COCA-COLA AMATIL INJECTS FUNDS INTO STRUGGLING AUSTRALIAN BUSINESS
Written on the 23 November 2017 by Ben Hall
BEVERAGE giant Coca-Cola Amatil (ASX: CCL) says it will bring forward $40 million of investments to drive growth in its Australian drinks business as it faces tough trading conditions.
In a trading update ahead of an investment forum in Indonesia, the company confirmed flat underlying profit and says the $20 million in costs it planned to save in both 2019 and 2020 would be invested back into the business earlier than planned.
Coca-Cola Amatil will fast track the $40 million to 2018, lowering prices, increasing marketing and adding new drink machines and technology.
"Our Accelerated Australian Growth Plan brings forward around $40 million in reinvestment of cost savings to 2018, to deliver increases in marketing, execution, cold drink equipment, digital technology and price," says managing director Alison Watkins (pictured).
The company also confirmed tough trading conditions will continue into 2017 as underlying earnings in its Australian beverages division, which includes the Coca-Cola, Mount Franklin and Monster Energy brands, fell 13 per cent in the first half of 2017.
The Australian beverages arm drives around two thirds of the group's earnings.
"We're excited by this opportunity, which gives Australian beverages more room to move in building our category presence while retaining our share in areas of existing market strength," Watkins says.
"We do expect an impact on near-term earnings from this accelerated reinvestment, and from the uncertain impact of container deposit schemes.''
Watkins says the launch of new products, including Coca-Cola No Sugar and Coca-Cola Plus Coffee, had helped the bottom line but the company needs to move faster to rebalance its portfolio because it is heavily weighted towards carbonated drinks which has a much smaller market share than water, dairy and fruit juice.
Coca-Cola Amatil has forecast an underlying net profit in line with the $418 million underlying net profit made in 2016.
Business News Australia
Author: Ben Hall