Away-from-home channels represent around half the company’s revenues, and so the duration of social distancing and lockdowns look set to continue to affect sales in the coming weeks and months.
But Coca-Cola adds this is a temporary setback and says the company and its bottlers are continuing to adapt to the new environment.
'Significant changes in purchase patterns'
Coca-Cola says it entered 2020 with ‘strong momentum’, coming off strong results in 2019. Through the end of February, volumes were up 3% (excluding China) and the company was on track for its full year 2020 targets.
In March, however, as the coronavirus pandemic spread globally, countries meaningfully increased social distancing and shelter-in-place mandates.
“In markets around the world, the company subsequently saw significant changes in consumer purchase patterns, notably substantial declines in away-from-home channels. In at-home channels, the company witnessed early pantry loading in certain markets, followed by more normalized demand levels, along with a sharp increase in e-commerce,” says the company.
“Given that away-from-home channels represent approximately half of the company’s revenues, the company expects the net effect of these consumer purchase patterns to have a significant impact on second quarter results. For context, since the beginning of April, the company has experienced a volume decline globally of approximately 25%, with nearly all of that decline coming in away-from-home channels.
“The ultimate impact on the second quarter and full year 2020 is unknown at this time, as it will depend heavily on the duration of social distancing and shelter-in-place mandates, as well as the substance and pace of macroeconomic recovery. However, the impact to the second quarter will be material.”
'We remain optimistic on seeing sequential improvement in the back half of 2020'
Releasing its Q1 2020 results this week, Coca-Cola reported a 1% decline in net revenues to $8.6bn, while organic revenues (non-GAAP) were even. It also saw a 2% decline in operating income.
Coca-Cola says it is continuing to adapt to the new realities.
“We believe the pressure on the business is temporary and remain optimistic on seeing sequential improvement in the back half of 2020. The company, along with its bottling partners, is continuing to adapt quickly to the current environment, with a focus on mitigating the near-term impact while positioning for success coming out of the crisis.”