125 years young:The Coca-Cola Co. looks forward
For The Coca-Cola Co., Atlanta, marking the 125th anniversary of when Coca-Cola was first served is less an opportunity to look back at the brand’s storied history, but an opportunity to highlight its momentum for the future. As the company embarks on the milestone year, Muhtar Kent, the company’s chairman of the board and chief executive officer, emphasizes the anniversary is a testament to the business’ possibilities.
“Coca-Cola, in a way, is more than just a drink: it’s an idea, it’s a vision, it’s a feeling and a great connection. It’s a shared experience. It’s one of the truly common threads that actually bond the world together, tie the world together.”
“In a way, we are just getting started,” Kent says. “We’ve just scratched the surface of our potential. We remain today as energized and as excited as Dr. John Pemberton was, I am sure, back on May 8, 1886, when he poured his first drink of Coca-Cola just a few blocks away from [the Coca-Cola headquarters in Atlanta] at his pharmacy, Jacob’s Pharmacy. The fact that we are a thriving business, a growing business and a dynamic business 125 years later is not a testament, for sure, to our age, but to our youth.”
As it celebrates the milestone, the company remains focused on the growth prospects it set forth in its 2020 Vision, The Coca-Cola Co.’s roadmap for winning together with its bottling partners released in September 2009. The 2020 Vision builds on the company’s “Strategy for the 1980s” and its “Manifesto for Growth” released by Neville Isdell in 2004.
At the heart of the company’s goals is to build upon the collective power of trademark Coca-Cola to bring people together around the world.
“Coca-Cola, in a way, is more than just a drink: it’s an idea, it’s a vision, it’s a feeling and a great connection,” Kent says. “It’s a shared experience. It’s one of the truly common threads that actually bond the world together, tie the world together.
“It’s a simple truth that reminds us every single day why we at Coca-Cola love our business so very much all around the world,” he continues. “It’s what we see in the course of our daily lives. It’s a world really that’s yearning not just for the beverages and the quality of the beverages that we produce, but also it’s a world that looks at the ideals and values that Coca-Cola represents.”
A world of change
Prior to the release of the 2020 vision, Kent organized Coca-Cola’s leadership and bottling partners to identify a framework for what it saw as a dramatically changing global landscape.
“Today’s consumers are, in a way, telling us very clearly what they want, how they want it, where they want it, in what conditions they want it in and what they are going to pay for it. Increasingly just as important is that consumers are judging us, not only on the value that we bring with the quality of the beverages that we proudly serve, but also they are judging us very simply on the character of the companies that are producing those goods.”
“It became apparent to me and it became apparent to our leadership team that the world that we were inheriting at the end of 2007 was shaping up to be one that would be significantly different than even a year or a couple of years before that, not just even a decade, but the change was very rapid,” Kent says. “The world was changing and we saw a number of things that were happening that would fundamentally, and also dramatically reshape not just our industry, but also the world going into this decade. Changes that were going to make those previous ten years seem downright tranquil compared to the coming ten years.”
The leadership team identified six major global trends that had the potential to change the world — and its business — by 2020. First, the company predicted a larger middle class emerging internationally with 800 million to 1 billion new people joining the middle class within the decade, Kent says. More than 60 percent of this new wealth would be from emerging nations, such as Brazil, Russia, India and China, he says.
Subsequent to the population boom was that many of those people were relocating.
“We saw a massive urbanization taking place as the world continues to move off the farm and into the cities,” Kent says. “Think about it this way: For the next several years, an urban population is going to be created about every 90 to 100 days equal to the size of New York City.”
The emerging middle class in countries around the world also will contribute to the predicted rebalancing of economic might from a few economic superpowers to several, Kent says. In addition to the forecasted powerhouses of Brazil, Russia, India and China, economic potential also is foreseen in Indonesia, Turkey, Morocco, Vietnam, Chile and Mexico, he says.
