Coca-Cola Amatil reveals its strategy for returning to growth

May 16, 2019
By Alana House

Coca-Cola Amatil Chairman Ilana Douglas has admitted to shareholders that the group’s results “are not where the Board would like them to be”, despite strong performances in New Zealand, Fiji and Alcohol & Coffee.

Douglas addressed Amatil’s annual general meeting, saying: “Coca-Cola Amatil’s medium and long-term value is the main focus of the Board’s work. Our plan is for the business to return to mid-single digit growth in earnings per share from 2020.” 

Australian Beverages underlying EBIT declined 8.8%, mainly driven by the reinvestment of an additional $40 million into the business in 2018 through its ‘Accelerated Australian Growth Plan’.

According to MD Alison Watkins, adjusting for this additional investment, “EBIT growth would have been positive for the year”.

“However, we recognise that this investment is important in supporting the long-term growth of our business,” she said. 

“Our performance for the year was also impacted by the NSW container deposit scheme, with NSW volumes down 3.4% compared to other states, which were down 0.4%.” 

Watkins revealed Amatil’s focus was in the “must-win” categories of cola and water.

“There were significant gains in both categories during the year, in particular, Coca-Cola volumes in Australia grew in the second half of 2018, driven by Coca-Cola No Sugar,” she said. “This in-market success is a testament to the consumer trend toward low and no-sugar choices. It also reflects the success of our integrated marketing and execution strategies particularly around the key selling weeks.”

New sales strategy to roll out nationally

Amatil reported it had reversed a decline in beverage volumes in NSW by hiring 97 additional sales and business development staff to liaise with stores and cafes, giving tips on increasing consumption of soft drinks, juice and bottled water.

Watkins said that volumes in the “immediate consumption” channel in metro NSW had risen 2% in the year to date as a result, after falling 11% in the year-earlier period.

“New trendy cafes have been opening, and we had been probably assuming that those customers would be comfortable dealing with us through phone and online channels and hadn’t been investing in the face-to-face visitation of those customers,” Watkins added.

The person-to-person sales approach is in the process of being rolled out nationwide, with expectations it would have a “really meaningful” impact on its business.

Watkins said most of the benefits from the nationwide rollout were expected to flow through in the second half.

Alcohol & Coffee delivers another strong result

Alcohol & Coffee saw 8% revenue growth and 12.1% underlying EBIT growth.

Ratu rum

This is the third consecutive year of strong growth in this segment, with EBIT more than doubling from $25.8 million in 2014 to $55.7 million in 2018.

“We invested in the business to build capability and support our long-term growth initiatives and worked closely with our partners’ and our own brands to leverage opportunities across all categories,” Watkins noted. 

In the coming year, New Zealand & Fiji, Papua New Guinea and Alcohol & Coffee are expected to deliver growth in line with Amatil’s Shareholder Value Proposition. 

Watkins said the delivery of mid-single digit earnings per share growth from 2020 would depend on the success of revenue growth initiatives in Australia, Indonesian economic factors and regulatory conditions in each of our markets.

Peter McLoughlin with Alison Watkins

Watkins also paid tribute to the late Peter McLoughlin (above), formerly Managing Director of Australian Beverages.

She opened her address to shareholders with these heartfelt words: “Peter McLoughlin (Pod) stepped down in January 2018 to take an extended period of sick leave. Sadly, Pod passed away later in the year.

“I take this opportunity to again recognise his huge contribution to our business and to the beverages industry over the years, and to acknowledge our tremendous affection and respect for him as a member of our team. Pod distinguished himself as a straightforward and open leader who helped shape Australian Beverages’ growth plans. His unique combination of drive, care and good humour are greatly missed.”

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