The FINANCIAL -- The Coca-Cola Company today reported second quarter 2020 results and provided an update on strategic actions that are positioning the system to emerge stronger from the ongoing coronavirus pandemic. The Coca-Cola system remained agile in the second quarter, with a focus on maintaining a safe environment for employees while also providing necessary products and services to consumers, customers and communities during this unprecedented time.
Coca-Cola Co reported a 28% drop in adjusted quarterly revenue on Tuesday as sales of its sodas were battered by the closure of restaurants, theaters, and sporting venues due to lockdowns to contain the spread of the novel coronavirus. The Diet Coke, Fanta and Sprite maker generates about half of its revenues by selling its soft drinks and concentrates to restaurants and theater operators, such as McDonald's Corp and AMC Entertainment Holdings Inc, but most of them had to close some or all of their operations under government-mandated curbs to fight the health crisis, The New York Post reported.
Organic revenues (non-GAAP) declined 26%. Revenue performance included a 22% decline in concentrate sales and a 4% decline in price/mix. The revenue declines were primarily driven by pressure in away-from-home channels, which represent approximately half of the company’s revenues, according to second quarter report.
Despite the high degree of uncertainty, the company is committed to emerging stronger by gaining share and consumers, maintaining strong system economics, strengthening its reputation with stakeholders and positioning the organization to win in the new reality.
The Atlanta-based company reported adjusted revenue of $7.18 billion for the second quarter ended June 26, largely in line with Wall Street estimates according to IBES data from Refinitiv. Unit volume, a key measure that indicates demand, declined 16%, with Coca-Cola falling 7% and sparkling soft drinks tumbling 12%. Rival PepsiCo Inc (PEP.O) also reported a fall in beverage sales, but a boost in at-home consumption of snacks helped it beat quarterly revenue estimates, according to Reuters.
Since the company's last earnings update in April, global unit case volume trends have improved sequentially, from a decline of approximately 25% in April to a decline of approximately 10% in June. Unit case volume for July month-todate was down mid single digits globally. Performance has been driven by improving trends in away-from-home channels, along with sustained, elevated sales in at-home channels.
"I'm proud of the people of the Coca-Cola system as we continue to adjust and accelerate our strategies in this fastchanging landscape," said James Quincey, chairman and CEO of The Coca-Cola Company. "We believe the second quarter will prove to be the most challenging of the year; however, we still have work to do as we drive our pursuit of 'Beverages for Life' and meet evolving consumer needs," he added.
Operating margin, which included items impacting comparability, was 27.7% versus 29.9% in the prior year, while comparable operating margin (non-GAAP) was 30.0% versus 30.3% in the prior year. Operating margin contraction was primarily driven by top-line pressure and currency headwinds, partially offset by effective cost management.
The company lost value share in total nonalcoholic ready-to-drink (NARTD) beverages as an underlying share gain was more than offset by negative channel mix due to pressure in away-from-home channels, where the company has a strong share position.