The company began notifying affected staff on Thursday and estimates that it will cut 1,600 to 1,800 non-bottling and non-distribution jobs in coming months, including around 500 at its Atlanta head office.
During Coke’s Q3 2014 earnings call on October 21, CEO Muhtar Kent told analysts: “We are streamlining and simplifying our operating model for better speed, better decision-making and enhanced, also, local market focus that will help us to drive better growth.
“We expect to refocus the role for our corporate center and further scale our back office to support our processes and also policies on a global basis to get more synergies there and better service to our business units that operate around the world and basically make up the Coca-Cola Company.”
Savings will help fund larger media spend
Kent said Coke would extend its productivity program from $1bn in savings by 2016 to $2bn in annualized savings by 2017 and $3bn by 2019, and invest in technology to streamline operations.
The savings will fund an up-weighted media spend of at least $800m on the company’s brands – which include Coke, Sprite, Dasani, Vitaminwater – $250-300m of which will be spent in 2015.
The technology spend will cover in-line blowing, further plant automation, light-weighting of packages and optimizing Coke’s production network and procurement, to reduce its cost base and improve margins.
The company is introducing zero-based budgeting (where managers must justify expenses for each new reporting period) and restructuring its global supply chain – refranchising the majority of the Coke-owned bottling system in North America by 2017.
World volatility hits Coke’s ‘immediate consumption’ business
As a consequence of this move, Coke will retain approximately one third of its total bottler-distributed volume in North America; the company also plans to refranchise the majority of its other bottling territories across the world by 2020 at the latest.
Kent warned last October that Coke faced a challenging growth environment with less disposable income growth for consumers – he noted deteriorating economic conditions in key emerging markets and lackluster consumer spending in developed markets.
“It’s not just related to the Western developed markets of Europe and Japan and United States and Canada, but it’s also related to emerging markets,” Kent said.
“There’s a lot of volatility in the world when you look at the currencies, the interest rates, when you look at the growth rates, and when you actually factor in all the different geopolitical issues around the world. There just is a lot of apprehension.”
Less people are traveling due to disease and scares, Kent said, which meant mobility was down and this hit Coke’s immediate consumption business.