Coca-Cola has suffered its steepest quarterly sales drop in at least a decade, in stark contrast to the resilient performance of its rival PepsiCo and raising questions about the drinks company’s defensive qualities.
Second-quarter sales tumbled 28 per cent year-on-year to $7.2bn after the US multinational was hit by the closure of bars, restaurants and other venues through which it normally generates about half its annual revenues.
The sharp turnround in Coca-Cola’s fortunes contrasts with its results during the 2008 financial crisis and its aftermath, when the company demonstrated it could outperform in recessions. Revenues at Coca-Cola, whose biggest shareholder is Warren Buffett’s Berkshire Hathaway, rose 11 per cent in 2008 and lost only 3 per cent in 2009.
Results published on Tuesday showed Coca-Cola’s organic revenues fell sharply at each six of its main divisions in the three months to June 26, pushing net income down a third from the same period last year to $1.76bn.
The Europe, Middle East and Africa business was particularly hard hit, down 26 per cent. Organic revenues in North America fell 18 per cent.
James Quincey, chief executive since 2017 who also became the company’s chairman in 2019, indicated that he expected demand to pick up in the months ahead, despite a resurgence of coronavirus cases in the US. Volumes globally had picked up from a 25 per cent slump in April to a 10 per cent decline in June, the company said.
“We believe the second quarter will prove to be the most challenging of the year,” Mr Quincey said in a statement. “However, we still have work to do.”
Mr Quincey struck a £3.9bn deal to acquire Britain’s Costa Coffee chain in 2018, whose cafés were closed for much of the second quarter.
Coca-Cola’s weak performance comes after stronger numbers from rival PepsiCo, which has been supported by its snacks business. PepsiCo’s organic sales were flat in the quarter year-on-year.
While Coca-Cola has expanded beyond its eponymous drink and other brands such as Fanta and Sprite and into coffee, energy drinks and other beverages, it has avoided food.
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Despite robust demand for its products in the home, Coca-Cola has been hurt by the closure of venues such as cinemas and stadiums, as well as bars and restaurants.
In an effort to protect its bottom line, Coca-Cola has reined in marketing and other spending across the company and said it would also “streamline [its] innovation pipeline” and focus on certain brands.
Earnings per share declined 32 per cent to $0.41 and the company declined to give financial guidance for the year.
Shares in Coca-Cola are down 16 per cent this year, whereas PepsiCo has lost less than 2 per cent. Coca-Cola ticked 0.3 per cent higher in pre-market trading.