Having delivered a strong first quarter, with net revenues up 5%, The Coca-Cola Company’s chairman and CEO, James Quincey, highlighted the continued uncertainty in the trading environment, driven by the different phases of the pandemic across different markets.
When the pandemic struck just over a year ago, most markets went into lockdown simultaneously. While the impact was severe, especially given that out-of-home represents around half of its business, the synchronisation of markets enabled a consistent global response. However, the nature of the pandemic, vaccine roll-out and associated lockdown restrictions is seeing markets move into different phases of recovery, with some experiencing their highest daily case rates since the start of the crisis.
Mobility key to recovery
During the latest quarter, the company saw mobility increase in some markets as lockdowns eased and the vaccine roll-out accelerated. However, the situation remains patchy, with the vaccine roll-out slower than anticipated in some regions , e.g., Europe, while cases surge in others, driving new restrictions, e.g., India. The main uncertainty the business faces in 2021 is the risk of additional lockdowns. While the business has had a good start to the year, it is challenging to identify this as a straight-line recovery trend.
Source: IGD Research, The Coca-Cola Company
Phase 1: restaurants reopening
Based on its global reach, and particularly its experiences in China, Australia and the US, Coca-Cola is seeing the recovery emerge in three different phases. In the first phase, as reopening occurs, people are going out to restaurants, especially in the evenings. There is also a consolidation impact as the universe of businesses it supplies has shrunk due to the financial impact of the pandemic.
Phase 2: ecosystem supporting commuting and office working
In the second phase, there is an improvement in channels related to working in offices and commuting, However, as offices are not going back to 100% capacity initially, there is an impact on the ecosystem of businesses which support travel and lunchtime eating in city centres. This will be a slow recovery, depending on how working from home normalises over time.
Phase 3: large gatherings including cinemas, concerts and sporting events
The third phase is related to large gatherings, including cinemas, concerts and sporting events. The consumption channels related to these will not come back until economies fully reopen. While the vaccination rate is important, Coca-Cola is watching COVID-19 case rates and the response of governments through lockdowns more closely, as this is what has the most impact on its operations.
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