Coca-Cola (NYSE:KO) said on Tuesday while releasing their earnings report they will have to cut 1,200 jobs as the entire industry is grappling with weak sales growth. The layoffs will begin in the second half of the year as a part of the broader plan to increase the company’s cost-savings program by $800 million to $3.8 billion.
Coca-Cola says “at least half of the savings” will be re-invested. However, they haven’t yet managed to create a complete plan for how they propose to invest the savings. Coca-Cola only says they will create value for shareholders.
Consumers Moving Away From Drinks With Artificial Sweeteners
The company employs more than 100,000 workers worldwide, so it’s a relatively small number. However, Coca-Cola warns that more jobs could be in the line in the future. These are troubled times for the big food and beverage manufacturers, as consumers are moving towards healthier foods and beverages. There is a definite move away from sugary drinks, as more and more consumers become aware of the health risks associated with artificial sweeteners.
Analysts say this trend will only become stronger in the future, meaning worsening sales for businesses such as Coca-Cola.
James Quincey, who is the incoming CEO of Coca-Cola, says the move will make the business leaner and more agile. Apart from the 1,200 workers, Coca-Cola will also be re-franchising a few of their bottling operations in North America to save money. Quincey is presently the COO of the business. He will take over as the Chief Executive on May 1st. The present CEO Muhtar Kent will stay on as the Chairman.
Sales Down 11%, Profit Falls By 20%
Coca-Cola says their sales are down by 11 percent overall from a year back. The profits have come down by 20 percent sharply. Rival Pepsi (NYSE:PEP) has suffered too, but not by this much. Many have argued that Coke must do more to expand their business beyond beverages. In fact, Coca-Cola is already walking that path and pushing into healthier beverages such as milk, water, and soy-based drinks.
But as of now, they are not making enough money for the business to offset the loss from the sale of artificially sweetened beverages. The first quarter results of Coca-Cola (NYSE:KO) clearly show that sales of dairy, juice, and plant-based beverages have remained flat. Coke’s water and sports drinks showed a marginal growth of 3 percent. Tea and coffee grew by 2 percent.