A resurgent coronavirus slowed Coca-Cola’s recovery in the fourth quarter, and the company said the slump has continued into this year.
The company did issue guidance for the first time since the pandemic began. Many of the biggest corporations in the U.S. have pulled projections due to the unprecedented scope of the pandemic.
Global case volume slipped 3% for the October-December period, exceeding Wall Street projections for a decline of 2.2%, according to analysts polled by FactSet. Case volume rose 2% in Latin America thaks to strong demand in Brazil, but it fell elsewhere.
The Atlanta company has been decimated by the closure of arenas, restaurants, theaters and other public places, where it normally books about half its revenue.
Unit case volumes of soft drinks fell 1% in the fourth quarter, primarily due to declines in away-from-home business in North America and Europe. Juice and dairy sales fell 2% and water and sports drink demand fell 9%. Tea and coffee sales dropped 15% as the virus hampered sales at Costa coffee shops.
Coke’s net revenue fell 5% to $8.6 billion for the fourth quarter. It was a significant improvement from the second quarter, when revenue fell 29%, and the third quarter, when revenues fell 9%.
Coke earned $1.46 billion, or 34 cents per share. That per-share number would be 47 cents if one time costs and benefits are removed, six cents better than Wall Street had projected.
Coke Chairman and CEO James Quincey said the company is confident it will return to growth in 2021, despite sales declines that have persisted through February.
The company said it expects to deliver organic revenue growth in the high single digits in 2021, as well as single-digit growth in its per-share earnings.
But it also revealed a potential headwind. Coke said it could potentially face $12 billion in liability as the result of an ongoing lawsuit filed by the U.S. Internal Revenue Service. In November, a U.S. tax court ruled in favor of the IRS in the 6-year-old case, saying Coke must pay the bulk of a $3.4 billion tax bill. Coke is appealing and said it is confident it will eventually prevail.
The pandemic sped up a planned restructuring at Coke, which has been shedding slow-selling brands and focus on growing categories, like juices and sparkling water. Coke is reducing its brands by half to 200. Among those it dropped last year were Tab, Zico coconut water and Odwalla juices.
Coke’s workforce is also getting leaner. The company announced in December that it would lay off 2,200 workers, or 17% of its global workforce. Coke said severance packages would cost between $350 million and $550 million.