Coca-Cola CFO Helps Company Make Cuts, Operational Changes
November 25 2020 - 5:59AM
Dow Jones News
By Mark Maurer
Coca-Cola Co.'s finance chief John Murphy is helping the company
shrink its product portfolio along with its head count as part of a
restructuring effort responding to the coronavirus pandemic.
The Atlanta-based beverage giant wants to cut the number of its
brands, lay off or buy out thousands of workers and revise its
marketing strategy.
Those plans are part of a strategic overhaul that began in 2017
to increase collaboration between business units and better
understand consumer trends. The pandemic has accelerated the need
for those changes, Chief Financial Officer John Murphy said in an
interview with CFO Journal.
"The number one priority for me is to be able to look back on
this period and say we actually moved the needle significantly on
how we allocate our resources," Mr. Murphy said, referring to the
restructuring.
Coca-Cola's global sales have taken a hit in recent quarters as
many bars, sports stadiums and movie theaters that serve the
company's soft drinks remain closed. Revenue for the third quarter
that ended Sept. 25 fell 9% to $8.65 billion compared with the
prior-year period, following a 28% decline in the second quarter
from the year-earlier period.
The company said in October it plans to eliminate about 200
brands -- of a total of more than 500 -- to free up funds for
other, more profitable products. Brands to be discontinued
represent about 1% of net sales revenue and underperformed even
before the pandemic began, a spokesman said.
Mr. Murphy said he works with Coca-Cola's marketing and
operations chiefs to decide which brands to keep. "My role...has
been to sort of steward and shepherd that process, marrying the
strategic rationale for doing it with the economics," he said.
The heavy lifting of the restructuring is expected to be
completed in the next six months, Mr. Murphy said. Coca-Cola will
continue adding brands to its portfolio and remove those that "are
not cutting it," he added, noting the company looks at criteria
such as historic performance and anticipated consumer demand when
assessing its brands.
The spokesman declined to provide a target for the company's
cost savings.
Other food and beverage companies also have taken a close look
at their product portfolios in recent months, marking a reversal of
a yearslong trend that saw many such businesses adding new products
to attract health-conscious consumers.
The pandemic increased the urgency for Coca-Cola to reduce the
number of its brands because too many of them generated too little
revenue, said Gerald Phelan, an analyst at credit rating firm
S&P Global Ratings.
Coca-Cola has also cut jobs as part of its restructuring. In
August, the company said it was offering buyouts to about 4,000
employees in the U.S. and Canada. Employees in certain other
countries also received such offers, Mr. Murphy said.
The restructuring will allow Coca-Cola to function more like a
network needing "less decision making, less bureaucracy and
ultimately less people," Mr. Murphy added. The company had more
than 86,000 employees at the end of 2019, according to a filing
with securities regulators.
Mr. Murphy said he is also reviewing Coca-Cola's advertising and
marketing expenses to better manage spending, especially for
digital marketing. The company in 2019 allocated about $4.24
billion for advertising, up 3.2% from $4.11 billion in 2018,
according to its latest annual report.
Coca-Cola in recent years spent too much on advertising agencies
and marketing campaigns, said Nicholas Johnson, an analyst at
Morningstar Research Services LLC, a research firm.
"When you have [such an] immediate...decline or disruption, it
really forces you to re-evaluate through a more stringent lens,"
Mr. Johnson said, referring to the blow to Coca-Cola's business
from the pandemic.
Write to Mark Maurer at mark.maurer@wsj.com
(END) Dow Jones Newswires
November 25, 2020 05:44 ET (10:44 GMT)
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