The beverage company relies on artificial sweeteners from China to make their diet products, including Diet Coke and Coke Zero. As suppliers have delayed production and exportation in an attempt to contain the virus in China, the company may not be able to keep up with demand.
Among the artificial sweeteners used in Coca-Cola products are acesulfame potassium, aspartame, sucralose, cyclamate, saccharin, and steviol gylcosides. The company considers sucralose a "critical raw material," which is sourced from both China and the United States. However, sucralose product Splenda, which is used in Diet Coke, is sourced completely in the U.S. As for the rest of the sweeteners, Coca-Cola did not specify which ones would be affected by the disruption in the supply chain and the delays in exportation.
The company expects to see its case volume decline by two to three percentage points, while first-quarter earnings-per-share could drop one to two cents. Additionally, organic revenue could also decline by one to two percentage points.
As part of its annual report, which was released this past Monday, Coca-Cola included the information about coronavirus supply chain disruptions.
"We have initiated contingency supply plans and do not foresee a short-term impact due to these delays. However, we may see tighter supplies of some of these ingredients in the longer term should production or export operations in China deteriorate."On Friday, February 28, the company released a separate statement specifying the effects they expect to see as a result of the virus and added that they were taking precautionary steps with their employees in China to help contain the virus and avoid its spread.
"The safety and health of the company's associates remains a high priority. The company has implemented precautionary measures to protect employees in China, which includes providing face masks and hand sanitizers; installing temperature screening in offices and manufacturing facilities; and setting up health monitoring mechanisms across the Coca-Cola system in China."In addition to taking precautionary measures in China, Coca-Cola is donating funds to aid organizations in their attempts to treat patients infected by the coronavirus and prevent continued spread of the disease. The exact monetary amount has not been disclosed.
China ranks as the third-largest global market for Coca-Cola in terms of unit case volume.