On Tuesday (6/15), Cristiano Ronaldo, the football prodigy, did something that shook lots of parties at the press conference after a Euro 2020 football match between Hungary and Portugal. He slid a Coca-Cola bottle, one of the event's top-tier sponsors, that was placed in his table out of the frame and chose mineral water instead. This led to a fall in Coca-Cola's shares by 1.6% from US$56.1 each to US$55.2 each after the press conference ended (6/15). Coca-Cola also experienced a US$4 billion or equivalent to Rp57 trillion (exchange rate of Rp14,300/US$) loss in market value. The Coca-Cola Company's stock price on the US Wall Street exchange also fell significantly. In addition to the parent Coca-Cola Company (KO), whose trading was corrected on the New York Stock Exchange (NYSE), its bottling subsidiary also experienced a stock price correction. Shares of Coca-Cola Bottling Co. Consolidated (COKE) traded on the NASDAQ exchange also fell 1.74%, from US$417.70 to US$410.56 each, at the same time after Ronaldo's press conference. Meanwhile, the brand's nemesis and main competitor, PepsiCo Inc., has been rising onto the green zone since the beginning of NASDAQ's opening. Ronaldo's action was in no intention other than his preferences, as he has been undergoing a strict diet himself. Coca-Cola also responded to the incident by stating that everyone has their drink preferences as there are different tastes and needs.
Apart from the commotion, the question arises whether this incident was solely caused by Ronaldo or the current poor financial performance of the company. Based on the financial performance report released by the company, during the first quarter of 2021, Coca-Cola Company's revenue rose 4.87% on an annual basis to US$9.02 billion or equivalent to Rp129 trillion, compared to the previous quarter. It is the same as the previous year, which was at US$8.6 billion or Rp123 trillion. Despite the increase in revenue, the Coca-Cola Company's net profit fell 19.10% on an annual basis, from previously earning a net profit of US$2.77 billion or Rp40 trillion in the first quarter of last year. Now, the company's net profit dropped to only US$2.24 billion or Rp32 trillion in the first three months of this year. Earlier, in the fourth quarter of 2020, the company's revenue came in at US$8.6 billion, or down 5.5% from last year. It was slightly worse than expected. Weakness in Europe, Middle East, Africa, and North American was offset by a slight improvement in Latin America, yet not enough to move the needle. On the other hand, PepsiCo Inc. grew in Q4 and 2020, which puts it in a much better position than Coke going into 2021. PepsiCo Inc. reported US$22.46 billion in revenue, producing 8.8% quarterly growth and 4.8% annual growth. This growth continued into the first quarter of 2021, where PepsiCo Inc. reported its fiscal 2021 Q1 earnings on April 15th with GAAP EPS of US$1.24, which beat expectations by US$0.13. Revenue of US$14.8 billion climbed 6.8% year-over-year.
From this incident, we can clearly see that brand value is one of the core aspects that move stock prices. On the other hand, aside from the recent episode of the Ronaldo fiasco, one memorable incident was when most US biotech stocks plunged in 2015 after then president-candidate Hillary Clinton tweeted about pharmaceutical price gouging. Adding to that, Chip Wilson, the founder of Lululemon Athletica (LULU), claimed in a Bloomberg TV interview in 2013 that the new collection of jogging pants from Lululemon Athletica "simply didn't work for certain women's bodies." Since Wilson's TV comments, LULU stock has dropped by 44%. According to Investopedia, when a company has a positive brand image, it undoubtedly might impact the buying patterns of its target audience. Thus, we can witness that brand value will drive consumer spending and as the pattern goes, consumer spending is closely linked with the rise in the value of the stock market. As a result, a company should be aware of its brand value and ensure that its ambassador, advertisement, and the sentiment from the public does not comprehend a brand disaster. Lastly, we can discern from the Ronaldo and Coca-Cola incident that numerous catalysts, such as brand value, affect the value of the stock market.
Sources
CNBC Indonesia
Investopedia
The Athletic
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