The changes in population also are giving rise to the most sophisticated and engaged youth generation, much of whom is empowered by communication, Kent says. On the other hand, the company also noticed that the population older than 40 years old also is increasing. The demographic changes are reshaping the world and The Coca-Cola Co.’s business, he says.
|One of many target demographics for The Coca-Cola Co. in its growth strategy are the 1 billion teenagers in the world, according to Joe Tripodi, chief marketing and commercial officer of The Coca-Cola Co. The age group represents 18 percent of Coca-Cola’s volume, however 47 percent of the world’s teens have not had a Coca-Cola in the last month, which presents “an enormous opportunity,” Tripodi says.|
Fifth on the list is a scarcity of natural resources due to population expansion, which is reflected in the current volatility in commodity and energy prices, Kent says.
The final item on the company’s trend list is a fundamental consumer re-set of priorities, values and expectations, he says.
“Today’s consumers are, in a way, telling us very clearly what they want, how they want it, where they want it, in what conditions they want it in and what they are going to pay for it,” he says. “Increasingly just as important is that consumers are judging us, not only on the value that we bring with the quality of the beverages that we proudly serve, but also they are judging us very simply on the character of the companies that are producing those goods. Moral contract and social license are as important as great and inspirational products.”
Although the company foresees a future marked by great change, it also presents increased possibilities, Kent says.
“For our industry we see a world with more people, more wealth, more demand for choice, living on-the-go and highly mobile lifestyles that has contributed to a higher demand for ready-to-drink, non-alcohol beverages,” he says.
Coca-Cola sees the global market for non-alcohol ready-to-drink (NARTD) beverages as growing from its current $650 billion market to $1 trillion in the next decade. Translated into daily servings, the company set a goal of doubling from its current level of 1.7 billion servings of Coca-Cola products worldwide every day to 3 billion daily servings by 2020.
“We know that capturing new opportunities, however, is going to require vision and is going to require flawless execution by ourselves, our bottling partners and our system,” Kent says. “So getting our company leadership, our bottling leadership and our strong 700,000 system employees behind that vision so that everyone can articulate it with one voice and to take ownership of that vision was really a priority, and has been an essential part of that strategic renewal process inside our company.”
Kent insists that achieving the goals set forth in the 2020 Vision is not going to be easy, “It’s not for the faint-hearted to create what you have created in 125 years in 10 years. It is not for the people who have a faint heart, but is it achievable? The answer is absolutely yes.”
For John Farrell, vice president and chief strategy officer for The Coca-Cola Co., the company’s history provides the basis for belief in its present ambitions.
“Having been working on this for 125 years, there’s easily another 125 years worth of growth and development available,” Farrell says. “We discussed where our planning horizon is in an academic sense, I say it’s forever. If you build a system that has a horizon of forever, you can make some very reasonable long-term investments in people, in infrastructure, in training and development, in sustainability and the supply chain, but the reason that we believe it can be forever is as to what per capita [consumption rates] can be.”
Vision in execution
In its 2020 Vision, The Coca-Cola Co. captured the possibilities presented by the six global trends and organized corporate goals around the potential it identified for the next decade. As Kent explains broadly the goals are, “to more than double our system revenue, winning with the greatest talent pool in the world, certainly leveraging the power of trademark Coca-Cola and our sparkling beverages, creating the most valuable portfolio and ensuring that we have greater leadership position than we have today by 2020 in the sustainability spectrum by embedding that into our business planning process and creating the most efficient and effective business system.”
The occasion of its anniversary provides an opportunity for The Coca-Cola Co. to provide a report card on its 2020 Vision. The roadmap organizes its goals around six P’s: Profit, People, Portfolio, Partners, Planet and Productivity.
Five of the alliterative goals were first set in the “Manifesto for Growth,” and Kent added Productivity to the 2020 Vision. The addition encapsulates The Coca-Cola Co.’s plan to design and implement the most effective and efficient business system. The 2020 Vision summarizes Productivity’s goal as to “manage people, time and money for greatest effectiveness.”
