Coca-Cola Renews Fat-Trimming Strategy As New CEO Takes the Helm
The largest beverage company in the world, Coca-Cola Co, is looking to cut $800 million a year in costs to save a total of $3 billion, annually, under the guidance of new Chief Executive Officer, James Quincey. This is a budget-tightening measure that includes a spin off of many of the company’s bottling operations, making it among the company’s largest strategy shifts in a couple of decades.
This week, Coca-Cola reported an earnings per share of 43 cents, adjusted down from 44 cents. At the same time, the company had projected $8.874 in revenue but earned nearly $9.2 billion.
According to [present] CEO, Muhtar Kent, “As anticipated, revenues in the quarter were adversely impacted by two fewer days and the shift of the Easter holiday,” adding that the company is still “on track to deliver our underlying revenue and profit targets for the full year.”
Earlier this year, Coke had warned that its profits for 2017 would fall as the company continues to work on the refranchising of its bottling operations. The company hopes to have finished this restructuring by the end of the year.
As such, the company now expects adjusted share earnings for 2017 to fall between 1 and 3 percent, compared with the $1.91 per share earnings posted in 2016. Previously, the company had a targeted a 1 percent drop to reach 4 percent earnings on the year (so the new expectations are definitely down).
Basically, Coca-Cola says that its unit case volume remains flat all over the world. Specifically, case volume fell 3 percent in Latin America, driven largely by double-digit declines in both the Brazil unit and the Latin Center unit. On the other hand, unit case volume in the company’s Europe, Middle East, and Africa segments are up 2 percent, at least for this quarter.
In a statement, Quincey comments, “We are rapidly evolving our growth model to make changes that will result in an even more consumer-centric portfolio that meets people’s changing tastes and preferences. These portfolio changes will help our consumers moderate the amount of added sugar they consume.”
Quincey also goes on to say, “Our revamped portfolio, a stronger global bottling system, and a leaner enterprise structure will allow us to capture an increasing share [in the beverage industry],” adding that the company’s goal is to turn Coca-Cola into a “total beverage business.”