Slammed by the pandemic, Coca-Cola in 2020 suffered its steepest annual decline in the volume of drinks sold since just after World War II.
While the Atlanta-based company’s business has improved since the early days of the coronavirus, nearly a year in, the beverage giant is still being pummeled by ripple effects around the globe.
And Coke cautioned Wednesday it could face a massive income tax penalty tied to a years-long court battle with the Internal Revenue Service. The matter centers on where and how the company allocates profit between the United States and some lower-tax nations, particularly Brazil and Ireland, where it makes beverage concentrates.
The IRS contends Coke owes about $3.3 billion for underpayment of taxes for 2007 through 2009. In November, the U.S. Tax Court found in favor of the IRS on the biggest portions of the case. The company said it expects to prevail over what it considers unconstitutional actions. If it doesn’t, it could face a $12 billion tax liability if the IRS applies its methodology through 2020.
Coke highlighted financial improvements it had made since early in the pandemic as cases of the virus spiked and many parts of the world put lockdown restrictions in place.
Still, “our work isn’t done,” Chairman and Chief Executive Officer James Quincey told analysts after the company reported 2020 financial results.
He said he expects further revenue and earnings per share improvements as vaccine distribution becomes widespread this year — crucial for a company that sells much of its namesake soda and other famous drink brands in restaurants and at big public gatherings like movie theaters, concerts and sporting events.
Global case volume of drinks sold — a crucial measure for Coke’s portfolio of soft drinks, bottled water, juices and sports drinks — was down 6% last year and 3% in the final quarter. It marked only the second annual volume decline for the company in at least three decades. And it was the steepest since 1946, when there was a 12% fall off.
Trademark Coke brands were down 1% for the year, even with growth in Coca-Cola Zero Sugar.
About half of the company’s overall sales now are tied to public venues.
Net revenue in 2020 was $33 billion, down 11% from the year earlier. Annual net income skidded to $7.7 billion, a 13% fall. In the final three months of last year, revenues were down 5% and net income sank 29%.
Last year, Coke announced it was cutting 2,200 employees around the globe, including 500 in metro Atlanta, or nearly 10% of its local workforce. Some of the reductions were tied to employees who took voluntary separation packages.
In October, Coke announced it was dropping half its drink brands, most of them sold outside the United States. They accounted for only about 1% of the company’s profits. Among those being ditched: Tab, the company’s original diet soft drink.
What it means:
Coca-Cola’s steepest annual decline in drink volume in more than 70 years highlights how the pandemic has rearranged the financial prospects of many Georgia companies. Some local employers, such as Delta Air Lines, have been battered as travel plummeted. Others, including delivery giant UPS, saw profits soar with the rise of e-commerce.
Coca-Cola by the numbers:
Net revenue
2020: $33.0 billion
2019: $37.3 billion
Net income
2020: $7.7 billion
2019: $8.9 billion
Unit case volume
2020: down 6% from year before
2019: up 2% from year before
Source: Coca-Cola Company
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