Coke, Pepsi report stable financial in March quarter, but Covid cloud looms

Cola majors say they will monitor localised lockdowns, vaccination progress

Cola majors Coca-Cola and Pepsi saw resilient financial performances in India for the second straight quarter, after reeling from the impact of the first wave of the Covid-19 pandemic and the nationwide lockdown.
 
Management commentary from global investor calls of the two companies indicate that the March quarter was stable, with Coca-Cola reporting 4 per cent growth in its sparkling soft drinks portfolio, led by India and China. While PepsiCo reported “mid-single-digit growth” in India in the quarter.
 
Coke, based in Atlanta, and Pepsi, headquartered in Purchase, New York, follow a January-December accounting year. PepsiCo counts brands such as Mountain Dew, Slice, and Minute Maid apart from Pepsi among its key beverage brands. It also has a food business, including brands such as Lay’s, Kurkure, and Quaker Oats.
 
Coca-Cola has brands such as Thums Up, Sprite, and Maaza apart from Coke in its beverage portfolio. It does not have a presence in foods.
 
The October-December 2020 period was the first after three quarters to bring relief to the two firms, aided by the festive season and easing of lockdown restrictions.
 
While the March quarter continued to see lower restrictions, helping out-of-home consumption, the trend has reversed in April with the second wave of the pandemic in India.
 
The country reported over 250,000 Covid-19 cases for the third straight day on Tuesday, with the mortality rate inching up.
 
“India is seeing a surge in cases and responding with localised lockdowns. But as we begin to lap the most difficult period from last year, we feel good about our position and our ability to navigate the environment. However, the asynchronous feature of vaccine levels across countries, including in emerging markets, will be a key feature to watch in 2021,” said James Quincey, chairman and chief executive officer (CEO) of The Coca-Cola Company.
 
Ramon Laguarta, chairman and CEO, PepsiCo, said: “Recoveries have remained uneven across our markets as lockdown restrictions have varied across countries. Our developing and emerging markets, however, such as India, Brazil, Russia and China have remained resilient.”
 
But sector analysts say with curbs getting tighter across states in India, the June quarter could be challenging for the two majors.
 
The out-of-home market typically contributes two-thirds of sales for beverage companies. Any impact there will hit the companies hard as it did last year, when beverage companies had to write-off unsold inventory.
 
While India has begun vaccination since January, its slow pace has left stakeholders, including state governments, doctors, citizens, and businesses worried.
 
The central government has now expanded the vaccination drive to cover those aged 18 and above and has relaxed rules for corporates to inoculate their workforce, allowing them to procure vaccines directly from manufacturers and tie up with hospital chains.

 
Both Quincey and Laguarta say their companies remain committed to supporting their workforces and trade partners in the vaccination drive and that they will continue to engage with consumers in the summer.
 
PepsiCo has unveiled new campaigns with some of its key brand ambassadors, including Salman Khan, Katrina Kaif, and Hrithik Roshan this year for Pepsi, Slice, and Mountain Dew Ice, respectively, in India. The latter (Mountain Dew Ice) is a global brand, whose format has been tweaked for India.
 
In February, the company had indicated that it was launching Mountain Dew Ice in a “cloudy lemon format” here after extensive consumer research.
 
Coca-Cola, meanwhile, is making its drinks available at affordable price points and pushing large packs to partake of the in-home consumption trend.