Coke And Pepsi Serve Up New

Strategies For A Post-COVID World

Carbonated soft drinks, as a category, is getting accustomed to change.
Consumers were already buying less sugary soda when COVID-19 hit, and
second-quarter earnings reports from Coca-Cola and PepsiCoshow the two
iconic brands must make big modifications to what was seen as an
impervious business.
 
Coca-Cola CEO James Quincey set the tone even before his company
reported big second-quarter problems on Tuesday (July 21). Coke saw
earnings drop 33 percent, as revenues saw their largest decline in 25 years.
 
“The economic impact of the lockdown is just starting to begin,” Quincey told
CNBC in May. “[Coming] after this virus crisis will be the economic impact and
hangover of the lockdown, and there will be a much greater focus from the
consumer on affordability or getting the prices lower.”
 
PepsiCo also reported weak second-quarter earnings earlier this month, with
soft beverage sales only partly offset by strong food sales. Unlike Coca-Cola,
PepsiCo is far more diversified, owning Quaker Oats Company and Frito-Lay
– which have performed well during the COVID-19 lockdowns and left the
company less exposed to soda’s big fizzle.
 
PepsiCo Chairman and CEO Ramon Laguarta said in announcing the
company’s second-quarter resultsthat “despite being faced with significant
challenges and complexities as a result of the COVID-19 pandemic, our
businesses performed relatively well during the quarter, with a notable level of
resiliency in our global snacks and foods business.”
 
But citing continued volatility and uncertainty, Laguarta added that company
officials “are not providing a financial outlook for fiscal year 2020 at this time.
However, we continue to believe we have ample liquidity and flexibility to
meet the needs of our business and return cash to shareholders. We remain
focused on winning in the marketplace with our strong portfolio of brands in
attractive categories, agile supply chain and flexible go-to-market systems,
while also building on our competitive advantages, to emerge an even
stronger company in the future.”
 
Putting Some Pop Into the Recovery
 
The two beverage titans had already been busy over the past several quarters
developing new concepts and partnerships to offset soft drinks’ long, slow
slide in favor of healthier options. But now, they must correct for COVID as
well.
 
Coke’s new Pour By Phone mobile app leverages the demand for touchless
options in quick-service restaurants (QSRs) and casual dining establishments
using resurgent QR codes. Coke also debuted its touchless Freestyle
system with Bluetooth connectivity in restaurants in 2019.
 
“The software will be available at more than 10,000 Coca-Cola Freestyle
dispensers this summer. All Freestyle dispensers will be contactless-
compatible by the end of the year,” PYMNTS reported at the time. “Research
shows that 60 percent of restaurant guests would choose to pour their own
fountain drinks versus having an employee do it for them.”
 
The carbonated colossus also introduced a new monthly
subscription service in February called The Insiders Club that promises
Coke swag and new flavors partly in a bid to have recurring revenues make
up for traditional soft drinks’ ongoing slide.
 
As for PepsiCo, the company leveraged its relative strength in the snacks
category to launch two direct-to-consumer (DTC) websites
– PantryShop.com and Snacks.com — at the height of the lockdown. The
sites offer bundles of Frito-Lay and other PepsiCo food products via home
delivery. PantryShop.com focuses on brands like Quaker and Tropicana,
while Snacks.com specializes in Frito-Lay snacks and related items.
 
"In these uncertain times, as more and more consumers are using
eCommerce channels to purchase food and beverage products,
PantryShop.com and Snacks.com offer shoppers another alternative for easy
and fast access to products they love,” Gibu Thomas, PepsiCo’s senior vice
president and head of eCommerce, said in a statement announcing the new
sites. 
 
PepsiCo also announced a deal in February to buy the Rockstar Energy
drink brand for $3.85 billion, expanding its portfolio further away from
sweetened drinks into lifestyle niches. And last year, the company rolled out
its PepCoin cash-back loyalty rewards program.
 
Long Road To Recovery?
 
But despite such initiatives, Coca-Cola and PepsiCo could be in for a long
slog to make up for COVID-related losses. After all, they derive roughly half of
their sales from businesses outside of the home – bars, restaurants, stadiums
and other places that have been mostly shut down by the coronavirus.