Coronavirus Cripples Coca-Cola Amatil Sales

By Glenn Dyer | More Articles by Glenn Dyer

The COVID-19 pandemic hit Coca Cola Amatil hard in major markets in Australia, New Zealand, and the Pacific and Indonesia as retail outlets such as cafes and small supermarkets, cinemas, and theme parks were forced to close by the widespread lockdowns.

The company updated the market on Tuesday with the unwelcome news that sales of Coca-Cola Amatil’s soda and alcoholic drinks had slumped by 33% in April and 26% for most of May.

The trading update was issued before the company’s annual general meeting being held on Tuesday. Investors were left unsatisfied by the update and the shares dipped 1.5% to $8.82 in a wider market that was up strongly for a second successive day.

The month of lockdowns severely disrupted what are traditionally peak trading periods of Easter, Anzac Day, and Ramadan (in Indonesia) as well as school holiday periods which would have seen crows flocking to movies, theme parks (especially on the Gold Coast) and other tourist destinations.

While the impact in each geographical market has differed, the company said it experienced a significant impact on profit margins, particularly in Australia.

The easing of restrictions from mid-May generated a modest improvement in conditions, with volumes down about 26% in the first three weeks of this month from the same period in 2019.

Yesterday’s statement and comments at the AGM followed the update in April when the company said it would cut costs by $140 million this year. It would do this by a freeze on staff recruitment, cutting spending on travel and consultancies by more than $50 million, and slashing incentive payments by more than $40 million.

Coca-Cola, which also has a significant alcoholic drinks business, also this morning reported a substantial decline in sales volumes for this division in April, down about 35% in Australia as the strong trading periods of Easter and Anzac Day were hit by lockdowns and closures and making a mockery of the silly stories about how Australians were drinking more.

“At the time of our last COVID-19 update we noted significant volatility across channels and markets as the impacts of the pandemic started to take effect. This has continued,” said Coca-Cola Amatil CEO Alison Watkins.

“Since 1 April 2020 we have traded through the tighter COVID-19 lockdown restrictions, whilst simultaneously cycling the traditionally peak Easter and Ramadan trading periods. With many customers remaining closed or operating at significantly reduced capacity, there has been unprecedented disruption to trade,” she said.

But Ms. Watkins said the business was resilient and had been able to partially mitigate the impact of the trading disruptions with disciplined financial management, brand strength, and its range of routes to market.

The company maintained its no guidance stance – guidance for 2020 was dropped in the April statement.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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