Coca-Cola Amatil boss Alison Watkins warns of wages ‘cliff’

Coca-Cola Amatil’s chief has warned that the economy could fall off a cliff in September if JobKeeper is pulled prematurely.

Coca-Cola Amatil chief executive Alison Watkins. Picture: Ryan Osland

Coca-Cola Amatil chief executive Alison Watkins has sounded an upbeat note as businesses in Australia and New Zealand slowly come out of a coronavirus-­induced hibernation, but warned of concerns the economy could fall off a cliff in September if the government’s JobKeeper program was pulled prematurely.

Ms Watkins said there was a strong realisation on the part of the government to accelerate the recovery of the economy and “getting businesses back into business’’, and that rather than simply ending wages support abruptly there should be a more nuanced mechanism for taking the economy off life support.

“We all have to be very cautious about the recovery and the big milestone will be in September or October timeframes when we see JobKeeper support coming to an end, and also we see close to over 400,000 loans where interest rate deferrals have been implemented,’’ Ms Watkins said on Tuesday after Coca-Cola Amatil held its “virtual” annual meeting.

“That will be a bit of a crunch time when I think we will really get to understand what the lasting damage to the economy is and what the shape of a recovery might look like.

“There are quite a few businesses signalling concern about the ­potential cliff. There is a range of potential opportunities that might involve being a little more ­nuanced.

“For example, as certain sectors are able to get back into business versus other sectors that might have restrictions applying for longer, you might think about different forms of support that could create incentives for employers to hire new employees and get ­people into work.’’

JobKeeper is providing almost 3 million people payments of up to $1500 a fortnight, with Scott Morrison laying out his road map for a recovery in a speech to the National Press Club that will include the eventual end of the wages policy later in the year.

Ms Watkins, who is also working with the Business Council of Australia to help the government rebuild the economy, said there was “still some time, although not a lot of time” to make decisions on wages subsidies and other support policies.

After a brutal two months that has seen social distancing, home isolation and the shutdown of sports and other outside activities hit Coca-Cola Amatil’s sales volumes by more than 30 per cent, with some channels such as petrol stations suffering a 70 per cent collapse in beverage volumes, Ms Watkins said she was beginning to detect a pick-up in sales.

She was buoyed by the easing of restrictions in Australia and New Zealand, along with the promised resumption of sports, along with consumers feeling more confident about gathering together for social occasions.

“We are seeing very much as the outlets are able to open then we are getting orders again,” she said.

“We are getting customers up and running and importantly we are seeing consumers out and about and buying again.

“I don’t want to speak too soon, but so far so good and it has been really encouraging to see a bounce back in our customers’ business and therefore our business.”

Coca-Cola Amatil, which sells a large portfolio of drinks, juices and alcoholic beverages across a range of channels such as supermarkets, pubs, hotels, convenience stores and at sports events, earlier this year was forced to abandon its profit forecasts as the pandemic forced an economic lockdown. The company withdrew its guidance of single-digit earnings growth in 2020 as uncertainty driven by the pandemic rattled consumer confidence.

Widespread outlet closures and restricted trading affected the high-margin channels, resulting in volume transitioning to lower-margin channels and packs. This had a significant effect on margins, particularly in the Australian ­business.

In Australia, Coca-Cola Amatil experienced a near-30 per cent fall in volume in its non-alcoholic ready to drink category in April.

On-the-go volume in April was down 55 per cent on the previous corresponding period, and convenience and petroleum volume was down about 20 per cent. In the grocery channel, volume declined about 10 per cent as panic buying abated and consumers shopped less frequently. But in May, volumes were only about 26 per cent weaker as restrictions were relaxed.

In New Zealand in April, about 75 per cent of the company’s on-the-go customers were closed for business. Volumes at petrol stations were down as much as 70 per cent.

In Indonesia and Papua New Guinea, the Indonesian business was the hardest hit in the first two weeks of April, with volume down about 50 per cent due to social distancing measures.