Coca-Cola Japan in trouble as slumping sales, other problems put it in the red

Higher prices, lower asset values are hurting the soft drink king.

Few companies have as much of a presence in the world as Coca-Cola. As a matter of fact, there are only two countries in the world where Coca-Cola is not sold, Cuba and North Korea. In Japan, the company and its huge variety of soft drinks are as popular as in any other country, thanks to a lineup that features intriguing original flavors such as Demon Lemon canned cocktails, Clear Lime Coke, and Peach Coke.

But in spite of that, Coca-Cola Bottlers Japan, Inc. (CCBJ), the company that manages the production and sales of Coca-Cola beverage products in Japan, might be in trouble. They’re experiencing a slump in sales that has put its estimated yearly profit billions of yen in the red, which has also caused their total assets to plummet as well.

▼ In spite of great marketing ploys, like special, limited edition bottles for major Japanese cities.

Perhaps because Coca-Cola raised the prices of its 1.5 liter (50.7-ounce) bottled products earlier this year, sales of those products between January and June this year were 3.2 percent less than the same period last year, at 433.7 billion yen (about US$4.12 billion). Business income, money generated by company and trade operations, also dropped 64.4 percent.

But what really put them in the red was a huge markdown in the estimated value of the company’s goodwill. The company’s operating income (gross income minus operating expenses like wages, asset depreciation, and cost of goods sold) was negative for the second quarter, which means expenses well exceeded the 433.7 billion yen in profits. A significant factor in Coca-Cola’s expenses is a recorded loss of goodwill valued at 61.9 billion yen, an adjustment made to correct a previous over-estimation of the value of the company’s intangible assets.

▼ One of Coca-Cola’s newest products, Coca-Cola Energy

As a result, CCBJ recorded a net income of -64.5 billion yen for the second quarter of 2019, and Coca-Cola Japan is now predicting a net loss for the end of the year of 56.7 billion yen. This is bad news for Coca-Cola Japan, who’d likely hoped to finish in the black thanks to the price increase, a plan which has failed to produce such results.

▼ Coca-Cola Plus, Coca-Cola’s healthiest soda

Nevertheless, the company intends to try improve outlooks with major company changes, according to a statement from Coca-Cola Japan themselves: “[We are] planning to carry out structural transformation and capital investments to improve cost efficiencies and to drive medium and long-term sustainable growth,” Coca-Cola says, which could possibly mean a whole host of things, from buying new assets to eliminating existing sub-companies, but which will certainly mean less cash-flow in the short run.

Let’s hope that Coca-Cola Bottlers Japan can make it through safely! We’d hate to see their special flavors and unique bottles disappear from convenience store shelves.

Source: NHK News Web via My Game News Flash, Coca-Cola Bottlers Japan, Inc.
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at 10:36

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