Playing to Win

October 1, 2005
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Playing to Win
By SARAH THEODORE
Coca-Cola Enterprises change the rules
In beverage marketing, it’s widely believed that the larger the company, the less responsive it will be to changes in the marketplace. Coca-Cola Enterprises, the largest soft drink bottler in the world, knows firsthand the challenges that come with size, but it is hoping to change that rule with a new “one company” focus and a slimmed-down operating structure.
Despite its large company stature, Atlanta-based CCE actually is made up of many smaller bottlers acquired over the years and pieced together to form one company. Doing away with what remains of disparate operating systems and uniting those groups under a common operating framework has been a priority, says Terry Marks, president of the company’s North American business unit.
“If you think back on the way this company was first put together and how it has evolved, we are the aggregation of many independent bottlers with their own cultures, processes and ways of doing things,” he says. “We have reached a point in our development where we really need to operate more like one company across North America.”
The changes will make the company easier for large national retailers to do business with, and it will allow CCE to meet its own desire to be more responsive, faster to market, and in Marks’ words, “play to win.”
“There’s a very big difference between playing to win and playing not to lose,” Marks says. “When you play not to lose, people tend to be very tentative, and they’re afraid of making a mistake. But playing to win involves taking calculated risks.
“We’re not going to achieve success in the long run by doing things the way we’ve always done them,” he says. “Once you come to that realization, it pushes you into areas where you can be comfortable taking risks.”
The company devised its new operating framework on that tenant, focusing on building three key world-class capabilities — revenue growth management, sales and customer service and supply chain — and the role the entire company plays in achieving those capabilities.
“The energy and dedication of our people makes this company great, and their support of this new framework is what will make it a success,” Marks says.
From pricing to value-creation
Revenue growth management usually concerns pricing strategy, but according to Hal Kravitz, vice president of North American business development and chief revenue officer, CCE has expanded the way it thinks about revenue management to a much broader value-creation philosophy based on research and collaboration with brand owners such as The Coca-Cola Co. and Cadbury Schweppes.
“When you operate in a decentralized environment across diverse markets that are comprised of many bottling companies with different packages and brands, it can get quite complicated,” Kravitz explains. “So we spent a lot of time building solid modeling and implementation tools around sound pricing strategy by geography, customer segments, package and product type — essentially, we are finding the balance between the art and science of our approach.”
Kravitz describes the core of revenue growth management as identifying business opportunities through research provided by brand owners, as well as retail data and syndicated data such as household panel research.
“It’s a combination of the brand owners having a lot of good information and using the other data to figure out where we want to go,” he says. “It’s identifying market opportunities based on those insights — what categories of products do we need to compete today, tomorrow, the next two to three years, and down the road.
“This process will enable us to understand and identify where those opportunities are going to be, not just products or packages, but also what other distribution channels consumers are shifting to,” Kravitz says.
With those opportunities identified, the Coca-Cola system plans to step up innovation in both carbonated soft drinks and other beverage categories. The company spent much of the summer concentrating on diets, with the rollout of Coca-Cola Zero and Diet Coke sweetened with Splenda, and most recently, new Fresca flavor extensions and packages.
 “We’ve been pleased with the new zero-calorie products we’ve introduced,” Marks says. “Both Diet Coke sweetened with Splenda and Coke Zero are on target from a volume standpoint, and from a profit standpoint, they are a little bit ahead of plan because of the mix.”
But he points out, being faster to market doesn’t mean unrealistic new product expectations. “The great brands in this business were not built in three months, they were built over years and years,” he says. “We all have to remember that we need to be patient. It takes time for consumers to change consumption habits.”
CCE’s North American business unit has stated its destination as having the No. 1 or strong No. 2 brand in every category in which it participates.  To facilitate that, it has developed a “build or borrow” attitude toward innovation that allows it to add to the product portfolio in differing ways. The company can “build” products by working closely with brand owners such as The Coca-Cola Co. or it may “borrow” products through distribution agreements such as the ones signed this summer with Rockstar Inc. and Bravo! Foods International.
“We want to identify where consumers are going, and then based upon the development of any individual category, we’ll make a decision as to whether it’s best to build or borrow a brand,” Marks says. “It will differ category by category.”
Of course, pricing is an essential part of revenue growth management, and the company is working to develop a more structured pricing system based on brand, package and retail channel.
“It all comes back to creating and maximizing value,” Kravitz says. “It doesn’t mean one price across the United States or one package, but we’ll look for natural geographic breaks and price zones ... again, bringing science to the decision-making process.”
The company also plans to centralize a lot of the commercialization tools for its field organization, creating programs at the North American business unit level and turning them over to field personnel to localize and bring to life in the marketplace. Kravitz stresses the importance of the frontline in ensuring the success of its brand programs.
“We give them all the rationale and the logic so they can effectively sell,” Kravitz says. “It’s really soup to nuts — everything they would need to effectively launch a brand and implement a brand initiative.”
Retail partnerships
In addition to developing superior commercialization in stores through its field organizations, CCE has made retail partnerships one of its essential capabilities, and it has devised several programs that it hopes will benefit both itself and its customers.
