Coca-Cola Co revealed Tuesday that its global sales volume has dropped by 25 percent so far in April with restaurants, theaters and sports stadiums closed because of the coronavirus pandemic.
Sales in venues and restaurants generally represent about half of the company’s revenue.
The beverage giant released it first-quarter results this week which showed a short-term lift in March as customers rushed to stores to stock up before lockdown began.
It warned that the pandemic would hit harder in the second quarter as businesses remain closed and Coca-Cola sponsored events such as the Olympic Games are postponed.
Coca-Cola has been hit by the closure of restaurants and other venues that generally account for about half of its revenue. Pictured is the Landmark Dinner closed during the pandemic
The global beverage company withdrew its 2020 outlook in March as uncertainty grew regarding the timeline for the end to coronavirus shutdowns.
‘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.
‘However, the impact to the second quarter will be material.’
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.
Several concerts and sporting events, including the company-sponsored Tokyo 2020 Olympics, have been postponed or canceled.
As a result, volumes fell about 25 percent globally since the beginning of April, largely stemming from the loss of sales other than at retail stores, the company said.
The Atlanta-based beverage maker said, however, it saw stockpiling in some markets and a sharp rise in e-commerce sales, as consumers rushed to buy goods in preparation for lockdowns.
In some parts of the world, the e-commerce growth rate doubled but Chief Executive Officer James Quincey warned it remains a small part of the 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,’ Quincey told analysts.
‘We do know that our over 134 years of business, we’ve seen many types of crisis…. We are in a better position today than we were heading into previous periods of challenge,’ he added.
Current restrictions on business are crippling the United States economy but restaurants such as this is Georgia, where Coke is headquartered, can begin restricted dine-in from Monday
The company more commonly known for its soda drinks, also saw higher sales on products such as Minute Maid and Simply orange juices in March as more people ate breakfast at home.
For the first quarter, the soda maker reported better-than-expected revenue and profit, and said it expected conditions to start improving from mid-year.
For the first quarter, ending March 27, net revenue fell 1 percent to $8.6 billion.
The result was better than analysts were expecting.
They had predicted $8.28 billion, according to IBES data from Refinitiv.
Excluding one-time items, Coke earned 51 cents per share, beating the market consensus estimate of 44 cents.
Coke reported a net income of $2.78 billion, or 64 cents per share, up from $1.68 billion, or 39 cents per share, a year earlier in their 2019 first-quarter report.
The company had reported ‘solid momentum’ at the start of the year with its unit case volume growing by three percent until the end of February, excluding China.
Restrictions and lockdowns were not yet in place in much of the world and Coke was increasing appeal to consumers with healthier options such as smaller cans and Zero Sugar soda.
By March as shutdowns were implemented, volumes were declining with a seven percent dip in Asia Pacific – the first coronavirus hotspot – and sales Latin America and Europe, the Middle East and Africa falling flat.
Throughout last month, North America was the sole region to see growing volumes.
UBS analyst Sean King noted that 2020 first-quarter results were better than feared, but the company had a tougher road ahead.
The company said sales in China are beginning to recover as the lockdown is lifted and a new normal begins.
The soda maker’s shares, a Dow 30 component, were down about 4 percent. They have lost about 16 percent so far this year.
Coca-Cola added it expected comparable revenue to include 4 percent to 5 percent hit from a stronger dollar.
Coca-Cola Chief Executive Officer James Quincey warned Tuesday that the lifting of coronavirus restrictions must come in phases and that they may not be permanent
Executives are looking to make cutbacks for the remainder of the year, however, pulling back on marketing spending but there are no plans to make any significant acquisitions this year or repurchase its stock.
‘The power of the Coca-Cola system is our greatest strength in times of crisis,’ Quincy said.
‘The resilience of our people, the equity of our brands and the strength of our bottling partners continue to be competitive advantages in the market.’
The state of Georgia, where Coke is headquartered, announced Monday its plans to lift restrictions on many businesses.
Tattoo parlors, gyms and hair salons can reopen on Friday, April 24, as long as they follow social distancing and sanitary requirements, while restaurants can begin to offer restricted dine-in meals on Monday.
Quincy warned Tuesday, however, that the lifting of restrictions must come in phases.
‘We shouldn’t assume that each step forward is permanent necessarily,’ Quincy said on CNBC.