Vending

Coca-Cola Consolidated boosts Q2 income despite 3.6% COVID-19 sales hit

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August 5, 2020

Volatility caused by COVID-19 clipped Coca-Cola Consolidated Inc.'s net sales 3.6% from $1.27 billion to $1.22 billion in the second quarter ended June 28.

The company reacted to the changes in customer buying habits, however, and ended the quarter with an income boost.

Net income in the second quarter of 2020 was $39.6 million, compared to $15.4 million in the second quarter of 2019, an improvement of $24.2 million. Net income per share was $4.23 in the second quarter this year compared to $1.64 last year.

Adjusted income from operations in the second quarter of 2020 was $81.7 million, an increase of 5.4%.

Income from operations in the second quarter of 2020 was $83.1 million, compared to $67.2 million in the second quarter of 2019, an increase of 23.7%.

COVID-19-related stay-at-home orders resulted in extreme volatility in revenue and physical case sales during the quarter as the shift towards multi-serve packages sold in larger retail stores caused by the closure of on-premise outlets that started during March continued during the second quarter of 2020.

"The rapid changes in consumer demand we faced in March and during the second quarter required us to make swift changes to our operating model, significantly reduce discretionary spending and make investments to ensure the health and safety of our teammates and customers," Dave Katz, president and chief operating officer, said in a prepared statement. "While our business experienced a severe downturn in sales during April, consumer demand rebounded in May and continued to strengthen in June."

Gross profit decreased $6.5 million, or 1.5%, in the second quarter, while gross margin increased 80 basis points to 35.0%, primarily driven by a shift in product mix to sparkling take home packages which generally carry a lower per case gross profit than immediate consumption packages.

On an adjusted basis, gross profit declined $13.2 million, or 3.0%, in the second quarter of 2020.

Adjusted gross margin increased 20 basis points to 34.9% primarily as a result of favorable commodity prices.

The negative mix impact was partially offset by commodity price favorability and favorable manufacturing costs.

Volume was strong in the sparkling beverage category, increasing 3.7% in the second quarter of 2020.

Still beverage volume declined 6.6%, as convenience retail and on-premise outlets were negatively impacted by less consumer traffic.

The still beverage portfolio relies more heavily on single-serve sales in small stores and accounts where products are consumed on-premise. Consumer demand was highly volatile during the quarter but improved sequentially as stay-at-home orders were lifted and local economies re-opened.

Revenue from bottle/can sparkling beverages increased 4.4%, driven primarily by volume growth and price realization within this category.

Revenue from still beverages declined 4.7% in the second quarter of 2020 as a result of lower sales volume in small store and on-premise outlets.

Revenue from fountain syrup, which is primarily sold through restaurants, convenience stores, amusement parks and other on-premise outlets, declined $29.3 million, or 56.6%. The significant decline in fountain syrup revenue is a direct result of the previously mentioned stay-at-home orders.

The company does not expect the demand experienced in June to sustain itself in future months, but it is encouraged by the volume growth generated in the second quarter of 2020.

For an update on how the coronavirus pandemic is affecting convenience services, click here.