Financial Performance

Coke Warns of Q2 Hit From Virus Lockdowns

The soda giant has already seen "significant changes in consumer purchase patterns, notably substantial declines in away-from-home channels."
Matthew HellerApril 21, 2020
Coke Warns of Q2 Hit From Virus Lockdowns

Coca-Cola is bracing for a significant hit to sales in the current quarter as coronavirus lockdowns force consumers to stay away from venues such as movie theaters, restaurants, and sports arenas that sell its products.

The soda giant said Tuesday that it saw “significant changes in consumer purchase patterns, notably substantial declines in away-from-home channels” in March, and since the beginning of April, “has experienced a volume decline globally of approximately 25%, with nearly all of that decline coming in away-from-home channels.”

In at-home channels, Coke saw some stockpiling in certain markets, followed by more normalized demand levels, along with a sharp increase in e-commerce.

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But with away-from-home channels accounting for about half of its revenue, it “expects the net effect of these consumer purchase patterns to have a significant impact on second-quarter results.”

“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,” Coke said in its first-quarter earnings release. “However, the impact to the second quarter will be material.”

As Reuters reports, “Coca-Cola makes syrups and concentrates and through its bottlers distributes them to fast-food chains, theaters, amusement parks, and other venues, most of which have either closed all operations or limited their businesses.”

In the first quarter, Coke’s revenue fell 1% to $8.6 billion while net income rose to $2.78 billion, or 64 cents per share, from $1.68 billion, or 39 cents per share, a year ago. Adjusted earnings were 51 cents a share, beating analysts’ estimates of 44 cents.

CEO James Quincey said e-commerce growth doubled in many countries, though it still remains a relatively small part of Coke’s business.

“It’s certainly not the case that e-commerce is offsetting the losses … E-commerce, even though it’s doubled in sales, for a beverage category, it’s still a very small percentage of the total beverage category,” he told analysts.

Unit-case volume for Coke’s carbonated soft drinks fell for the first time since 2016, declining 2% for the quarter.