Coca-Cola share price up, to axe jobs under cost-cutting plan

Coca-Cola Co intends to trim its workforce by at least 1 000 to 2 000 employees globally in line with its cost-cutting $3-billion plan announced in October, after the beverage maker posted disappointing results for the third quarter.

Under its plan Atlanta-based Coca-Cola will be undertaking its largest employee lay off in 15 years during the upcoming weeks, the company already canceled its generous Wall Street Christmas party and encouraged its executives to use more modest ways of transportation, rather than limousines.

The Wall Street Journal reported, citing people with inside information on the matter, that early estimates expect the company, which had 130 600 workers at the end of 2013, to part ways with around 1 000 to 2 000 employees. However, one person said that job cuts could extend those numbers. Back in 2000 Coca-Cola axed more than 5 000 staffers due to a similar situation of declining sales and profit.

For the third quarter, the company stated a 14% drop in profit and said it would not reach its full-year target either, blaming poor soda sales, its prime source of revenue.

The center of the employee cuts is expected to be at Coca-Colas headquarters and regional offices, where around 10% corporate positions could be axed. However, the move is not expected to largely affect bottling and distribution operations, in which 85% of all employees are involved.

Coca-Cola intends to tune down bureaucracy by implementing standardized working protocol across regional businesses, including offices in Mexico City, Hong Kong, Istanbul and London. CEO Muhtar Kent said those action are aimed to “rewire our organization for faster and more effective decision making,” with global units communicating directly with the companys headquarters in Atlanta.

Coca-Cola is still calculating the number of workers which would be dismissed. According to people with knowledge of the matter, job-cut notices will start reaching North American employees as soon as January 8 and by January 15 international workers will be given a timeline for cuts.

“We certainly can do things more efficiently,” said Brent Hastie, vice president of strategy and planning, in an interview at headquarters, cited by the Wall Street Journal.

However, shareholders have mixed feelings about the restructuring plan, which is due to 2019, with some saying that the job-cuts would not be sufficient.

“Their track record in cutting costs has not been very strong, so there’s a reluctance among investors to believe in them,” said Ali Dibadj, an analyst at Sanford Bernstein, cited by the Wall Street Journal.

The Coca-Cola Co gained 0.95% on Monday and an additional 1.46% on Tuesday to close at $42.97 in New York, marking a one-year increase of 7%. The company is valued at $ 188.21 billion. According to the Financial Times, the 21 analysts offering 12-month price targets for The Coca-Cola Co have a median target of $44.00, with a high estimate of $53.00 and a low estimate of $37.00. The median estimate represents a 2.40% increase from the last price of $42.97.