In terms of profit, the company announced performance in line with its goals for the first quarter of 2011.
“Our global system is on the move again today,” Kent says. “Brands are healthy and getting healthier. Reputation is strong and getting stronger. Investments are growing. And our system is solidly aligned and executing towards that 2020 Vision. Over this past quarter, we kept that momentum alive with 5 percent volume growth across all geographic groups and 2 percent growth here in our flagship market in North America — the fourth consecutive organic volume growth in our flagship market.”
Excluding new cross-licensed brands in North America, worldwide volume grew 5 percent in the first quarter of 2011. In addition to the North American market, The Coca-Cola Co. achieved broad-based volume growth in the quarter across each of its five geographic operating groups, with growth of 8 percent in Eurasia and Africa, 7 percent in Latin America, 5 percent in Pacific and 1 percent in Europe.
The company emphasizes that the key to doubling its system revenue will be balance.
“The 2020 Vision calls for balanced growth: balanced between present markets and emerging markets and balanced between sparkling beverages and still beverages,” Kent says. “That has got to happen in order to achieve our 2020 Vision. We believe that it is definitely do-able to grow in Western markets and to grow in emerging markets. The growth rate will not be the same because you have markets that are 400 to 500 per capita [consumption rates] and they will grow at a lower percentage, and you have markets like China that are around the 30 per capita rate, and they will grow at a higher pace.”
One of goals within its profit platform is to use the company’s size and expertise to create economies of scale. The scale of the system provides opportunities to strategically align operations with its more than 300 franchise bottlers worldwide to achieve economic advantages.
“The real art form in sort of leading a system of this scale is making sure you take advantage of the economics — the Coke scale — but also keep it very, very local, and that’s why the franchise system has served us so well over the years,” Farrell says.
North America in focus
As Kent mentioned, volume in the North American market grew 6 percent and 2 percent excluding cross-licensed brands, which are primarily Dr Pepper brands, in the first quarter of 2011. Organic volume for sparkling beverages in North America declined 1 percent in the quarter, but was up 6 percent including cross-licensed brands.
|In North America in 2010, approximately 20 billion cases of non-alcohol ready-to-drink volume was sold representing nearly $150 billion in sales, says Steve Cahillane, president and chief executive officer of Coca-Cola Refreshments. That’s equivalent to 22 percent of the total company unit cases and 18 percent of total company operating income.|
Coca-Cola grew sparkling beverage volume share in the quarter and maintained value share, it said. Coke Zero delivered double-digit volume growth for the 20th consecutive quarter. Sprite growth also continued for the fourth consecutive quarter, up 2 percent, and Fanta was up 5 percent for its third consecutive quarter of growth. In addition, Seagram’s grew more than 30 percent driven by expanded availability and additional media support, The Coca-Cola Co. said.
North American still beverage volume growth was up 8 percent in the quarter, led by 21 percent growth in Powerade and 20 percent growth in Simply juice products. The company’s tea portfolio continued to expand, with growth of 12 percent. In addition, the Glacéau business grew 12 percent in North America driven by the expansion of Vitaminwater Zero along with continued double-digit growth in Smartwater.
As evidenced by its recent performance, The Coca-Cola Co. sees opportunities in the United States market.
“The U.S. looks as much as a developing economy as anyone else, primarily because there’s some underlying population growth there,” Farrell says. “It is the third largest teen population. It’s also a relatively wealthy country on a per capita basis.”
In October 2010, The Coca-Cola Co. finalized its acquisition of Coca-Cola Enterprises (CCE) North American operations. The company integrated CCE’s North American bottling operations with Coca-Cola North America (CCNA) Foodservice, the Minute Maid and Odwalla juice businesses, CCNA Supply Chain Operations and a Coca-Cola-owned bottling operation in Philadelphia. The merged companies are now operating as Coca-Cola Refreshments USA Inc. (CCR), which is led by Steve Cahillane, president and chief executive officer of CCR.
