The Fall of Coca-Cola, the Symbol of American Capitalism

Pro Sports Postponed One After Another Due to COVID-19 Spread

Bars and Other Entertainment Facilities Face Sales Blow Due to Business Suspension

[Asia Economy Reporter Kwon Jaehee] The novel coronavirus infection (COVID-19) is toppling the dominance of Coca-Cola, known as the most American company. Coca-Cola, which sells more than 2 billion bottles daily and 22,000 cups per second in over 200 countries worldwide except North Korea and Cuba, saw its sales plunge 25% this month, raising concerns about future prospects.

Coca-Cola recently announced in its first-quarter earnings report that global sales this month decreased by 25% compared to the same period last year. While Coca-Cola's global sales increased by 3% in January and February this year compared to the previous year, sales sharply declined last month. Due to the uncertain future, the company also withdrew its earnings forecast for this year. As sales plummeted, the stock price also crashed, falling from $54.99 per share at the beginning of the year to a year-to-date low of $36.37 per share on the 23rd of last month. On the 24th, the stock price recorded $45.43 per share.

The decline in Coca-Cola's performance may be a natural outcome. The spread of social distancing has led to the cancellation of sports events one after another, and the suspension of operations at bars and restaurants has had a significant impact. The sales proportion from bars and sports events accounts for about half of Coca-Cola's revenue, making it absolutely critical. James Quincey, Coca-Cola's CEO, expressed concern, saying, "There is great uncertainty because we do not know how long measures such as social distancing, home quarantine, and movement restrictions in various countries will last," and added, "The impact on earnings in the second quarter, when the effects of COVID-19 become more pronounced, will be considerable."

However, Coca-Cola's performance is meaningful in that it cannot be confined simply to the corporate domain. It has long been established as part of American culture beyond just a beverage. The professional sports and bars responsible for Coca-Cola's sales are also symbols of American culture.

Coca-Cola's growth followed a curve similar to American hegemony. Coca-Cola emerged as a symbol of capitalism after World War II, when the United States began to exert influence worldwide. In 1950, it was the first consumer product, not a person, to appear on the cover of the American news magazine Time. After Mao Zedong, who called cola the opium of capitalism, passed away, Coca-Cola succeeded in entering the Chinese market. The American economic magazine Business Insider reported that the only two countries Coca-Cola has not entered are North Korea and Cuba. In 2001, Coca-Cola's manufacturing plant in Andhra Pradesh, southern India, was destroyed by the extremist anti-American group People's War Group, making it a major target of anti-American forces worldwide. As the United States effectively failed in its COVID-19 response this year, Coca-Cola's performance also plummeted. This has led to interpretations that Coca-Cola's performance serves as a barometer of global hegemony competition after the COVID-19 crisis.

[Image source=Pixabay]

Some argue that Coca-Cola's crisis began even before the outbreak of COVID-19. In the 'Best Global Brands 100' list published annually by the brand consulting group Interbrand, Coca-Cola held the number one spot in brand value for 13 consecutive years from 2000. However, after losing first place to Apple in 2013 and dropping to third place, it fell to fifth place in 2018. Coca-Cola's brand value also declined, reaching $63.365 billion last year, about one-third of the top company Apple’s $2.34241 trillion.

Global credit rating agencies have also taken a darker view of Coca-Cola compared to the past. Standard & Poor's (S&P) maintained Coca-Cola's credit rating at A+ in a report on the 6th before the earnings announcement but downgraded the outlook from 'stable' to 'negative.' S&P explained that the downgrade in outlook was due to "the global economic recession caused by COVID-19, which is expected to prevent Coca-Cola from improving its leverage ratio," and added, "This indicates the possibility of further rating downgrades within the next 12 months."

Moody's also maintained an A1 (stable) rating in a report on the 20th of last month but pointed out that acquisitions based on debt could weaken operating capacity and lead to a downgrade.

Coca-Cola stated that it will take necessary measures such as layoffs to reduce costs. Already, the coffee franchise Costa Coffee temporarily laid off about 16,000 baristas due to the COVID-19 crisis. CEO Quincey explained, "The COVID-19 pandemic is having a severe impact on some of our business segments," and CFO John Murphy said, "We plan to reduce unnecessary operating expenses in business units due to the COVID-19 situation."

This content was produced with the assistance of AI translation services.