Why Things Didn't Go Better for Coca-Cola

Gulp! After losses in Russia and the Far East, the soft-drink giant axes one fifth of its global workforce.

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Not even all those spoonfuls of sugar in every glass of Coke will help thismedicine go down. Coca-Cola announced plans Wednesday to eliminate more than one fifth of its 29,000 global workforce, and its new chief warned analysts to lower their projected annual growth targets for the company. The axe fell on 3,300 U.S. jobs and 2,500 overseas positions as new CEO Douglas Daft sought to absorb the delayed impact of the global financial crisis of 1998-99, which had a dramatic impact on demand for U.S. soft drinks. "The key factor in the company's performance is a write-down of its assets in Russia and former Soviet territories, where it had a meltdown a couple of years ago," says TIME business editor Bill Saporito. "Pepsi declared its Russian operations distressed assets some time back, and analysts had wondered how long Coke could continue to carry its own. This was just a case of reality catching up with the corporation."

Although the company's fourth-quarter performance was slightly better than predicted, Coke also announced that inventory cuts by its bottling company partners around the world would result in a one-time charge this year of between 11 and 13 cents a share. It would also cost the company some $800 million to handle the job cuts, which are expected to save the company $300 million a year. The Atlanta-based corporation also plans to decentralize its operations, bringing its management closer to the consumer in its various global markets. Atlanta was criticized last year for reacting too slowly to a series of consumer crises in Europe, which dented the company's image. "It may be a good strategy for the new CEO to take the big bath in one fell swoop and then move on," says Saporito. "But it's obviously going to be a huge blow in Atlanta." Indeed, some 2,500 residents of that city may soon not feel much like buying the world a Coke.