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Coke to trim in Moscow
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September 30, 1999: 10:30 a.m. ET
Soft drink maker plans to reduce office staff by a third; bottlers unaffected
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LONDON (CNNfn) - Coca-Cola Co., crippled by the aftermath of a European contamination scare, plans to cut a third of the staff in its Moscow office as it seeks to rein in costs and recoup lost profits, the company confirmed Thursday.
The cuts represent a small fraction of Coke's vast Russian workforce. The Moscow head office is a relatively small operation that employs 130 people who handle local marketing and administration for the Atlantic-based Coca-Cola Co.
Nearly 6,000 other workers in Russia are employed by a subsidiary, the Coca-Cola Bottling Co., which operates three companies that oversee bottling and distribution at 12 plants across the country. These workers will not be affected by the latest round of cuts.
A Coca-Cola spokesman was careful to stress Friday the company remained committed to its Russian operations.
Nonetheless, the layoffs, at a high-profile Coke office in the Russian capital, are liable to be seen as another symbolic blow for the soft drink maker after a string of recent setbacks.
The company is trying to reverse a downturn in worldwide unit sales and lure back European customers scared off when scores of Belgian schoolchildren fell ill after drinking tainted Coke (KO) products.
Those bouts of adversity -- coupled with the recent earthquake in Turkey, floods in China and rising soft drink prices in North America -- forced the Atlanta-based company to issue a third-quarter profit warning earlier this month.
In Russia, where Coke has invested $750 million since 1991, the company's sales volume has dropped about 60 percent since the country's ruble collapsed in August 1998, people close to Coke told the Wall Street Journal, which initially reported the job cuts.
Alexander Chernov, the Moscow office's spokesman, told the newspaper Coke planned to ax 39 of about 130 employees, ranging from secretaries to managers. In previous layoffs, in the wake of the ruble collapse, Coke's Moscow bottler axed 900 workers, while regional bottlers also laid off some workers.
Chernov said around half of those dismissed in the latest round of cuts at Coca-Cola Co.'s administrative office likely would be hired by a Coke-owned bottler that has opened an administrative office in Moscow.
The Moscow cuts had prompted concerns in the analyst community that Coke may have to resort to a write-down of its Russian investment, the Journal said.
But Paul Pendergrass, a Coke spokesman, insisted Thursday the company had "no plans" for a write-down.
In its recent profit warning, Coke cut its per-share earnings projection for the third quarter by about 2 to 3 cents, to 31 to 33 cents. Analysts had been expecting EPS of about 36 cents.
But Coke's chief executive, Douglas Ivester, said at the time he expects to see an earnings upswing for the second half of the year.
"Global economic conditions have been progressing as we expected during the quarter, thus resulting in the gradually improving volume trends," Ivester said. "I am pleased to say that we are experiencing improving unit case volume trends in each of our operating groups when compared to the trends of the previous two quarters."
Coke shares were 1/4 higher at 49-1/8 in early trading Thursday in New York.
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Coca-Cola
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