The reshaped CCNA division is led by President Sandy Douglas who provides franchise leadership, consumer marketing and innovation for the flagship North American market. Douglas says the company believes that the future in the United States and Canada is “incredibly bright.” He adds that The Coca-Cola Co. is investing in the United States and Canada because it sees opportunity for growth for many years to come.
In honor of its 125th Anniversary, The Coca-Cola Co. created a new 1.25-liter package in Coca-Cola’s signature contour shape. The 1.25-liter bottle will be available for less than $1 in Coca-Cola, Diet Coke, Coke Zero, Sprite and Fanta varieties.
“Not only are the demographics right and not only is our business young, but as we put our capabilities to work, and we make a little bit of progress, we get confidence that the opportunities that we have going forward are extraordinary,” Douglas says.
The company anticipated operational synergies of at least $350 million each year with a phase-in schedule lasting the next four years, it said. In the first quarter of 2011, The Coca-Cola Co. reported net revenue for the quarter increased 143 percent in North America, primarily reflecting the acquisition of Coca-Cola Enterprises’ (CCE) North American operations, it said.
In addition to the synergies created by the alignment, the company continues to work with its network of 70 independent bottlers, Douglas explains. Kent has insisted that The Coca-Cola Co. is dedicated to the existing system in North America, explains Steve Cahillane, president and chief executive officer of Coca-Cola Refreshments.`
“We are 100 percent committed to the franchise system and having partners in North America and around the world, that’s very important,” Cahillane says. “The reason we did the transaction was really to unlock growth potential and the way the business grew in the United States is very different than the way it grew internationally.”
In the North American market, The Coca-Cola Co.’s business grew through the years without an opportunity to align the synergies of the business, Cahillane says. In essence, he says, The Coca-Cola Co. is recreating its existing international business model for operations in the United States, and establishing CCR’s operations is its present focus, Cahillane says.
“As we look into the future, and as we continue to make Coca-Cola Refreshments more and more efficient, there will undoubtedly be continuing opportunities for partners as we go forward,” he says.
Commitment to its workforce
As The Coca-Cola Co. looks forward to growing its business, it continues to prioritize the people who help its operations run. Its 2020 Vision includes a platform on People in which the company’s primary goal is to be a great place to work. The vision outlines its priorities to attract, engage and retain the best talent by increasing employees’ system knowledge and cross-system movement, inspire people to be passionate ambassadors for its brands, recruit, develop and advance women, and achieve true diversity.
Empowering women is a priority set forth by Kent. In October, the company’s chairman and chief executive officer delivered a speech at Yale University in which he outlined that The Coca-Cola Co. could not grow its business or reach any of its long-term goals without greater women’s economic empowerment and entrepreneurship around the world. The company sees that women’s empowerment has a correlation in national gross domestic product growth, environmental sustainability, improved healthcare and more, it says.
“Women now control over $20 trillion dollars in spending worldwide,” says Jerry Wilson, senior vice president and chief customer and commercial officer. “To put that in context, that’s an economic impact larger than that of the United States, China and India economies combined. So it’s big.”
Women control over $20 trillion dollars in spending worldwide, says Jerry Wilson, senior vice president and chief customer and commercial officer. Put in context, that’s an economic impact larger than that of the United States, China and India economies combined, he says.
Two programs that the company has dedicated to women’s empowerment include its internal Women’s Leadership Council as well as the recently announced 5 By 20 initiative, which aims to empower 5 million women across the world by 2020.
Created by Kent to encourage more women to take on leadership positions within the company, the Women’s Leadership Council consists of 16 women representing the company’s geographic groups, bottling operations and corporate, explains Kathy Waller, vice president and controller of The Coca-Cola Co., who chairs the council. It aims to support women and help them develop their careers as well as develop a pipeline of women to be ready and available to compete for leadership positions in the future. Since the council started in 2009, 160 women have participated in events that teach them more about The Coca-Cola Co.’s system as well as energize them to create change, Waller says.
