Bubble bursts at CCE as job losses loom

By Chris Mercer

- Last updated on GMT

Related tags: Coca-cola, Coca-cola enterprises

Bottling group Coca-Cola Enterprises will cut five per cent of its
workforce, around 3,500 jobs, after the firm was flattened by cost
rises and falling demand for fizzy drinks.

The job losses will come as part of a restructuring drive, the firm announced this week alongside a net loss of $1.1bn for its 2006 full year. The statement reveals a crisis period for Coca-Cola Enterprises (CCE) and provides yet another stark example of how parts of the soft drinks industry are struggling to meet changing consumer demand and counter rising costs. John Brock, CCE chief executive, said during the group's results conference that industry players had wrongly assumed 10 years ago that carbonated drinks sales would continue to grow solidly. CCE, he said, remained "heavily dependent on carbonated soft drinks"​ in Europe when most growth was in other sectors, like tea, water and juice. Now, job losses and restructuring were the only answer. "Shifting consumer preferences away from carbonated soft drinks and onto non-carbs, the fact that our non-carb portfolio is less robust than it could be, and the impact of unprecedented cost increases on our 2007 profitability, have all combined to create the need for this change." ​ The restructuring is expected to cost $300m, largely spread over 2007 and 2008, as CCE looks to create a more efficient supply and distribution chain in both North America and Western Europe. It was unclear where the job losses would occur. Brock said there would be several new initiatives, such as a Customer Centred Excellence scheme and more productive selling systems, although details were scarce. There was more bad news for CCE North America as Brock went on to predict a "daunting cost environment"​ over the next year. Cost of goods is expected to rise nine per cent per case, sending CCE's earnings per share down between five and 10 per cent on 2006. Fighting talk enabled some flickers of optimism to shine through. Brock repeatedly affirmed CCE's ambition to be the best in the business and said both it and the Coca-Cola Company shared a commitment to innovation. Volumes in the fourth quarter were up 5.5 per cent. And in Europe, the firm praised a successful launch of Coke Zero, the no calorie drink, in the UK and Belgium. It will be launched in France and Holland this year. The football World Cup also played a "vital role"​ in the region, according to Brock. But that only comes around every four years.

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