Analysis

Analysis - More cost cutting at Coca-Cola, PepsiCo expected this year

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As pressure on CSD volumes in the US continues, how significantly will the Coca-Cola Co and PepsiCo look to cut costs and consolidate their separate businesses? 

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According to analysts at Bernstein Research, Coca-Cola has saved around US$270m in costs through distribution centre and manufacturing facility closures since 2010. PepsiCo meanwhile has shaved around $70m in costs by similar means, Bernstein estimates in a note today (10 February). 

And looking ahead, more bad news for the companies’ employees is on the horizon, the analysts suggest. Coca-Cola and PepsiCo could “conservatively realise another (approx) $600m and $900m in cost savings, respectively through further consolidation of their manufacturing facilities and distribution centres - and even more for their systems overall,” the note says.  

Bernstein expects “accelerated cost-cutting efforts” from both companies this year. “We believe the persistently weak volumes in carbonated soft drinks provides greater leverage for management to pursue the cost cutting,” the note says. 

PepsiCo has promised investors more information on its plans for its North American bottling system, which offers management an “attractive opportunity to unveil a comprehensive cost-cutting programme,” the analyts said. Meanwhile, Coca-Cola is reorganising its North American operations to return to a franchise model, instead of owning bottlers. “We believe this structure is more conducive to a significant cost-cutting programme,” the note adds. 


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