Coca-Cola plans to remove “zombie brands” from its portfolio

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Coca-Cola Co. says it will streamline its portfolio, cutting out what it calls “zombie brands” in order to focus on more successful brands and smaller names with potential.
According to James Quincey, CEO of Coca-Cola KO,
+ 0,43%
, many of the company’s 400 “main brands” are located in a single country, accounting for just 2% of total sales.

At the onset of the pandemic, Quincey said the company decided to “ruthlessly prioritize” major brands, which would help the supply chain as well.
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“We are prioritizing fewer but bigger and stronger brands for the different needs of consumers,” he said, according to a FactSet transcript. “At the same time, we need to do a better job of nurturing and developing smaller, more sustainable proposals and bringing out certain zombie brands, not just zombie SKUs. [stock-keeping units]. »
The cuts have already started. Coca-Cola has said it will halt operations on the brand of juice drinks Odwalla, effective July 31. There will be 300 job cuts as a result of this decision.
“This gives us the flexibility to support our investments in brands like Minute Maid and Simply and to continue to move towards a bottom-up start like Topo Chico,” Quincey said.
Topo Chico is a brand of sparkling mineral water. Bottled water has been a hot topic, with Nielsen data showing online sales of seltzer, tonic and club soda increased 61% year-over-year for the week ending the 13th. June.
Quincey said Coca-Cola turned its attention to the sparkling category in China and saw its volume increase by 14% for the quarter, with strength in Coke Zero Sugar.
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For the second quarter, Coca-Cola posted better-than-expected profits, although revenues were lower than expected. Shares have fallen nearly 13% since the start of the year.
Le Dow Jones Industrial Average DJIA,
-0,68%
is down 6.7% for 2020 so far.
Coca-Cola has suffered from declining sales in places like stadiums, arenas and cinemas, which have been closed due to COVID-19. However, Fairlife milk and Simply juice brands have done well as more consumers have stayed at home.
Ryan Giannotto, research director at GraniteShares, which offers the US Large Cap XOUT,
-0,85%
among their products, says the company failed to generate wealth for shareholders during the quarter due to a lack of technological advancement.
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“From optimizing its product offering to opening new channels, Coca-Cola has fallen on the wrong side of the market in terms of digital adoption,” he said. “It is for this reason, combined with lackluster management and little reinvestment of capital, that we identify Coca-Cola as one of the top 10 stocks to exclude from our XOUT index.”
The GraniteShares XOUT index has gained 7.8% since the start of the year.
Coca-Cola spoke about its touchless drink fountains, which were introduced last week and allow customers to refill their drinks from their phones without creating an account or downloading an app. The company plans to roll out these Coca-Cola Freestyle fountains across the United States by the end of the year.

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