The benefits of The Coca-Cola Co.’s global system also are leveraged in plans for its 5 By 20 initiative to empower women across the world and throughout its supply chain.
“When we talk about empowerment we really mean economic empowerment,” says Charlotte Oades, global director of women’s economic empowerment for The Coca-Cola Co. “That means the ability to earn a livelihood, the ability to generate an income for those women and their families in such a way that enables them to be empowered economically to really overcome some of the barriers that we know they face today, and in doing that to create a very successful, thriving business.”
The company’s 5 By 20 initiative aims to economically empower 5 million women globally by the year 2020. The program essentially is “about investing in women and by economically empowering women, actually we can impact entire communities leading to more sustainable communities,” says Charlotte Oades, global director of women’s economic empowerment for The Coca-Cola Co.
The company has found that empowering women has effects beyond the individual person, Oades says.
“What’s exciting about that is we know that when you empower a woman economically it has a much, much more significant impact than just on her immediate family,” she explains. “What happens, and we’re understanding this more and more now as we are looking at this more closely, is that we know that when she earns that income, she is much more likely to reinvest that in the education and the wellbeing of her children, and in her community.”
The company plans to work with governments, non-government organizations and other business partners to address some of the specific barriers for women in business around the world. The barriers include lack of access to finance, lack of access to business skills and education, and lack of access to entrepreneurial mentors, support groups and care networks, Oades says. The company will present its plans on how it will achieve the 5 By 20 goal at this year’s Clinton Global Initiative, which is where Kent announced the program in 2010.
Products for performance
The Coca-Cola Co.’s business was based on one product in one package until 1955, which is the year it launched the king-sized package. Soon thereafter it expanded into new beverage offerings, but the company recognizes its legacy was built on trademark Coca-Cola, which is why its 2020 Vision prioritizes winning with the flagship product.
The company’s 5 By 20 initiative aims to economically empower 5 million women globally by the year 2020. The program essentially is “about investing in women and by economically empowering women, actually we can impact entire communities leading to more sustainable communities,” says Charlotte Oades, global director of women’s economic empowerment for The Coca-Cola Co.
“Coca-Cola provides the scale,” Farrell says. “It provides the oxygen. It provides the energy. It provides literally the cash flow to allow you to build not only itself, but also the broader portfolio.”
Although the company aims to accelerate growth of Coca-Cola and capture the loyalty of youth, it also set a goal to increase the value of its portfolio. Today its portfolio includes 3,500 beverages throughout the world. Its 2020 Vision outlines the following goals for growing its portfolio:
- Acquire or develop scalable, innovative premium brands (See Venturing & Emerging Brands feature),
- Bring innovations to the market faster,
- Satisfy the needs of older consumers with the right brands and marketing,
- Together with its bottlers, use new technologies to reinvent its fountain business (See sidebar on the Freestyle machine below), and
- Ensure that its products are always the “gold standard” for quality.
In line with one of its goals, Farrell highlights the advantage of its global scale in being able to introduce new products to market faster.
“The important thing for us to remember is that we have one trademark, one brand, which is $84 billion dollars, and that is Coke. So when I say the economics really depend on this one growing, it is very, very true.”
“One of the true strategic advantages of a truly global system, such as this one, is transfer of knowledge,” he says. “So as you’re having a great product or a good consumer proposition, the faster you can transfer it to other countries around the world, the greater your opportunities are to not only grow the business, but to give consumers a choice.”
A recent example is the international success of Minute Maid Pulpy, a juice drink that features added fruit pulp. The beverage launched in China in 2005 and was formulated for the local taste, which has a preference for pulp. Pulpy is now available on three continents in 18 geographies and was designed to appeal to the local taste profiles. In 2010, the pulp-enriched juice product was introduced in Algeria, Malaysia, Singapore and Vietnam, in Kazakhstan as Piko Pulpy as well as Mexico as Valle Pulpy under its del Valle trademark. The global expansion of the product recently led to Pulpy’s addition to Coca-Cola’s roster of billion dollar brands.
