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September 28, 2021
BUSINESS BUSINESS COMPANIES ECONOMY EDITORIAL OP-ED OPINION POINTS OF VIEW

Market commentary by eToro analyst for Romania, Bogdan Maioreanu

Coca-Cola vs. Pepsi – soft drinks giants’ sales rebounding after relaxing of pandemic restrictions

Coca-Cola (KO) and its traditional rival, PepsiCo (PEP) posted impressive results in the second quarter as they benefited from the relaxing of restrictions, with sales in restaurant settings booming again after a tough pandemic year. Both companies raised guidance for the year end results, showing confidence in the rebounding of the economy.

Coca-Cola posted on Wednesday Q2 revenues of 10.1 Billion USD, a 42% increase, exceeding analysts expectations by 800 Million USD. Earnings per share grew 48% to 0.61 USD and the company organic revenues grew 38%. Investors have been wary, as Coke’s shares price underperformed the S&P 500 index this year, but the reopening potential may refocus their interest. “The company saw away-from-home channels rebound as restrictions eased in certain markets, driving value across the enterprise and leading to second quarter revenues ahead of the 2019 level.” the company said. The Covid-19 challenges still linger, though the company’s CEO, James Quincey told CNBC that he’s seeing an impact from the Delta variant on sales even in the states with the highest infection levels.

Besides Covid, Coca Cola also had to deal recently with a mini-crisis when star footballer Cristiano Ronaldo put away two Coke bottles at an EURO 2020 press conference. The internet released a torrent of memes and the shares took a dive for a few days. On a greater scale, this was just one action in the growing concern of the public that sugary beverages may harm your health.

Faced with declining revenues and Covid-19 challenges, Coca Cola started last year a restructuring process that is focusing on a few global categories with “the stronger consumer opportunities,” including Coca-Cola, Sparkling Flavors, Hydration, Sport, Coffee,Tea, Nutrition, Juice, Milk and Plants. By the end of the restructuring, 2200 jobs will be cut with the bulk of 1200 in the US only.  But the results are starting to show and Coca-Cola’s growth was double its arch-rival PepsiCo in Q2.

Last week PepsiCo (PEP) announced Q2 revenues of 19.22 Billion USD, a 20.5% increase YoY and EPS of 1.72 USD, 19 cents over expectations. PepsiCo also benefited from the reopenings of venues in many Western countries that relaxed restrictions, with its soft drinks sales growing by 21%.

Looking at today’s results, one would find it hard to believe that John Pemberton, the inventor of Coca-Cola, struggled to sell its “nerve tonic that relieves exhaustion”. An intrepid businessman, Asa Griggs Candler took over the business in 1888 and started by giving free coupons for the beverage, just to hook possible customers. And eventually, the whole world got hooked, Coca Cola being present in more than 200 countries with world-wide sales in excess of 33 Billion USD last year.

Pepsi Cola started in 1893 as a beverage with its inventor name – Caleb Davis Bradham – Brad’s Drink. That was changed five years later to reflect its creator’s belief that it helps to stave off dyspepsia (indigestion), hence the name Pepsi. After the merger with Frito-Lay Inc. in 1965, PepsiCo Inc. was born. Now PepsiCo has a global net revenue of over 70 Billion USD.

In Romania, Coca-Cola HBC (CCH.L) and Pepsi – Quadrant Amroq  bottlers are dominating the top 10 of the soft beverages industry with a combined turnover exceeding the total turnover of the remaining 8 companies. Coca Cola HBC is the leader with more than 2.4 Billion RON turnover in 2020 followed by Pepsi with 0.94 Billion RON. Total sales of top 10 companies exceeded 6.1 Billion lei last year with the prospect to increase further this year due to opening of hotels and restaurants.

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Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

 

 

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