Coca-Cola, one of the world’s largest soda manufacturers, wants to cut costs after it had to admit profits dropped 8.4 % in its fourth quarter. Sales grew slower than expected as Americans are waging a crusade against soda.
Higher sales volume, lower turnover
Last year, Coca-Cola managed to increase its volume, both in the fourth quarter (+ 1 %) as in the year on a whole (+2 %), but that was well below its own expectations and those of shareholders. Investors had hoped for a 3 % increase in the fourth quarter and punished Coca-Cola for the weaker results with its largest share drop since August 2011 (- 3.8 %).
Despite its higher sales volume, Coca-Cola had a lower turnover in the fourth quarter compared to the year before (a 3.6 % drop to 11.04 billion dollars or 8 billion euro), which also impacted the share prices. Its full-year turnover dropped 2.4 % to 46.854 billion dollars (34.1 billion euro).
Fourth quarter net profit dropped to 1.71 billion dollars (1.2 billion euro), while it had raked in 1.87 billion dollars (1.36 billion euro) the year before. For the full year, net profit fell from 9 billion dollars last year (6.5 billion euro) to 8.6 billion dollars (6.2 billion euro) this year. It is expected that for the next year, profit will have to grow as exchange rate fluctuations should impact the numbers quite negatively, some 7 %.
The results prompted Coca-Cola to announce cost-cutting measures, which should lower expenditures by 1 billion dollars (720 million euro) by 2016. According to Muhtar Kent, Coca-Cola’s CEO, 2013 “was marked by ongoing global macroeconomic challenges in many markets around the world” and this resulted in sluggish sales in emerging economies like China and Mexico.
Reinvest in exposure
The American company hopes to find one billion dollars in savings through an altered information technology, changes in its supply chain system and a remodelled marketing strategy. The money will be reinvested in marketing, with new ads for television, print and digital channels in order to boost sales, which experienced a “speed bump” in 2013, said Muhtar Kent.
Coca-Cola had already accepted the fact that sweet carbonated beverages are under siege in the United States, as an increasing amount of people become conscious of their health. Coca-Cola hopes to reinvigorate sales through the deal with Green Mountain Coffee Roasters, which should allow for at-home cold drinks makers geared towards Coca-Cola products.