Covid-19 lockdown takes the fizz out of Coke's operations in June quarter

Coca-Cola’s operations took a significant dent during the June 2020 quarter, owing to the lockdown. Disruption in the Indian market impacted all aspects — from volume offtake to its key sparkling beverages business — The Coca-Cola Company informed the NYSE on Tuesday.

Global volume offtake dropped 16 per cent year-on-year (YoY) and its aerated drinks business fell 12 per cent YoY, with the lockdown being the major factor. Products under its flagship Coca-Cola contributed significantly towards the decline in its sparkling beverages business. The trademark Coca-Cola business fell 7 per cent, while the Coke Zero Sugar segment declined by 4 per cent.

The category, which constitutes the majority of Coke’s volume and revenue, was severely hit “led by the decline in India, western Europe, and fountain business in North America”, the firm told its investors.

India, its third-largest market in Asia and fifth-largest globally, dragged regional business for Coke to a greater extent. Volume offtake in Asia-Pacific plunged 18 per cent, “primarily due to the strict lockdown in India”, said the firm. Operating income fell 9 per cent for the region in constant currency (CC) terms.

Operating income for the BIG segment shrank a whopping 98 per cent (in CC terms) during the quarter, driven by top line pressure in India and South Africa due to the outbreak, Coke said.

According to James Quincey, CEO of The Coca-Cola Company, the lockdown had a significant impact on business. Though some markets have shown signs of recovery, many are experiencing a second spike — thereby pushing sales back into a negative trajectory.

“It is unlikely that the recovery will be linear. Too many ‘unknowns’ ahead of us — such as the continuing lockdown. In many markets, a lockdown had to be re-imposed following an unlocking,” he told investors.