Coca-Cola is a recognized global beverage giant with operations worldwide, and its extensive business naturally means a large number of employees. According to relevant data, as of December 31, 2019, Coca-Cola had 86,200 employees, including approximately 10,100 in the United States.

This year, due to a combination of factors, many small factories face closure, while large companies suffer from severe declines in performance and losses from product overstocking. Many major companies have resorted to layoffs and other plans to weather the crisis. Recently, Coca-Cola also publicly announced a plan that has caused a stir in the industry. Some were perhaps expecting such a move, but the scale of this major reform plan has shocked many.

-01- Business Restructuring + Department Reduction + Global Layoffs of Up to 4,000 Employees

On the 28th local time, Coca-Cola, the world beverage giant, announced a plan that includes layoffs, business restructuring, and department consolidation.

The layoff plan includes offering voluntary separation packages to 4,000 employees in the U.S., Canada, and Puerto Rico. This affects nearly 40% of local employees; Coca-Cola has about 10,800 employees in these regions, and those eligible for voluntary separation are employees hired on or before September 1, 2017.

The company is also seeking similar actions in its overseas business units. It is reported that this round of layoffs will incur severance costs of approximately $350 million to $550 million (about RMB 2.4 billion to 3.78 billion).

When media interviewed Coca-Cola China, the company responded, "We have not received relevant information at this time."

Related reports indicate that in addition to workforce adjustments, Coca-Cola plans to establish nine new operating units within four geographically defined regional markets. It also plans to reduce its original 17 business units to 9 within the framework of 4 different regional markets, including the existing Global Ventures and Bottling Investments units.

It is understood that the Global Ventures unit was established just over two years ago and is still a new department. James Quincey originally set it up to help accelerate the transformation and global expansion of beverage brands that Coca-Cola invests in or acquires. This includes the acquired coffee chain Costa and the partnership with functional beverage brand Monster Beverages.

Furthermore, Coca-Cola has reorganized its business units by category. The Coca-Cola brand and flavored soda business have been split into two separate units, while sports drinks, coffee, and tea now fall under the same business. Recently popular plant-based beverages, along with milk and juice, are grouped into one category. Additionally, Coca-Cola has established a separate emerging categories unit.

-02- The Pandemic as a Catalyst

From the current development situation, the global pandemic is undoubtedly one of the key triggers for Coca-Cola's drastic layoffs, business integration, and department reduction. Except for China, where the outbreak is well controlled and daily life has returned to normal, some overseas regions still face severe situations.

According to data from Johns Hopkins University, as of 5:28 PM Eastern Time on the 28th, the cumulative number of COVID-19 cases in the U.S. exceeded 5.9 million.

From the industry's perspective earlier this year, the pandemic has severely impacted beverage companies, including shortages of production materials, transportation issues, and consumer spending cuts. Coca-Cola has likely been affected by these factors, perhaps even more severely.

According to relevant data, Coca-Cola's sales in the second quarter of this year were $7.2 billion, down 28% year-over-year, and net profit fell 32% to $1.8 billion.

-03- Coca-Cola Losing Market Share

If the pandemic is the biggest catalyst, then various developments have laid the foundation for this event.

Coca-Cola is the world's largest beverage company, holding a 48% global market share and owning two of the top three global beverage brands.

Carbonated soft drinks have been the foundation of the company's success and rapid growth. However, with the increasing variety of beverage choices, richer flavors, and most importantly, growing consumer health awareness, other products are continuously eroding the carbonated beverage market. Coca-Cola's market share is shrinking, and with the relentless pursuit of Pepsi, it is becoming increasingly difficult for Coca-Cola to achieve further growth.

In recent years, Coca-Cola has been exploring other avenues, such as expanding its product categories and extending its product lines to pursue more sustainable development.

Image source: Coca-Cola Tmall official flagship store

According to relevant data, in the Chinese market alone, Coca-Cola offers more than 15 brands with over 50 beverage choices to meet diverse consumer needs.

Some also note that Coca-Cola is not just a well-known carbonated beverage for all ages, but also a cultural symbol.

Therefore, although the pandemic has catalyzed Coca-Cola's layoffs and business integration plans, the reform may have been brewing for some time, with the pandemic providing the opportunity to act.

However, according to domestic media reports, the U.S. unemployment rate remains high after the pandemic, with estimates suggesting it could be around 9% this year. Whether Coca-Cola's layoffs will proceed smoothly remains to be seen. But it is foreseeable that in the short term, Coca-Cola's century-old foundation will be hard to shake.

Article references: "Coca-Cola to Lay Off Employees Globally; China Company Says No Relevant Information Received" - Beverage Food Network "Coca-Cola to Offer Voluntary Separation Packages to 4,000 Employees" - Interface News, Ya Hanxiang

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