Mark Schortman, vice president of North American sales and chief customer officer, says the company wants to create collaborative business development plans with customers that allow Coca-Cola Enterprises to learn from the retailers’ insights and share their own expertise to jointly grow the beverage categories.
The company has implemented or is in the process of implementing a number of programs for achieving its execution goals that include working with retailers on several levels. One plan is for a select few retailers who choose to be part of an ongoing initiative, with long-term goals.
“This is for a series of customers who are business and industry leaders who choose to invest time with Coca-Cola and our brands,” Schortman says. “They are willing to share custom consumer analytics so we can make better decisions based on their consumers and shoppers. They have a willingness to invest in future solutions and in working together to find solutions.”
The programs are less about pricing and more about finding opportunities that create value for the customer and the consumer, he says. “They tend to be our larger growth customers,” Schortman says. “It’s an alignment between two parties who want to invest the time and effort to grow the business together. They span every channel, within every customer segment we do business.”
But the company is not only concentrating on the biggest customers; it is implementing collaborative planning programs with all of its customers, big and small.
“We have macro consumer insights that we can share with all customers,” Schortman says. “We have 27 years of studies from the Coca-Cola Research Council globally ... there’s a lot of work from around the world that we can already share with customers.
“The biggest issue is taking what the information says and asking ‘So what?’ How do we move it from strategy to execution ... being able to make informed decisions, take it forward and take calculated risks,” he says.
The company executes programs in the marketplace by tailoring opportunities to its customers, and it often makes use of events or properties such as sports venues.
Schortman says it also has placed high importance in integrity around customer agreements as another of its stated goals. “The key measurement is around better consistency and performance-based reinvestment,” he says.
Removing decision layers from the organization has been a goal on all levels, especially as it pertains to marketplace execution.
“The new organization really creates a bias for action,” Schortman says. “You marshal the energy you have in the business — we have incredible energy and passionate people — and then it’s about directing the focus.”
“As you de-layer the organization, it brings clarity in two ways, the strategy from the North American Business Unit to the field organization, and feedback from the field organization that it’s working,” Schortman says. “By having fewer layers, the clarity of communication both ways increases, for both speed and accuracy.”
“I would absolutely expect and hope that customers would feel the effect of this because we should be much easier to do business with,” Marks adds. “We will be able to make decisions more quickly and implement programs and initiatives in a more consistent manner across the country.”
End-to-end alignment
The third leg of CCE’s new operating structure is supply chain, and Ed Sutter, vice president of supply chain for North America, says his organization’s inclusion in the new framework speaks to the company’s effort to streamline all of its operations into a unified company.
“It’s very significant that supply chain is recognized as a key capability,” he says. “If we can’t be world class at supply chain, we won’t reach the destination that we’ve set out for ourselves.”
The supply chain goal is to align all functions end to end — from raw material to retail scanner.  It’s an area on which the company hasn’t always concentrated in the past, but Sutter says it will make CCE more efficient and effective in producing quality products and enabling top-line growth.
“A world-class supply chain doesn’t separate manufacturing from transportation, distribution and merchandising,” Sutter says. “It’s a single supply chain that is optimized at the whole vs. sub optimized at the components.”
While CCE is the largest Coca-Cola bottler, it is not the only one, and Sutter and his team are also focused on aligning with other bottlers in the system.  And Coca-Cola North America also has its own supply chain organization that handles Powerade, bottled water and foodservice.
“Those are huge supply chains that we are working very hard to align ourselves with and to make sure we’re taking advantage of all our synergies,” Sutter says.
While ideas about innovation often are limited to new products, Sutter says CCE’s supply chain team can be creative in its own right.
“It should be a system that is proactive in bringing supplier innovations into the company,” he says. “We are not just an enabler, we are part of the process.”
Like the others, Sutter believes the new framework and its goal of creating a faster flow of information within the organization will enable everyone at CCE to clearly understand their role in making things happen. BI
Building or borrowing brands
Coca-Cola Enterprises has put significant stock in innovation, and has developed a “build or borrow” philosophy toward creating brands.
Several brand-building strategies are behind the company’s recent jump into the energy drink category. Making up for what it felt was a late entry into energy drinks, CCE decided to both “build” a brand in the Coca-Cola Co.’s Full Throttle, and “borrow” the more established Rockstar energy drink through a master distribution agreement with Rockstar Inc. Rockstar’s creator, Russ Weiner, maintains ownership of the brand, but CCE will distribute the product in most of its territories.
The company also recently took on Bravo! Foods International’s Slammers milk products through a master distribution agreement. “It’s early days with Bravo!, but we think there is a good opportunity for us in immediate consumption,” says Terry Marks, president of CCE’s North American business unit.
But everyone at CCE stresses that its relationship with The Coca-Cola Co. remains its most important.
“We’re working hard on strengthening our relationship with The Coca-Cola Co., and it’s never been stronger here in North America,” says Hal Kravitz, vice president of North American business development and chief revenue officer at CCE. “We know that for us to be successful, they must be successful, and for them to be successful, we must be successful.”
“The Coca-Cola Co. will always be our primary source of innovation and future revenue growth,” Marks adds. “What we’re doing together as a system is getting smarter, and beginning to understand that there is value out there that we can capture for the benefit of Coca-Cola Enterprises and the Coca-Cola system.”

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