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Summary
- Coca Cola has declared to lay-off 2,200 staff from its global workforce.
- Amid COVID-19 pandemic, the Company experienced the impact on its Q3 FY2020 results as well as on its market share.
- A significant drop of 20% was seen in the operating cash flow and free cash flow by 17%, which forced them to take this decision.
- Employees who would be removed from the services will be given lay-off packages.
Coca Cola has sprung to limelight after announcing its plan to lay off 2,200 workers around the globe. The Company had to take this step as a part of its restructuring plan, which was necessitated because of unpalatable COVID-19 repercussions.
In its home market, i.e., the US, Coke would resort to lay-offs and buyouts to cut 1,200 jobs, which account for 12% of the workforce. The Company which had 86.2 thousand global employees at the close of 2019, has to let 2,200 people go because of the pandemic.
The decision to lay off thousands of staff worldwide comes after the Company saw its revenue being battered by COVID-19, necessitating a restructuring plan.
In places like the US, Canada and Puerto Rico, the employees who would be removed from the services would be provided lay-off packages. Coke projects the cost of this process in the range of US$350 million to US$550 million.
A Glance at Q3 2020 Results:
On 23 October 2020, the Company released its Q3 results, besides updating about its various strategic initiatives:
- There was a decline in the global unit case volume by 4%.
- Net revenue declined by 9% and organic revenue by 6%.
- Operating income dropped by 8%. However, there was an improvement in the Comparable Currency Neutral Operating Income by 7%.
- Operating margin, which was 26.3% in the previous corresponding period (pcp) improved to 26.6% in Q3 FY2020.
- A significant drop of 33% was seen in earnings per share to US$0.40. Comparable EPS dropped by 2% on pcp.
Impact on the company’s market share:
In Q3 FY2020, Coca Cola lost value share in overall non-alcoholic ready-to-drink beverages. The underlying share gain was compensated by the negative channel mix because of the constant stress in away-from-home networks.
Impact on the Cash Flow:
COVID-19 pandemic also impacted YTD cash flow from operations. During the September 2020 quarter, cash flow from operations slipped 20% to US$6.2 billion. Free cash flow dropped 17% to US$5.5 billion.
To tackle the above situation, Coke responded by accelerating its plan to restructure the organisation and slim its portfolio. Presently, the Company has stopped manufacturing drinks like Tab and Odwalla. The Company feels that these brands do not sell well, and have no growth prospects. Further, the Company would build new operating units with the focus on the regional and local levels. These units would then work with five global marketing leadership teams.
Stock Information:
By the end of day’s trade on 18 December 2020, Coca Cola shares on NYSE improved marginally by 0.9% and settled at US$53.74.
