Analysts believe Coca-Cola Amatil is facing big challenges following massive changes in the local and international beverage market.
The Australian reports that CCA needs to address a number of problems, including a raft of sweeping demographics, pricing and consumer changes.
It’s expected that recently appointed CCA boss Alison Watkins will release a strategy update on 30 October, where she will unveil her wholesale plan to resurrect the group which will cover all aspects of the business — from its soft drink business in Indonesia to its SPC fruit cannery in country Victoria.
Merrill Lynch analyst David Errington said CCA has admitted it faces a huge range of problems across its biggest businesses.
“There has been a whole heap of problems Coke has highlighted and the main problems are a decline in the beverage market from the point of view of the consumer, a decline in sales to the field accounts (independent small stores such as milk bars and fish and chip shops), an overpriced portfolio, a production base not aligned to products that are growing that CC Amatil are not participating in,” Errington said.
The bottler’s food business, SPC Ardmona, was also struggling and its once high-growth Indonesian arm remained sluggish.
He said the price premium of Coke over Pepsi in the shops was also a headache for company management.
And lowering the price of Coke to bring it closer to its main rival wouldn’t help either, analysts said, as the way CCA’s business was structured, every one percent drop in price relative to costs would slash pre-tax earnings by five percent.
This would mean that on latest financial results for CCA, a one percent drop in prices would strip around $30 million from CCA’s pre-tax earnings. In 2013 CCA’s pre-tax earnings for its flagship Australian business was $566 million.
In August, CCA posted a 15.6 percent fall in net profit to $182.3 million in the six months to June.