Why does the recession proof Coca-Cola have so much cash?

As economies around the world continue to be shattered by the economic consequences of Covid-19, millions of business have found themselves running out of cash. Stemming from huge declines in demand for almost every good and service, this has forced many businesses to shut up shop entirely, with millions of people subsequently losing their jobs.

One business however which has not experienced such dire consequences is Coca-Cola, a company which has also been called “recession-proof” after their historical ability to not only survive, but in some cases thrive during every financial crisis which has come its way.

Many experts point to the beverage giant’s impressive annual cash-flow as the key to their success. Cash-flow here referring to the net amount of cash coming in and out of a business.

With a presence in over 200 countries, and owners of four of the world’s five best selling non-alcoholic drinks: Coca-Cola, Diet Coke, Fanta, and Sprite, Coca-Cola is able to generate huge amounts of cash due to the sheer scale of their business operations.

Through their business model of selling vast quantities of their beverages directly to consumers in supermarkets, as well as in venues like stadiums, movie theatres and restaurants, Coca-Cola ensures that cash flows into the company with ease.

Despite the global spread of Covid-19, the company still reported an operating cash flow of $556 million in the first quarter of 2020, albeit down from $788 million in the same period a year ago. Following restrictions on restaurants and large gatherings, it is no surprise that cash flow was down. $588 million however is still a huge amount of cash, and shows how the business is able to weather any economic storm. In fact, during the last recession of 2009, the company even grew its operating cash flow from $7.2 billion in 2007 to $8.2 billion in 2009.

With addictive qualities, strong brand loyalty, and multi-million-dollar contracts with large venues, even the most pessimistic of commentators is unlikely to worry much about Coca-Cola at present. Income may be down slightly, but it will bounce back quickly, and the company will continue to thrive as long as people continue to drink!