ATLANTA — The Coca-Cola Co.’s global footprint may be viewed as a strength during normal periods of business activity. Markets may fluctuate depending on a variety of economic or social factors, but there is consistency in how consumers respond to different market conditions. The coronavirus (COVID-19) has upended global markets, and now that the initial shock has passed company executives are evaluating the pace of recovery in different regions of the world.
During a virtual May 27 presentation before the RBC Global Consumer & Retail Conference, John Murphy, executive vice president and chief financial officer of Coca-Cola, said he considers five factors when evaluating the global recovery, including the health of the economy in advance of the pandemic; how containment of the virus has been managed; the political leadership in place; the strength of public services; and the strength of Coca-Cola’s system in the region.
He said he sees Southeast Asia responding well in the coming months. He called Southwest Asia a bigger challenge.
“India's lockdown has been quite severe, and it's happened just at the start of our peak season,” he said. “So, I would expect recovery in India to be a little bit more delayed.”
Mr. Murphy is more positive about Japan as that economy opens.
“They've had a kind of an up-and-down period of containment, and this latter phase seems to have been managed very, very well,” he said. “So, I'm a little bit more optimistic for Japan going into the second half of the year.”
In Australia and New Zealand, the company is starting to see sequential improvement, and in Europe trends are improving but remain challenging as the foodservice sector recovers.
“Costa in the UK is a primarily retail store-based business, and it has been closed for much of the second quarter,” Mr. Murphy said. “And the impact, therefore, has been significant in this period. We're starting to see some opening up in the UK, and so a little bit more hopeful that we'll get some degree of normalcy returning as we approach the end of the second quarter.”
He said the US has a long way to go but May has been sequentially better than April.
“We've got a gradual reopening of many states,” Mr. Murphy said. “Improving trends (are) in direct correlation to the reopening of these states but still quite negative year-on-year. Restaurants (are) beginning to open, (but) not to near the levels yet of what I would consider close to being healthy.”
In Latin America, Mr. Murphy said he is reserving judgment until he sees how countries like Brazil and Mexico approach the virus. He said the approaches are currently not consistent with what other developed countries have done.
With that global backdrop, two capital allocation priorities highlighted by Mr. Murphy included investing in the business and supporting the Coca-Cola Co.’s dividend.
“For the foreseeable future, we probably, relative to some previous discussions, would see the M&A piece being a lower priority at the moment,” he said. “We think we've got a lot in our portfolio to work with. So, that's maybe a slight change.
“And share repurchase, we don't see that being really a part of the equation for the time being. And obviously, the shape of the recovery in the second half going into 2021 in terms of cash inflows will be equally important to take into consideration as we continue to make decisions on this area going forward.”