Coca-Cola Enterprises (CCE) hopes its activation around the London Olympics and Britvic’s recent packaging related ‘dislocation’ will provide a timely boost to its business after a subdued Q2.
The Atlanta-based firm, Coke’s anchor bottler in Western Europe, announced net sales of $2.2bn for Q2 (down 8.5% on Q2 2011) while operating income was down 11% to $301m on the same basis.
Net sales were also well down in the first six months of 2012 at $4.076bn ($4.251bn: 2011), while net income slid from $352m to $314m.
Announcing the firm’s results in London today, CCE chairman and CEO John Brock blamed a “unique combination of unfavourable weather and…marketplace challenges” for CCE’s muted performance.
CCE’s Q2 volumes dipped 6% overall due to bad weather, the impact of the French tax increase and prior year hurdles, with the company hit by declines in both still and sparkling categories.
Energy drinks bucked the trend (although growth slowed to +16%) while Coke Zero grew 2.5%, and CCE Hubert Patricot, executive VP, European Group hailed the London Olympics as a “unique multi-year opportunity for CCE to build brands”.
Discussing the growth slowdown in relation to energy drinks on a later analyst call, Patricot said: “Energy, even if it is growing – is not immune from the bad weather. There is still an impact.
“In fact, as a category it is even more seasonal than the rest of soft drinks. So it’s no surprise that it’s slowed down.”
He added that the firm had nonetheless seen a good reaction to new SKU’s such as Rehab and Powerade Energy.
“But we are seeing the success of our multi-brand strategy, with a lot of traction behind the brands. The majority of the growth is coming from Monster," he said.
Judy Hong, an analyst at Goldman Sachs asked Brock about the promotional environment across CCE’s territories, and whether the firm envisioned any benefit from Britvic’s product recall issue , which means the latter's Fruit Shoot brand is off-sale in all territories bar Ireland, Australia and the US.
“In terms of either gaining any share in terms of the products where you overlap, or in terms of their focus on fixing that issue rather than other categories that you have a broader overlap with?"
On Britvic, Brock said: “In terms of the recall, clearly we’ve got a portfolio of products that appeal to a wide variety of consumers. And you can assume that, anytime there’s any kind of dislocation in the marketplace, we want to make sure that everyone knows our products are available.
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We will do what we can to make sure our consumers get some of their choices in stills – Capri Sun particularly is a product that plays nicely in that category.
Discussing discounting from Britvic (which produces and sells PepsiCo brands Pepsi, 7UP and Mountain Dew Energy in GB and Ireland) in H1, Patricot said:“In GB as in other territories, we see the category as being extendable and a value-creation category.
“H1 has been quite heavy in terms of competitive activity, especially through the end of the quarter.”
“Listening to our competitor Britvic in their earnings call, they have mentioned that they are planning to take price as of May and June, so we expect the pricing environment to be more rational for H2, while we have Olympic programme especially in action,” he added.
