Recently, Coca-Cola Company, one of the "fat house and water duo", announced 4000 layoffs, with severance payments estimated to be as high as $550 million, or about 3.8 billion yuan. Coca-Cola Company's net profit fell 33 per cent to $1.8 billion in the second quarter, meaning about 1/3 of the profit will be used to pay severance pay.

Coca-Cola Company's revenue fell 15.73 per cent in the first half, while PepsiCo grew 1.68 per cent in the first half, according to the first-half results.

They all sell fat houses and water, so why is Coca-Cola Company more miserable than Pepsi?

First, the underlying reason: single category VS multiple categories

Under the influence of the epidemic, cinemas are closed, business supermarkets are closed, football matches are postponed, and non-home consumption is almost stagnant, which is not good news for Pepsi and Coca-Cola Company. But Pepsi is less affected by the epidemic than Coca-Cola Company. The main reason lies in the product structure of the two companies-Pepsi is also involved in the snack business in addition to beverages, and the two contribute equally to the company; although Coca-Cola Company has many brands, he has always focused on the beverage industry, which dragged down the performance during the epidemic.

Stress and boredom during the outbreak drove the consumption of snacks, especially salty snacks, and people cooked at home more often, boosting sales of products such as cereal and syrup. This gives Pepsi's snack business a chance to perform.

Although PepsiCo has also suffered some losses due to the offline depression, its snacks, cereals and other categories have increased significantly as a result of home isolation, which to a certain extent offset the losses caused by the closure of offline venues and help PepsiCo resist the crisis brought about by the epidemic.

The excellent performance of the snack business directly contributed to Pepsi's 7.9 per cent organic growth during Q1 (natural growth excluding mergers and acquisitions, divestitures, exchange rates and other factors) to $13.88 billion, an increase of 7.7 per cent year-on-year.

By contrast, Coca-Cola Company, who only sells drinks, is not so lucky.

Coca-Cola Company earns half of his revenue from cinemas, restaurants and stadiums. As a result of a single category, the company is almost unable to make up for the decline in revenue in the epidemic environment. Coca-Cola Company experienced perhaps the worst first half in the company's history, with operating cash flow falling 29 per cent year-on-year to $556 million and free cash flow down 43 per cent to $229 million. Q2's results were even uglier-revenues fell 25 per cent year-on-year, the biggest quarterly decline in 25 years, and net profit fell 32 per cent to $1.8 billion.

It is also more obvious that PepsiCo's more diverse categories are the underlying basis for growth in the face of the same blow. Prior to this, Procter & Gamble Co was able to maintain steady growth because the decline in beauty makeup was offset by the surge in sales of paper and clean household products during the epidemic, so that Procter & Gamble Co still had the capital to continue to invest in the brand.

Offline vs online

Consumers are indeed more accustomed to buying drinks in supermarkets or convenience stores, and e-commerce has always been a common problem for Coca-Cola Company and Pepsi. During the outbreak, the two companies handed over different answers.

PepsiCo has significantly made more efforts to digitize.

The first is, of course, "buy and buy". The acquisition is a major strategy for PepsiCo to increase its e-commerce genes. In recent years, PepsiCo has acquired some DTC brands to increase its online business, which is more conducive to brand digitization. The recent "double hundred acquisition" is a typical example. In February, Pepsi bought Baicawei, an e-commerce brand owned by Haoxiang Health Foods Co., Ltd., for $705 million. In addition to Pepsi's desire to develop "healthy food", Baicawei's e-commerce gene is the key. Data show that Baicaowei accounted for 95.22% and 95.64% of e-commerce revenue in 2018 and 2019, respectively, which means that Baicaowei can make up for Pepsi's lack of e-commerce genes.

Pepsi set up an online channel service team of 200 people as early as 2015, and their role is to design packaging and marketing strategies for products that are suitable for online sales.

In May, PepsiCo launched two e-commerce sites, snacks.com and PantryShop.com. The website provides home delivery of its products within two days to expand its e-commerce business.

It is reported that the website took only 30 days from planning to landing, which is a quick decision-making efficiency for such a large company, reflecting the importance PepsiCo attaches to its e-commerce business.

In contrast, Coca-Cola Company still regards offline distribution channels as core competitiveness.

As early as 2011, Coca-Cola Company tried the water subscription model in Australia to sell personalized bottled cola, but the attempt was more like marketing than channel innovation. In recent years, in order to better adapt to offline consumption, Coca-Cola Company continues to shrink the packaging to facilitate carrying. (the greater profit brought by small packaging is also one of the "contributors" that Coca-Cola Company's financial performance has exceeded market expectations in the past five years.)

In February this year, Coca-Cola Company Japan reduced the packaging of the core 500ml to 350ml and launched a new specification of 700ml for two people to drink.

Obviously, the "small package" that brought Coca-Cola Company back to life is not suitable for online sales. Coca-Cola Company CEO James Quincy said at the Q1 earnings report in 2020 that in order to cater to consumers' online shopping habits, Coca-Cola Company focused on larger packaging and increased online promotion.

Coca-Cola Company who missed the Olympic Games and Pepsi who caught up with the Super Bowl

Sports events with great exposure have always been a battleground for major brands, and Pepsi and Coca-Cola Company are no exception.

In 2019, Coca-Cola Company spent 3 billion US dollars to sign a 12-year cooperation treaty with the Olympic Committee, consolidating his exclusive brand sponsorship position. The "Olympic year" can not only improve the brand volume, but also provide an opportunity for consumer market education in the host city. The postponement of the Tokyo Olympic Games is an incalculable loss to Coca-Cola Company, a long-time sponsor of the Games.

Football leagues from all continents were also cancelled / postponed in the first half of the year. This is also an area that Coca-Cola Company has sponsored all the year round. However, the sponsorship of the Football League has less and less effect on Coca-Cola Company's sales. According to CMSCMEDIA analysis, the audience of football matches prefer middle-aged people over 30 years old, whose taste is basically fixed, and marketing has less effect on them.

PepsiCo won back a game with Super Bowl sponsorship in February, when the epidemic was not fully broken out. Thanks to a massive advertising campaign during the period, PepsiCo's net profit rose 7.7% at the end of the quarter ended March 21. Industry analysts point out that Super Bowl sponsorship has a positive impact on Pepsi's influence among young people.

However, PepsiCo's chief financial officer also said in recent days that he would reduce unnecessary advertising and marketing spending, but would maintain the necessary marketing efforts, such as strengthening the advertising of snacks and Quaker oatmeal products. and focus on marketing that drives sales more directly.

Among the first-quarter results of many brands, "The worst is yet to come" is the most common phrase used by CEO. The epidemic may have changed more than we thought.