Coca-Cola on Tuesday reported its largest decline in quarterly revenue in at least 30 years, but the company sees demand improving as global lockdowns ease.
CEO James Quincey said the company believes the second quarter will likely be the most challenging of the year.
Shares of the company rose 3% in morning trading.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Coke reported fiscal second-quarter net income of $1.78 billion, or 41 cents per share, down from $2.61 billion, or 61 cents per share, a year earlier.
Excluding items, the beverage giant earned 42 cents per share, topping the 40 cents expected by analysts surveyed by Refinitiv.
Net sales dropped 28% to $7.2 billion, meeting expectations. Organic revenue, which strips out the impact of currency, acquisitions and divestitures, fell 26% in the quarter.
Global unit case volume shrank by 16%, although volume trends have shown signs of sequential improvement as global lockdowns ease. After plunging 25% in April, unit case volume fell by just 10% in June. So far in July, volume has fallen by the mid-single digits. The company attributed the change to improvements in its away-from-home sales, which typically make up about half of its revenue, and sustained, higher sales for its at-home drinks.
Quincey said that the biggest variable going forward is the degree of lockdowns. Some countries, including Coke's home market, have seen cases once again surge. However, restrictions on businesses have not been as severe as the first round.
Sparkling soft drinks' volume fell 12% in the quarter. Coke's namesake brand saw volumes decline by 7%, and demand for Coca-Cola Zero Sugar, which had been boosting sales for the brand, fell 4%.
Other drink segments were hit even harder. Tea and coffee volume plunged 31%, largely due to temporary closures of nearly all Costa cafes in western Europe. Water, enhanced water and sports drinks saw volume decline by 24%. Volume of juice, dairy and plant-based beverages sank 20%, although Coke reported strong growth in North America for its Fairlife milk and Simply juices.
As Coke tries to emerge from crisis stronger, it is planning a "refreshed" marketing approach that focuses on spending efficiently and effectively. The company announced in late June that it would be pausing all social media advertising for 30 days. Coke did not officially join the July advertising boycott against Facebook, which was meant to put pressure on the social media company to crack down on hate speech and misinformation.
Coke is also looking to streamline its portfolio, with a focus on larger and more popular brands. Less than half of its 400 major brands account for 98% of the company's revenue. Quincey said that the changes will mean making its entire organization more flexible and could result in layoffs.
The company won't be completely abandoning smaller brands. Instead, it will prioritize those that are growing. Although not directly tied to the pandemic, Coke recently said it is discontinuing its Odwalla juice and smoothie products on July 31 amid slowing sales and a greater need for efficiency.
The company pulled its full-year outlook in March, citing uncertainty around the coronavirus pandemic.
"The pandemic is not behind us," said CFO John Murphy, adding that the path to recovery will not be linear.