Coca-Cola to axe 200 brands, continues to evaluate spend with third-party agencies

The Coca-Cola Company has plans to axe approximately 200 of its brands after seeing revenue decline of 9% to US$8.7 billion in the third-quarter of 2020. Coca-Cola is also looking to phase out some of its products, such as coconut water brand Zico and soft drink brand Tab. According to a press release, the move comes as the company calibrates its portfolio with an optimal set of global, regional and local brands with "the strongest potential" to grow their consumer bases, increase frequency, and drive system margins. Coca-Cola is also looking to phase out some of its products, such as coconut water brand Zico and soft drink brand Tab.

Coca-Cola has also registered a 30% decline in marketing spend from Q2 to Q3 in 2020, as compared to 2019. In an earnings call, John Murphy, CFO and executive vice president, The Coca-Cola Company said while its marketing spend remained below last year's levels for this quarter, the company increased it sequentially and in "a targeted way" as it saw recovery in the business. Murphy added that it will continue to monitor the effectiveness of spend with the goal of investing ahead of recovery. "I'd expect Q4, based on what we're seeing around the world, for us to continue to have targeted investments in those markets where it makes sense to do so," Murphy said.

James Quincey, chairman and CEO of The Coca-Cola Company added that the company's marketing transformation is also underway. According to him, it has undertaken a global initiative to improve marketing efficiency and effectiveness, jointly led by its marketing, procurement, and finance teams.

"This is a top priority, and the initial work to-date has validated the opportunity to sustainably reduce our spend by our proven procurement methodologies and other efficiency levers, while maintaining and improving marketing effectiveness," he said. Quincy added that this is not a top-down driven exercise to reduce expenses. There is no savings target.

Rather, by improving our processes, eliminating duplication, and optimising spend on areas such as third-party agencies, the company looks to increase its effectiveness and be able to fuel reinvestment in its brands.

The press release added that the company is committed to exploring new products in dynamic beverage categories. The company recently unveiled a new product, the Topo Chico Hard Seltzer, which it said will launch with scale in the US by the first half of 2021.

In its financial report, Coca-Cola reported a decrease in products sold across all its categories. Its sparkling soft drinks category saw a decline of 1%, while its juice, dairy and plant-based beverages declined by 6%. The water, enhanced water and sports drinks category took a bigger hit with a decline of 11%, and tea and coffee also declined by 15%.

In Asia Pacific, its unit case volume declined by 4%, primarily due to coronavirus-related restrictions in India and Japan. The unit case volume performance included growth in sparkling soft drinks in China. However, the company also reported a lost value share in total non-alcoholic ready-to-drink beverages, which was primarily driven by a share loss in sparkling soft drinks.

Quincey said while many challenges still lie ahead for the company, its progress in the quarter gives him confidence that it is on the right path. "Throughout this year's crisis, our system has remained focused on its beverages for life strategy. We are accelerating our transformation that was already underway, shaping our company to recover faster than the broader economic recovery," he added.

Earlier in September, Coca-Cola also said it will be merging its ASEAN and South Pacific business units from 2021, as part of its global restructuring. The new business unit is one of Coca-Cola's nine new geographical business units, which replace its current 17 business units. The other business units are: North America, Latin America, Europe, Africa, Eurasia and Middle East, Japan and South Korea, Greater China, as well as India and Southwest Asia. 

The nine new operating units were said to help streamline the company. It is added that the units will be highly-interconnected, with more consistency in structure and a focus on eliminating duplication of resources and scaling new products more quickly. The company's structural changes also resulted in the reallocation of some people and resources, which included voluntary and involuntary reductions in employees.

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(Photo courtesy: 123RF)

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