Coca-Cola Amatil sales plunge on widespread COVID-19 lockdowns

Coca-Cola Amatil boss Alison Watkins has signalled the company will make cutbacks if Australia falls into recession, as the drinks giant confirmed lockdowns and venue closures have smashed its sales in the past two months.

The company revealed its sales volumes were down 33 per cent in April as the restrictions severely disrupted the traditionally peak trading periods of Easter and Anzac Day, and Ramadan in Indonesia.

While the impact in each market differed, the company said its gross margins were hit significantly, particularly in Australia, as lockdowns generated changes in the channels where drinks were purchased and in the mix of drinks sold. The move took some of the fizz out of Amatil's sales, with consumers shifting to lower margin drinks.

Ms Watkins told analysts and investors that Amatil would carefully assess the resources it needed in a recessionary environment. "In parallel with handling the (COVID-19) situation, we are very focused in each of our businesses on what we think the longer-term resourcing shifts and potential reductions that we might need to make in our businesses are. And I think those will be different in each business," she said.

"If there is a recessionary environment, which seems likely, we will need to respond to that and make sure that we've got the right level of resourcing to serve our customers, to produce our product," she said.

In a subsequent interview with The Age and the Herald, when asked if this meant that job cuts were likely at Coca-Cola Amatil this year, Ms Watkins said it was too early to say.

"We really don't know what lies ahead well enough. We want to preserve the strength of our business and what it is that supports our fantastic brands and our customers ... So we're not about to make any short-sighted decisions on that front," she said.

Ms Watkins said Australia was likely to experience a recession this year. "Even under the most optimistic scenarios, growth will go backwards this year. And just the loss of activity in Q2 and Q3 is likely to ensure that," she said.

"I just can't see a scenario where there won't be substantial negative growth this year. And then the question obviously is how well we can recover. And it's encouraging to see the government listening to business, big business, small business, the ACTU and other stakeholders to really find ways to get the economic recovery accelerated as much as possible," she said.

Coca-Cola Amatil said the easing of restrictions in mid-May generated a modest improvement in group trading conditions, with volumes down about 26 per cent in the first three weeks of May compared to the prior corresponding period.

Coca-Cola reported that its alcohol sales volumes were down about 35 per cent in Australia in April as the strong trading periods of Easter and Anzac Day were hit by lockdowns.

The trading update follows an update in April when Amatil said it would cut costs by $140 million in 2020. At the time it revealed plans to freeze staff recruitment and cut spending on travel and consultancies by more than $50 million.

In Indonesia, Amatil's volumes and revenue were down about 40 per cent in April compared to last year, as social distancing measures were introduced and malls, cinemas and fast food chains were closed in the Muslim nation.

Morgans analyst Belinda Moore said analysts were likely to deliver earnings downgrades overnight following Coca-Cola Amatil's trading update.

"The positive is that it looks like, hopefully, April was as bad as it gets, as its regions and end markets slowly start to open up. But it's going to be a gradual process," she said.

In March Coca-Cola Amatil ditched its earnings guidance, citing the uncertainty created by the coronavirus pandemic.