Troubled soft drinks giant Coca-Cola Amatil axes 260 Aussie jobs
The changes stem from a broad strategic review that the company began under new group MD Alison Watkins (appointed in March); CCA told Aussie paper The Age that it expects the redundancies to hit its IT, HR and finance roles, principally in Sydney.
Published in October, the review was a response to poor performance in CCA’s crucial Australian business in the half year to June 30 2014, when EBIT fell 15.3% to $316.7m.
This targets better category leadership, productivity, marketplace execution and alignment with Coca-Cola in Atlanta, and CCA has set itself a deadline of mid-2015 to implement most of the initiatives – most of the job cuts announced today will also take place next year.
The $100m+ Aussie savings target was announced in August, and targets the company’s procurement function, ‘support costs’ and relies upon improving productivity following investment in the supply chain and IT over the past five years.
Re-engaging key Coke consumers
“Since then [August], we have finalized plans to restructure our back office support costs with a range of process improvement and automation initiatives,” Watkins said today.
“The restructure will lead to a reduction in up to 260 non-frontline positions, with the majority taking effect in 2015,” she added, saying that the restructure and other cost savings initiatives gave her confidence that the company would achieve its savings targets.
As part of Amatil’s drive to re-engage Australian consumers with Coke – key target groups include teens – the company recently launched 250ml cans priced at AUD $2, backing it with a digital campaign #colouryoursummer as it increases its marketing investment behind the brand.
“The recent launch of the 250ml cans…is tracking above expectations in terms of ranging, transactions and, most importantly, recruitment of the next generation of Coca-Cola consumers,” Watkins said.
Boosting the premium beverage portfolio
In October the company praised this new pack size for bringing new consumers into CSDs – after 55 days of sales it said 5% were completely new to the category – a 6.6% pick up in single-serve transactions and a halo effect on the rest of its Aussie soft drinks portfolio.
In the same review, CCA said it would continue to re-engineer its price pack architecture in Australia with new entry level packs aimed at increasing affordability and meeting the desire for smaller package sizes, while also bringing differentiation.
“We have a great line-up of new product launches and marketing initiatives including the launch of Coke Life in the first half of 2015,” Watkins said today; the launch strategy includes a focus on more premium beverages – June launch Barista Brothers, an iced coffee-flavored milk, is one example, as is waters brand Mount Franklin.
Review followed outspoken analyst attacks
Despite continued ‘challenging’ trading in Australia without anticipated improvements in the grocery channel and CCA’s operational accounts, Watkins said the company continued to expect H2 2014 earnings before interest and tax to exceed the H1 figure of AUD $316.7m.
At the end of August, Merrill Lynch analyst David Errington savaged CCA’s former management claiming they “compromised the business to meet short-term earnings targets” in 2013, as profits fell significantly in H1 2014.
Errington blamed operational errors in Australia including sales staff cuts, less frequent calls on customers and fewer promotions; he slammed the previous management team for a “really poor company culture” that overlooked long-term shareholder value.