NOT BULLETPROOF
Despite consistent profits, Coca-Cola has had periodoc layoffs over the years. But it’s also has grown larger through acquisitions and rehirings.
January 2000: Coke announces layoffs of up to 6,000 workers (later revised to 5,200). About 2,000 people lose jobs in Atlanta.
June 2000: The company starts hiring again to fill positions created by the restructuring and retirements.
August 2002: Coke cuts 140 workers, all in Atlanta, from its information technology department.
January 2003. The company trims another 1,000 employees, half them in metro Atlanta.
May 2005: Neville Isdell takes helm as CEO after Doug Daft steps down to end a difficult tenure.
September 2007: Layoffs hit 125 in North America restructuring.
July 2008: Muhtar Kent named CEO.
February 2010: Coke agrees to buy North American operations for bottler Coca-Cola Enterprises.
March 2013: Coke to layoff 750 U.S. workers — about 180 in Atlanta — as part of CCE integration.
January 2015: The company is expected to announce it will shed as many as 2,000 jobs.
Coca-Cola has been through a lot in the last couple of years. Soda sales have been sluggish. The company miscalculated the impact health and obesity concerns would have on the bottom line. Anxiety over artificial sweeteners has led to an implosion in the once mighty diet drink sector.
But this week may hurt, really hurt.
As many as 2,000 Coke employees — a large percentage of them at the company’s North Avenue headquarters — are expected to lose their jobs in layoffs that could be announced as early as midweek, according to analysts, people close to the company and some news reports.
The reduction is part of a plan by the world’s largest non-alcoholic beverage company to shave billions in annual costs through 2019.
It also would come as the metro area continues to struggle to bring down its jobless numbers.
Coke declined to comment on its plans. It’s unclear if cuts will include buyouts, early retirement offers or unfilled positions, all of which would soften the personal and economic effect. The company employs 130,600 people globally and nearly 8,900 in metro Atlanta, but the cuts will come from a core group of 14,000 or so corporate workers.
The expected moves come as the still-mighty brand has struggled to maintain growth in its biggest moneymaker — fizzy drinks — as consumers worldwide aren’t having “a Coke and a smile” as much as they used to.
David Winters, a Coke shareholder and frequent critic of the company’s management, called the impending layoffs outrageous and the result of avarice among board members and top execs, including CEO Muhtar Kent.
“The workers who are being laid off did not cause the problem,” said Winters, CEO of investment firm Wintergreen Advisers, which has called for Kent to step down.
He added: “Muhtar and Coca-Cola have been asleep. The only thing they have been actively doing is working on improving compensation at the top.”
Experts say the layoffs do not signal that Coca-Cola has completely lost its mojo.
Profit still strong
While the carbonated soft drink business has struggled, Coke’s overall sales, earnings and profit margins are still strong. Even in this tough year, revenue for the first nine months was $35 billion, which produced $6.3 billion in profit. Both numbers were basically flat from a year earlier.
Many also believe Kent, a Coke veteran named CEO in 2008, is the man to guide the company through a tough period.
“Muhtar and the Coke management team get what needs to be done and that’s the most important thing in moving the company to where it needs to be,” said John Sicher, editor and publisher of Beverage Digest.
But for Atlanta, job cuts at one of its marquee companies come at a bad time. Atlanta-based Turner Broadcasting System, one of the city’s biggest employers through companies such as CNN, Cartoon Network and TBS, said in October it was cutting 1,475 jobs, the brunt of which — 975 — were coming from the metro area.
The metro area and the state have been slow to recover from the recession. Metro Atlanta’s unemployment rate fell to 6.5 percent in November, while Georgia’s dropped to 7.2 percent (Georgia and California shared at 7.2 percent the nation’s second highest unemployment rates in November behind Mississippi).
Both Atlanta and the state trailed the national unemployment average of 5.8 percent in November.
Tom Smith, a labor economist at the Goizueta Business School at Emory University, said the good news is the economy is picking up with strong GDP growth and a rallying stock market, but metro Atlanta is a step or two behind in offering opportunities for job seekers.
“Does Atlanta have the capacity to absorb 1,000 jobless, we hope so,” he said. “But our unemployment rate is higher than in other places.”
A person close to Coca-Cola said the company will be more methodical in deciding who goes than it was in its last big layoff in 2000, when about 5,200 employees were let go — about 2,000 in Atlanta. Those cuts included layoffs, attrition, early retirements and the outsourcing of some work.
Another round of layoffs of about 1,000 people in the company’s North America operations followed in 2003. About half those cuts were in Atlanta.
Executive involvement
Coca-Cola hired consultants to make the painful decisions in 2000, a strategy critics said failed to cut the necessary fat because the consultants did not understand the business.
But many of those who lost jobs were rehired as either consultants or in new positions created by the restructurings.
This time, the restructuring will be handled by Kent and other senior advisers and will focus on redundancies and jobs that are no longer necessary because of technological advances or can be done by contractors.
The company also will trim a layer of management to get executives closer to workers on the ground, the source said.
A big focus will be on any remaining duplicate positions from Coke’s purchase in 2010 of its largest North American bottler, Coca-Cola Enterprises. Coca-Cola said last year it was eliminating 750 U.S. workers — about 180 in Atlanta — to trim redundancies after integrating CCE staff.
Coca-Cola also will save millions over the course of the next few years by selling many bottling units it purchased in the CCE deal back to independent bottlers, thereby reducing its payroll.
Sicher of Beverage Digest said he thinks Wall Street will like Coke’s austerity moves but added the company also needs to increase revenue growth. That will come, he said, with better marketing, innovation and product diversification.
And Coke has made efforts to do that, even while planning cutbacks. The company has released 8-ounce sodas for those who are calorie conscious; introduced in early fall Coke Life, a new mid-calorie drink made with natural sugar instead of high-fructose corn syrup; and bought a stake in Keurig owner Green Mountain Coffee Roasters, in the hopes of allowing consumers to make carbonated beverages at home.
Monster stake
The company also purchased a stake in August in energy drink category leader Monster, is partnering on a premium milk brand FairLife, and has appointed a new chief marketing officer, Marcos De Quinto.
The Share-A-Coke program, which allowed consumers to have their names put on bottles, was a big hit over the summer; the company plans to bring it back early next year.
But the company and Wall Street are worried that the links health advocates have created between soft drinks and the nation’s expanding waistline are sticking. Further, sales of diet Coke and other diet products have plummeted this year as the public has become leery of aspartame and other artificial sweeteners.
Kent even stepped back from his pledge to double revenue by decade’s end in the company’s so-called “2020 Vision.”
“Importantly, the goal of doubling system revenues is one our system can always aspire towards,” he said in a conference call with analysts. “But it is not a goal to be pursued at any cost over a fixed time frame, and we are realigning our expectations based on where we are today and the outlook for our industry. “
Winters said the pain should not be shouldered solely by the rank-and-file.
“There is no question that the company needs to be restructured,” he said, “but it needs to be shared equally.”
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