”
(PepsiCo’s Indra Nooyi in particular is seeking to change a market situation in the US where the bulk of soft drink sales are squeezed into heavy promotional periods during vacation periods .)
“And while you might conclude on-the-go consumption is slightly more profitable, it’s only slightly. So for us, we can balance that just fine,” Brock said.
Asked for his opinion on GlaxoSmithKline’s (GSK's) Lucozade and Ribena brands – which are up for sale – Brock said that GSK’s decision to sell meant “there’s going to be a number of people who will look at them very carefully, they’re outstanding brands”.