Coca-Cola Amatil spirits sales surge during COVID-19

August 20, 2020
By Alana House

Coca-Cola Amatil has reported a 10.8% growth in spirits sales in its 2020 half-year results.

However, this strong performance was offset by volume declines in Premix and Beer & Cider and there was an overall 9.2% decline in revenue for the company due to the impact of the Australian bushfires and COVID-19.

Alcohol & Coffee revenue declined by 5.3%, largely driven by the impact of on-premise closures on alcohol, and café, pub and club outlet closures on Coffee.

Overall, Coca-Cola Amatil suffered an $8.7 million net loss for the half year to June 30. Total revenue was down 9.2% to $2.19 billion.

“We experienced unique, market-wide challenges this half, ranging from Australian bushfires and Indonesian floods through to the COVID-19 pandemic which impacted all our businesses,” said CEO Alison Watkins.

“Despite these challenges, the resilience of our business was demonstrated by our agile response in addressing changes in channel mix and consumer behaviour, enabling us to grow our market share in key product categories.

“Our financial performance under these challenging conditions, in particular our strong cash realisation, is a testament to the strength of our business and the tenacity of our people, partners and customers.”

Peter West, Managing Director Australian Beverages, added that the beverage business rebounded in mid-February from the bushfires, which meant Amatil was “confident in our ability to recapture volume with strong plans across the Easter festive period”.

“By March, however, the onset of COVID resulted in panic buying and grocery, followed by significant impacts to on-the-go customers, leading to peak Easter volume uplifts being unable to be realized in lockdown.

“As a result, our total trading revenue for the half was down 8.8%. This decline was comprised of a 5% decline in our Alcohol & Coffee revenue and a 9% decline in our non-alcoholic ready-to-drink revenue.”

The highlights in spirits sales

West said spirits was the “star performer” in Alcohol & Coffee. Amatil maintained value share in Spirits, underpinned by share gains in vodka, gin and scotch. It said the Jim Beam trademark brand delivered a significant improvement in volume trajectory driven by volume growth in the Spirits and Zero variants.

Canadian Club

Canadian Club’s performance was impacted by on-premise outlet closures. However, the brand has shown a strong recovery spirits sales in June, delivering double digit volume growth.

“Our alcohol business grew volume by approximately 19% in July as on-premise outlets reopened and socializing resumed,” West said. “There was also ongoing strong growth a- home consumption of spirits, a trend that we’ve noticed since the second quarter of 2020 and an increase in demand for premix.”

Partnerships key to growth

Amatil said its strong partnerships across all markets remain a key competitive advantage. While it has a long-standing relationship with The Coca-Cola Company, it is one that “continues to evolve driven by the need for agility and responsiveness to the market conditions”.

“As such, we have agreed on principles that ensure balanced incentives and aligned plans throughout the pandemic and recovery stages,” Amatil said.

“Furthermore, we will continue to take advantage of fast access to global insights provided by our largest brand partners – The Coca-Cola Company, Beam Suntory and Monster Energy Corporation.”

Amatil said lockdown restrictions have increased at-home consumption occasions and a further pivot towards pack formats.

“While the pandemic has had a significant impact on consumer preferences, we are well-placed to respond to the trends that we see arising,” the company said.

“In these uncertain times consumers are seeking trusted, strong brands. This plays to our strength with a broad portfolio of leading brands.

“The pandemic has also brought the health trend even further to the front of consumers’ minds.”

The four trends shaping the beverages market

The COVID-19 pandemic and resulting restrictions had a significant impact on Amatil’s trading activity in terms of which products are sold, how they are sold, where they are purchased and where and when they are consumed.

The following key impacts were noted:

Channel – A shift of volume towards the grocery and off-premise channels, which continued to trade through the restrictions as an essential service, and away from the on-the-go and licenced channels, which were most impacted by the trading restrictions. Within this channel dynamic, consumer mobility (including an increase in working-from-home) led to geographic shifts within each channel where sales shifted to suburban and regional areas and away from central business districts.

Consumer behaviour – The consequential impact of the trading restrictions on channels, compounded by the social distancing restrictions on consumer mobility generally, led to an increase in at-home consumption including an increase in demand for multi-pack and take-home pack product offerings.

Portfolio variation – Amatil saw increased demand for strong brands and Diets/Lights segments including for its flagship brand Coca-Cola No Sugar. Conversely, demand for the water and sports categories and cold drink products declined during lockdown. Increased at-home consumption resulted in higher volumes in large PET and multi-serve packs.

E-Commerce – Amatil experienced an acceleration of the e-commerce opportunity with a step change in demand for online grocery and for beverages sold through food aggregators.

Amatil said: “While the shape and pace of recovery from COVID-19 remains uncertain, it is likely that some of these trends will persist, to some extent, in the short-medium term.”

However, West noted that the business has “some confidence and optimism” in light of the differences that its seeing by state.

“WA is probably the probably the lead example where we actually finished the half in volume growth at a total business,” he said. “And then we finished in volume growth on NARTD, Alcohol & Coffee.

“And then if you go to the July performance and the first two weeks of August, we’ve been in double-digit growth in WA, and a return to growth in the on-the-go channel in WA.”

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