Food and Beverage Sector Ideas

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>>> Coca-Cola Is Making Big Changes. What It Means for the Stock.


Barron's

By Teresa Rivas

Aug. 28, 2020


https://www.barrons.com/articles/coke-is-making-big-changes-what-it-means-for-the-stock-51598621074?siteid=yhoof2&yptr=yahoo


Coca-Cola stock rose early Friday, after the beverage giant said it plans to restructure its workforce as it looks to refocus its efforts on its fastest-growing products. That reorientation toward a higher-growth portfolio will likely please investors as the company struggles with a pandemic-related sales slump.

Coke (ticker: KO) said these changes will “result in the reallocation of some people and resources, which will include voluntary and involuntary reductions in employees.” It said it would share more information on that in the future, but eligible U.S. and Canadian employees can voluntarily take a “separation package” beginning today.

Coke plans to offer voluntary packages in other countries later as well, and is modeling that the global reduction in head count will cost between $350 million and $550 million.

It isn’t just employees that will be parting ways with Coke. The company is also “conducting a portfolio rationalization process that will lead to a tailored collection of global, regional and local brands with the potential for greater growth.” That means it is putting its efforts into five of its most promising categories—its banner Coca-Cola brands; sparkling flavors’ hydration; sports, coffee, and tea; nutrition, juice, milk, and plant-based drinks; and emerging categories.

It’s also looking to streamline its operations. Going forward, Coke will have nine new interconnected operating units (down from 17 now), which it hopes will also lead to less duplication and faster scaling of new products.

The company created a Platform Services organization, which will handle data management and e-commerce, and aims to “eliminate duplication of efforts across the company and is built to work in partnership with bottlers.”

Coke stock was up 1.1% to $48.74 before the start of regular trading. It has fallen nearly 13% year-to-date through Thursday’s close.

Although the shares got a bump after reporting earnings last month, it has been a tough year for Coke: The pandemic has hit it harder than rival PepsiCo (PEP) because more of its business comes from consumers buying its products away from home—anywhere from restaurants to sporting events, which have obviously taken a hit from coronavirus-mandated closures.

Coke may not be synonymous with fast growth in the minds of investors, but the shares had climbed to a new record late last year, and it has been boosting its business by adding popular new categories like energy drinks and hard seltzer.

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