‘Large volatility’: Coca-Cola Amatil struggles with sales in Oceania and Indonesia amidst COVID-19 lockdowns
Traditionally, April has always been a significant trading period for the firm as a precursor to the festive seasons of Easter (Australia, New Zealand) and Ramadan (Indonesia), but the COVID-19 pandemic outbreak has made things very different this year.
“This period has been adversely impacted by the COVID-19 and government measures with many customers closed or in decline, and people staying at home across all of our markets,” Coca-Cola Amatil Group Managing Director Alison Watkins told FoodNavigator-Asia.
“As a result, our [sales volumes] have gone down by approximately 30% on the prior corresponding period, with Indonesia down close to 50% and Australia down approximately 15%.”
Acknowledging Q1 2020 as a ‘highly unusual’ period, Watkins highlighted that panic-buying and stockpiling had created some growth, but this was just a demonstration of how volatile the market currently is.
“Looking specifically at March 2020 which was impacted by COVID-19, we experienced mid single digit percentage Volume growth versus March 2019 as consumers engaged in stockpiling,” she said.
“The COVID-19 impacts are continuing to evolve with the situation fluid across all of our markets. We are experiencing large volatility in volumes across markets and channels.”
The firm’s Australian market in particular has been very hard hit this year after facing two calamities in just a few short months: First was the Australian bushfires in January and February, and then COVID-19 since March when Australia started getting hit hard.
“All non-alcoholic ready-to-drink categories in Australia were impacted by these across the past few months, but revenues still remained flat [year-on-year] for the quarter with with volumes only declining by ~1%, reflecting the underlying momentum coming out of 2019,” said Watkins.
The hardest-hit drinks channel for the firm was, unsurprisingly, its On-The-Go channel, which depends on consumers walking in and buying beverages ‘on the go’ and would have been heavily hit by lockdowns.
Sales volumes in this channel dropped by around 50%, and a similar pattern was seen in New Zealand, with volumes dropping around 25%.
Over in Indonesia, lockdowns and social distancing measures also hit the firm heavily volumes in the first two weeks of April down some 50%.
“[Although] our Indonesian business delivered volume [and] mid single digit revenue growth for the quarter, [this] was not enough to offset wage inflation and increased marketing expenditure, resulting in an [overall higher EBIT] loss in Q1 2020 compared to Q12019,” said Watkins.
The firm also announced in a statement to the Australian Stock Exchange (ASX) that it has withdrawn its earnings guidance for the year to shareholders in order to maintain ‘additional flexibility to address any future headwinds or further adverse economic conditions arising from the pandemic’.
It also announced that it would be reducing costs by A$140mn (US$89.8mn) this year.
Despite overall volume losses thus far, Watkins remains positive that Coca-Cola Amatil is in a strong enough position to make it through the crisis.
“Despite the prevailing challenges we have a clear path forward to weather the current conditions – [Our] strong balance sheet, ample liquidity and solid credit ratings mean we are in a strong position financially and operationally not only to trade through the pandemic, but to also emerge a stronger and better business,” she said.
“We entered this crisis with a resilient business model and strong foundations that have enabled us to withstand the immediate challenges presented by [COVID-19, and have] solid foundations to weather the adverse impacts of lockdowns implemented by Governments in response to COVID19.”