Coca-Cola plans to remove ‘zombie brands’ from its portfolio

Coca-Cola Co. says it will streamline its portfolio, cutting what it calls “zombie brands” to focus on more successful brands and smaller names with potential.

According to James Quincey, CEO of Coca-Cola KO,
+ 2.34%
Many of the company’s 400 “master brands” are located in one country and represent only 2% of total revenue.

At the start of the pandemic, Quincey said the company decided to “ruthlessly prioritize” major brands, which would also help the supply chain.

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“We are shifting to prioritizing fewer brands, but bigger and stronger on various consumer needs,” he said, according to a FactSet transcript. “At the same time, we need to do a better job of fostering and making smaller and smaller, more durable propositions and coming out of some zombie brands, not just zombie SKUs. [stock-keeping units]. “

The cuts have already started. Coca-Cola said it would halt operations at the juice drink brand Odwalla, effective July 31. There will be 300 job cuts as a result of the move.

“This gives us the flexibility to support our investments in brands like Minute Maid and Simply and to continue to scale the start-up as Topo Chico,” said Quincey.

Topo Chico is a brand of sparkling mineral water. Bottled water has been a hot item, with Nielsen data showing online sales of mineral, tonic, and carbonated water rose 61% year-over-year during the week ending June 13.

Quincey said Coca-Cola turned its attention to the bright category in China and saw a 14% increase in volume for the quarter, with strength at Coca-Cola Zero Sugar.

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For the second quarter, Coca-Cola reported better-than-expected earnings, although revenues did not meet expectations. Shares were up 2.4% in trading on Tuesday, though shares have fallen 14.7% so far this year.

The Dow Jones Industrial Average DJIA,
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It is down 5.4% by 2020 so far.

Coca-Cola suffered a decrease in sales in places such as stadiums, arenas and cinemas, which were closed due to COVID-19. However, Fairlife milk and Simply juice brands performed well as more consumers stayed home.

Ryan Giannotto, director of research for GraniteShares, which offers the US Large Cap XOUT,
Among its products, it says that the company has been unable to generate wealth for shareholders during the quarter due to a lack of technological advance.

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“From optimizing its product offering to opening new channels, Coca-Cola has fallen on the wrong side of the market in terms of digital adoption,” he said. “It is for this reason, combined with mediocre management and poor capital reinvestment, that we identify Coca-Cola as one of the top 10 stocks to exclude from our XOUT index.”

The GraniteShares XOUT Index has gained 9.8% for the year to date.

Coca-Cola spoke about its contactless beverage fountains, which were unveiled last week and allow customers to fill their beverages from their phones without creating an account or downloading an app. The company plans to launch these Coca-Cola Freestyle fountains in the United States by the end of the year.