Coca-Cola is scaling down its operation in a big way. It's been announced that Coca-Cola is about to cut 200 drink brands from its catalog - about half of its current brand inventory. James Quincey, chairman, and CEO of The Coca-Cola Company is explaining the product reduction as a natural consequence of an unprecedented year of struggle: "Throughout this year's crisis, our system has remained focused on its beverages for life strategy," Quincey said. "We are accelerating our transformation that was already underway, shaping our company to recover faster than the broader economic recovery. While many challenges still lie ahead, our progress in the quarter gives me confidence we are on the right path."
In a press release, Coca-Cola stated that "The company expects to offer a portfolio of approximately 200 master brands, an approximate 50% reduction from the current number, and phase out some products, such as ZICO® and TaB®."
News that TaB was being phased out already hit earlier in the week, but this news of Coca-Cola's massive brand reduction is certainly an eye-raiser.
Like just about every other business in the world, Coca-Cola has been adversely affected by the COVID-19 pandemic and the resulting shutdowns of businesses, travel, and tourist attractions. Businesswire reports that Coca-Cola's third-quarter 2020 revenue was down 9% (to $8.7 billion), while non-GAAP organic revenues were down 6%. Earnings per share were down 33% to $0.40, and cash flow from operations was down 20%, with free cash flow (non-GAAP) down 17%.
Overall, Coca-Cola is still climbing back from the sudden and sharp declines when the novel coronavirus first erupted in the US and worldwide between February and March of this year. While Coca-Cola's recovery growth in Q3 was slower than in Q2, the company is teasing some new ventures that could definitely help open up new revenue streams like Hard Seltzer:
"[Coca-Cola] is committed to exploring new products in dynamic beverage categories. In the third quarter, the company launched Topo Chico™ Hard Seltzer, which blends purified sparkling water, a gluten-free alcohol base, and natural flavors, with minerals added for taste. Topo Chico™ Hard Seltzer is inspired by Topo Chico® sparkling mineral water, a 125-year-old brand with a rich heritage. The new product is currently available in select cities in Latin America. In the United States, the company entered into an agreement with Molson Coors Beverage Company to manufacture, market, and distribute the product. This relationship will allow Topo Chico™ Hard Seltzer to launch with scale in the U.S., which we anticipate will occur in the first half of 2021."
Out with old, in with the new.