Will Breon
Econ230
Week 6, Post 2
Analyizng Impacts of recent economic activity on Coca-Cola-Company
The Impacts of inflation, Unemployment, and Supply Shortages
Inflation can be generally defined as “an increase in the general or average level of prices” (Cowen & Tabarrok, 2021). With increasing inflation rates that just broke a 30 year high in regard to inflation percentage growth year over year, the prices of many goods are increasingly expensive. In response to these occurrences, the Coca-Cola Company announced in late 2021 that they would increase prices to offset rising expenses. CEO James Quincey said "there’s pressure built up for '22 that will necessitate some price increases. We intend to manage those intelligently, thinking through the way we use package sizes and really optimize the price points for consumers" (Doering, 2021). Coca-Cola’s saw revenue decrease around 4 billion, from $2019 to 2020 (Coca-Cola Company, 2021).
The impacts of unemployment have also been felt throughout the country in many ways, as “unemployment rates have soared from under 4% in 2019 to over 14% in 2020–largely in part to shutdowns from COVID-19” (Cox, 2021). Since then, unemployment rates have relatively steadily declined, with the current unemployment rate sitting around 4.6% according to the Bureau of Labor Statistics (Cox, 2021). With supply chain issues and global threats still in play, there is still risk for a resurgence in unemployment rates, but the general belief is that the highest unemployment rates are behind us for the immediate future.
Coca-Cola has experienced issues from these supply chain shortages first hand, with large shortages in aluminum cans—“it had been experiencing a number of logistics challenges” (Partridge, 2021).
Intertemporal Substitution and Labor Adjustment Costs:
To help combat these economic factors, Coca-Cola offers multiple developmental programs to help motivate employees and maximize both productivity and fulfillment in employees that are top performers within the company. The Coca-Cola company also offers a program called Red Tag, through which employees can earn merchandise and opportunities to travel, again based on performance. “Twenty-six global associates were selected and the winners blogged about their experiences on our internal website” (Coca-Cola Company, 2021).
Labor Adjustment Costs can be understood as the costs of workers transitioning from declining sectors of the economy to growing sectors, as well as costs of hiring and firing workers. The Coca-Cola Company was affected by these changes in the economic environment as their New York City delivery partner was “struggling to recruit enough truck drivers in the city, which one supermarket chain owner said was leading to product shortages in his stores” (Dean, 2021). In response to this, Coca-Cola cut dozens of brands, a move laying off over 2,200 workers, with the goal of “invest in growing brands like Minute Maid and Simply Juices and fund the launch of new products like Topo Chico Hard Seltzer, Coca-Cola Energy, and Aha sparkling water” (Durbin, 2020). The projected costs of the severance packages for employees as a result of this decision were around $350 million to $550 million, which is no minor commitment for Coca-Cola, highlighting their confidence in the direction of these newer products (Doering, 2020).
We see the many impacts that recent events, including COVID-19 and global invasions have had on economic forces such as inflation, unemployment, the supply chain, and impacts that companies like Coca-Cola have to constantly adapt to and manage. Coca-Cola is a true blue chip company and I believe that they have seen rougher days and will continue to expand and grow in both the immediate and long term future.
References
Coca-Cola Co. (2021, October 6). Coca-Cola Company statistics and Facts. Market.us. from https://market.us/statistics/food-and-beverage- companies/coca-cola-company/
Coca-Cola Co. (2021). Why work at The Coca-Cola Company - Careers. The Coca-Cola Company: Refresh the World. Make a Difference. from https://www.coca-colacompany.com/careers/why-work-at-the-coca-cola-company
Cowen, T., & Tabarrok, A. (2021). Modern principles of economics (4th ed.).
Cox, J. (2021, November 05). Job creation roars back in October as payrolls rise by 531,000. from https://www.cnbc.com/amp/2021/11/05/jobs-report- november-2021.html
Dean, G. (2021, September 16). Coca-Cola Delivery Driver Shortage in NYC, store runs low of Stock. Business Insider. from https://www.businessinsider.com/coca-cola-trucker-labor-shortage-new-york-city-supply- chain-2021-9?amp
Doering, C. (2021, May 04). As inflation rates, food and beverage manufacturers pass higher costs on to consumers. https://www.fooddive.com/news/as-inflation-rages-food-and-beverage-manufacturers- pass-higher-costs-on-to/599148/
Doering, C. (2020, August 28). Coca-Cola to offer buyouts to 4,000 employees, with layoffs to follow. Food Dive. from https://www.fooddive.com/news/coca-cola-to-offer-buyouts-to-4000-employees-with- layoffs-to-follow/584333/
Durbin, D.-ann. (2020, December 17). Coca-Cola laying off 2,200 workers as it pares brands. AP NEWS. from https://apnews.com/article/layoffs- james-quincey-coronavirus-pandemic-e3364940775d662b92f78fb97c8af5da
Partridge, J. (2021, September 02). Coca-Cola's supply chain under pressure due to shortage of cans. from https://www.theguardian.com/business/2021/sep/02/coca-colas-supply-chain-under- pressure-due-to-shortage-of-cans