Coca-Cola Amatil MD exclusive: Key markets, reformulation and sustainability priorities revealed
The firm announced its FY2019 full year financial results on Thursday February 20, where Group Managing Director Alison Watkins reported total revenue growth of 6.7% year-on-year to hit some A$5.01bn (US$3.4bn), and full-year net profits of A$374.4mn, a 34.2% year-on-year growth.
“We’ve been getting good results from our Australian Accelerated Growth Plan and the Indonesian Accelerate to Transform Plan. The former has particularly helped us to better position ourselves with smaller customers in the country, whereas the latter helped us better understand local consumers at a deeper level and connect with them,” Watkins told FoodNavigator-Asia in an interview after the results were announced.
Both plans are joint developments between Coca-Cola Amatil and the Coca-Cola Company. In Australia, this was launched in 2017 with the aim of building categories such as dairy, energy drinks and kombucha, as well as focusing resources on emerging customers in the foodservice sector.
“The Coca-Cola brand is still our biggest item in Australia, taking over 50% of sales, and this has enabled us to also invest in other categories,” said Watkins.
“The plan in Indonesia was developed in 2018 and has helped us understand how important certain areas are to the local consumers, such as options and affordability, which is absolutely critical in Indonesia.
“Because we knew this, we introduced a 250ml bottle in the country. This has a narrow neck and uses less plastic, allowing it to be retailed at a lower price; as well as a longer shelf life of some 12 months which is important as Indonesia has distribution challenges due to its geography and the product needs to stay fresh throughout.”
Coca-Cola No Sugar was said to be the star of the show in Australia, growing 1.5% in volumes (excluding Queensland, where saw negative volume impact due to a local container deposit scheme) and basically driving the revenue and volume growth in the country as a whole.
“We achieved a revenue growth of 2.4%, overall in Australia, and this was the first year we saw growth since 2012. The fact that Coca-Cola No Sugar is leading this shows a lot of room for growth in Low and No Sugar (LNS) options locally,” Watkins added.
Besides Australia, she also foresees growth for LNS options in New Zealand and Fiji, and believes that the company already has a ‘good portfolio’ which can be improved by reformulation to reduce sugar here - but expects to have to approach the Indonesian market in a very different way.
“In Indonesia, LNS products are much less driven by consumer demand, but we are doing work on our end to reformulate products there as we know how important it is to reduce sugar content in the country,” she said.
“In the last four years, we have already reduced overall sugar in our Indonesia products by 8%, and will reformulate more moving forward.”
That said, although the firm’s traditional brand offerings (such as Sprite, Fanta, Coca-Cola) were still strong performers in Indonesia, healthier options such as its dairy brand Nutriboost and Sprite Waterlymon (Lighter, less sweet version of Sprite) were also cited as having ‘performed well’.
Coca-Cola Amatil has been particularly active in promoting its sustainable efforts for Australia and New Zealand, such as switching 70% of its plastic bottles to 100% recycled materials, eliminating plastic straws, and looking into a Australian plastics recycling plant, but so far much less has been discussed about Indonesia with regard to these.
“For Indonesia, we are challenging ourselves to improve things like recycling rates and the amount of litter in waterways in the country, which we all know is a big problem,” said Watkins.
“We want to invest to be part of the solution, such as using more recycled content in bottles and boosting collection and recycling rates – which at present is done via a very informal process. There are opportunities here for economical benefits to flow to locals in this area, as opposed to using middle-men collectors.
“Our Jakarta factory has also installed solar panels on the roof to use this as an alternative energy source, and this will be the largest rooftop solar-powered facility in the ASEAN region.”
Challenges and focus moving forward
Despite 2019 having started with two major national and regional incidents, Watkins emphasised that no ‘material impact’ was expected for Amatil.
“The bushfires have impacted many of our customers, and sales numbers in January were somewhat affected, but we are confident that this is not a material impact for us especially as the areas most affected were water and frozen [items] sales, which are pretty low margin,” she said.
“Things returned to normal fairly quickly, we are not concerned about this having an impact on us for the year, per se, but more on our customers, and we are working to help them close the gap too.”
As for the ongoing novel coronavirus (COVID-19) outbreak, she added that the impact was more at a national level (Australian tourism flow, student population, supply chain disruption) as China is known to be a large trading partner for the country, but the firm was also not directly impacted.
“Coca-Cola Amatil has not really been directly affected by the outbreak as our supply chain is less reliant on China,” she said.
“There have been no material effects so far, but we will continue to monitor the situation, as it will nevertheless affect the national economy as a whole.”
Moving forward, the main focus in Australia will be on consolidation, whereas in Indonesia it will be on growth.
“We want to consolidate locally in Australia to realise the full potential of Coca-Cola No Sugar here, as well as work on the launches of some of our NPD, for example the recently-launched Mount Franklin Lightly Sparkling 350ml can,” said Watkins.
“In Indonesia though, we want to look at increasing ranging and supply, as well as working more with wholesalers so as to leverage on their local expertise to reach more smaller customers through them, rather than going one by one to each separate one.”