Coca-Cola and Carlsberg on coronavirus shutdown: ‘The key focus currently is the safety of our employees’

By Rachel Arthur contact

- Last updated on GMT

Pic:getty/wildpixel
Pic:getty/wildpixel

Related tags: coronavirus, Coca-cola, Carlsberg

Beverage companies such as Coca-Cola, Carlsberg, Diageo and Starbucks are among those affected as China seeks to stop the spread of the coronavirus outbreak. It is too early, however, to estimate the long-term impact of the virus.

The death toll has risen to 425, with more than 20,000 cases now confirmed globally. A number of provinces and municipalities in China are in shutdown in an effort to stop the virus spreading.

The sheer size of the Chinese market – in terms of both consumption and production – will impact beverage companies and suppliers: although to what extent is not yet clear.

At least 24 provinces, municipalities and other regions in China have told businesses not to resume work before February 10.

Carlsberg: Production to resume Feb 10

Carlsberg has 25 breweries in the country and markets 20 different brews: including Carlsberg Smooth Beer, Kronenbourg 1664, Brooklyn, Tuborg, Grimbergen and Chongquing.

Over FY2019, the Chinese business grew volumes organically by 8% and revenue by 19%, despite a slightly declining market. This was thanks to 7% growth in its premium portfolio; expansion outside its western regional footprint into big cities further east; and growth of local power brands (such as 45% growth for Wusu and 11% for Dali).  

CEO Cees ‘t Hart has confirmed that the company has closed production sites in China until February 10 in line with the rest of the industry.

“First of all, it’s a very sad situation for China and its people,” ​he said, speaking on the company’s FY2019 earnings call this morning.

“As you know the Chinese government it taking it very seriously and implementing a series of initiatives and obviously we hope the government will succeed in stopping the virus spreading. We are monitoring the situation closely: the key focus currently is the safety of our employees, and at this time no infection among employees has been reported.

“We have not seen any major lockdowns of cities or areas where we are present, so in that respect we are outside – at this moment in time – of the zones where the virus is present.

“The tills across the country will be impacted by closure of outlets. As you might have heard, on-trade is significantly impacted, almost all night entertainment outlets are closed, more than 50% of dining outlets are closed, and also the off-trade is impacted but at a lot less than the on-trade level. We estimate a double digit percentage of off-trade outlets are closed.

“In summary, the virus will affect our business negatively, we had a very good start in January up to the New Year, but at the moment of time it’s very hard to make any estimate or even guesstimate the impact. The impact really depends on how long it lasts and how wide it is spread.”

Fellow brewer AB InBev opened a new craft beer brewery​ in Wuhan in 2018, brewing Goose Island alongside local brands Boxing Cat and Kaiba. At the epicentre of the outbreak, the brewery remains closed, according to Reuters.

Coca-Cola: Offices and factories closed

China accounts for around 10% of Coca-Cola’s global volume.

“It is early days,” ​said CEO James Quincey, speaking during the company's earnings call on Thursday last week. “Our focus is firstly, our employee safety; secondly, to support efforts the Chinese government wants in accommodating what needs to be accommodated to help them deal with the crisis, whether that's making donations or product or money to help in the efforts, which we've already done through the Coke Foundation, through the Coke system and through donation of product.

“Then thirdly, [it’s] to worry about business continuity and recoverability or recoverability and then continuity.

“So far, of course, the short-term effects are that the offices are closed. A good number of the factories are closed. And so, that's the current situation.

"There is an effort by, of course, the Chinese government. There still has to be food and beverage available for the population. So, we, under the auspices of the Chinese government and their crisis management, are reopening some of our manufacturing facilities to make sure we continue to produce our product for the population and get it distributed in a way that's not going to be part of the spread.

"So, it's way too early to tell what the impact in the short term is. And I think ultimately, in the long run, it will rebalance.

“As I said: number one priority is employee safety; number two is help support the efforts to contain the virus and manage the crisis; number three, ensure business can be recovered and to support continuity in the short term.”

Searches for 'Corona beer virus' shoot up during outbreak

Searches for ‘Corona beer’ and ‘Corona beer virus’ have shot up as the coronavirus outbreak continues.

Many people appear to associate the word ‘corona’ with the beer - an unwanted side-effect of being a powerful global brand.

‘Corona beer’ searches shot up after January 20, as did searches for ‘Corona beer virus’. 

The beer and the virus are unrelated. The word ‘corona’ comes from Latin, meaning crown. In the case of the Corona beer brand, the crown logo is displayed on every bottle.

For the virus, the name comes from the crown-like spikes on their surface. While the current outbreak is more accurately described as 2019-CoV, the name coronavirus (technically the family of viruses than range from the common cold to severe diseases) has become attached to the virus.

 

Diageo: ‘There will be an impact, but we’re unsure of the scale’

Reporting its 2020 Interim Results last week, Diageo said it is closely monitoring the coronavirus situation in China.

China has been a strong point for the company in recent months – sales in Greater China grew 24% over the six months ending December 31, 2019 - and it claims to be the only international spirits company with a meaningful presence in the growing Chinese white spirits category.

Scotch continued to grow double digit: up 19% in the period as Diageo continues to build the category through initiatives such as building whisky boutiques, scaled up deployment of the Diageo whisky academy, banqueting and cultural partnerships, and strengthening the route to consumer. 

"On the evolving Coronavirus situation in China, we continue to monitor this very closely,"​ said CEO Ivan Menezez, speaking on Thursday. "Our primary concern is the welfare of our employees and ensuring they have all the available information and support as the situation evolves. There will be an impact on performance. However, it’s too early to be able to quantify this at this point in time."

Starbucks: brakes on for the company’s fastest growing market

Starbucks closed 2,000 coffee shops across China last week – representing half its outlets in the country – and warned that the virus is likely to affect its financial performance.

Starbucks has around 4,300 outlets in China - the most in any country aside from the US – and Starbucks China has been championed as ‘the Company’s fastest growing and most strategic international market, where a new Starbucks stores opens at an unprecedented rate of every 15 hours’. Its aim had been to open 6,000 stores in 230 cities by the end of FY 2022.

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