Coca-Cola Co. said yesterday that it will slash 6,000 jobs--about 20 percent of its work force--in a bid to reduce the power of its Atlanta headquarters and transfer more authority to local units in more than 200 countries.
"The world in which we operate has changed dramatically," said Doug Daft, who will become chairman in April and is moving quickly to place his stamp on the struggling soft-drink company. Daft added that Coke "must take our business to where our business is."
About 40 percent of the headquarters work force--2,500 jobs--will be eliminated. About 2,700 jobs will be cut outside the United States (about 14 percent of the company's non-U.S. work force) as well as 800 jobs in U.S. operations outside Atlanta, including one job in Coke's Washington office.
"Coke has been very centralized in Atlanta. This is probably, in the long run, going to make them more nimble," said Skip Carpenter, a beverage industry analyst with Donaldson, Lufkin & Jenrette. Still, Carpenter said, the layoffs will be painful and the outlook for the company may include slower growth.
Indeed, Coke shares fell more than 4 percent in heavy trading after the announcement, partly because of the short-term profit outlook, analysts said. In trading on the New York Stock Exchange, Coke closed at $63.06 1/4, down $2.81 1/4.
Daft was named last month to replace M. Douglas Ivester, who announced that he would retire after two years as chairman and chief executive, a period that included setbacks resulting from the Asian economic downturn, problems dealing with regulators in Western Europe over acquisitions and product recalls, and a sharp decline in the company's stock, once a darling of Wall Street.
Daft has moved quickly to change Coke's approach to managing the business "with a decentralized focus on local markets," said Carpenter, adding that he expects still more changes.
"It's a huge, dramatic change," said John Sicher, editor and publish of the Beverage Digest. As the best-known brand name in the world, "the company has to be very close to hundreds of different markets," he said. "This will also allow them to have closer relations with local governments and regulators.
"Daft spent his career building and running the business in Asia," Sicher said. "He knows what the Coke troops on the ground can do and intends to give them a lot more power."
Coke also announced a fourth-quarter net loss of $45 million (2 cents per fully diluted share), and annual profits for 1999 of $2.43 billion (98 cents). Those numbers compare with fourth-quarter 1998 earnings of $597 million (24 cents) and annual earnings of $3.53 billion ($1.42) in 1998.
The company said it would have had a profit of 31 cents per share in the fourth quarter of 1999 except for nonrecurring items that included the write-off of certain assets and the impact of the company's product withdrawal in Europe.
Daft said the outlook for 2000 will be affected by Coke's organizational realignment and by a plan to reduce the inventory of concentrates in the hands of bottlers. That move will reduce the company's earnings by about 11 to 13 cents a share, Daft said.
Coke estimated that the job cuts will save $300 million a year but earnings this year would be reduced by $800 million before taxes to cover the cost of the realignment.
Business: Beverages, including Coca-Cola, the world's No. 1 soft drink.
Brand names: Coca-Cola, Diet Coke, Sprite, Nestea, Hi-C, Minute Maid, Fruitopia.
Origins: Coca-Cola was invented by Atlanta pharmacist John Pemberton in 1886; by 1895, Coca-Cola's fountain drink was available throughout the United States. The firm bought Minute Maid in 1960 and launched several brands in the following decade. Under Chairman Roberto Goizueta, it rebounded quickly in the mid-1980s after an attempt to change Coke's formula was roundly rejected by consumers.
1999 sales: $19.8 billion
1999 net income: $2.4 billion
Closing stock price: $63.06 1/4, down $2.81 1/4
Ticker symbol: KO on the NYSE
Web address: www.cocacola.com
SOURCES: Hoover's, Bloomberg News