ATLANTA — The Coca-Cola Co.willcut certain "zombie" or struggling brands from its beverage business, the company’s chairman and CEO, James Quincey, said on an earnings call July 21.
The announcement comes weeks after the Atlanta-based business said it would discontinue the Odwalla juice brand and its chilled direct-store delivery distribution network.
"We are shifting to prioritizing fewer but bigger and stronger brands across various consumer needs," Quincey said. "At the same time, we need to do a better job nurturing and growing smaller, more enduring propositions and exiting some zombie brands."
Out of 400 master brands, more than half are single-country brands with little to no scale, Quincey said. The total combined revenue of those brands is about 2% of Coca-Cola’s total revenue, he said.
“They’re growing slower than the company average but each one still requires resources and investments,” Quincey said. “So in the case of a brand like Odwalla and its chilled direct-store delivery, which has struggled over the last several years, we started to stop operations effective July 31. This gives us the flexibility to support our investments in brands like Minute Maid and Simply and to continue to scale rising stars like Topo Chico.”
The company will be more selective with innovation in the future and target bigger, more scalable bets and be disciplined in its experimentation. Coca-Cola sees continued opportunity with reduced-sugar offerings in the Coke brand and in Aha flavored sparkling water in the United States, Quincey said. Aha captured double-digit retail value share in its first 18 weeks, he said.
The company did not name specific brands that will be discontinued. A Coca-Cola spokesperson did not immediately respond to CSP’s request for more information.
“Importantly, we are leveraging the crisis as a catalyst to accelerate the business transformation that was already underway, and we remain guided by our purpose, which is to refresh the world and make a difference, and we are clear on how we will emerge stronger,” Quincey said. “We will win more consumers, gain share, maintain strong system economics, strengthen our impact across our stakeholders, and equip our organization to win in the future.”
Business overall is improving since the start of the COVID-19 pandemic. While there were 25% volume declines in April, there are single-digit declines in July, Quincey said.
Lockdowns and social distancing requirements placed “profound pressures” on Coca-Cola’s customers, CFO John Murphy said. In the second quarter, volumes were down 16% driven by declines in higher revenue per case away-from-home channels.
The company is continuing to hold off on providing full-year guidance given the amount of uncertainty that remains, Murphy said.
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