Its billion dollar brand portfolio also grew this spring with the addition of the del Valle juice brands from Latin America. As much as the portfolio of highly popular brands is a mark of success for the company, it continues to emphasize the importance of its flagship brand.
“The important thing for us to remember is that we have one trademark, one brand, which is $84 billion dollars, and that is Coke,” Farrell says. “So when I say the economics really depend on this one growing, it is very, very true. Small percentages on a very big basis produce excellent cash flow and excellent volume. Coke grew about 3 percent, in total about 400 million cases, last year.”
This year the company also reported that its first zero-calorie innovation, Diet Coke, became the No. 2 sparkling beverage brand in the United States.
“That’s a big deal in many respects because what is shows is that when you provide choice to consumers, when you provide clear, accurate full front-of-pack labeling they can make decisions as to what’s right for them,” Farrell says. “While we continue to build the trademark, the brand, the imagery, the hopes and the happiness that comes with Coca-Cola, we offer it in whatever caloric content [consumers] desire.”
In 1981, the company’s cola business was 1 percent zero-calorie, today it’s 43 percent, CCNA’s Douglas says. He emphasizes that The Coca-Cola Co.’s approach to health and wellness revolves around transparency, choice and information. The Coca-Cola Co. expects the no calorie segment to continue to grow, he says, “because consumers are smart and when you give them great tasting choices, they make good decisions.”
Similar to its 2020 Vision, approach to innovation at The Coca-Cola Co. is arranged according to various platforms. The goals blend consumer needs and business strategies to help the company prioritize its investment strategy, explains Guy Wollaert, senior vice president and chief technical officer at The Coca-Cola Co. Wollaert’s role encompasses research and development, science, global product quality and integrity and supply chain functions.
The innovation structure is arranged around six basic consumer trends, Wollaert says.
“First and foremost, in everything we do, is making sure that we excel in sensory delight,” he says. “Taste is king and, of course, taste is a captive word for aroma and other aspects of sensory platform.”
No. 2 and No. 3 on the list spotlight worldwide trends of natural as well as wellness and nutrition. Wollaert explains the company is on pace to transform products to remove artificial ingredients and preservatives. Fitting in with wellness and nutrition requires a look at its overall portfolio, he says.
To keep up with the demand for Minute Maid Pulpy, The Coca-Cola Co. is now buying two-thirds of the world’s pulp. The fruit bits are purchased mostly from Brazil and Florida and shipped to China, says John Farrell, vice president and chief strategy officer for the company.
“Our business is really a balanced portfolio business, and so we are definitely main players in the wellness and nutrition space,” Wollaert says. “We have the No. 1 juice business in the world, and that is by factor of two over the next global competitor. We are the No. 2 sports drink in the world. We are the No. 3 water business in the world. So, yes, we do invest and there’s a lot of innovation activity in that platform.”
As part of its overall portfolio goals set forth in the 2020 Vision, The Coca-Cola Co. aims to have its brands be the No. 1 NARTD business in every market and every category that’s valuable to the company.
In addition to formulation trends, innovation also is impacted by sustainability, in which goals range from packaging innovations to plant efficiencies, Wollaert says. (For more on The Coca-Cola Co.’s recent sustainability initiatives and launches, including the new PlantBottle packaging, see page XX.)
In addition, packaging also plays a key role in the company’s future plans, he says.
“Innovation in terms of our package portfolio and our availability strategy makes sure that we have the right package in the right place [geared] to the right consumer needs in the right way,” Wollaert says. “It requires also a lot of exploration of new technologies on how we do consumer interfacing as well as technologies related to new packaging and base science of new packaging material.”
It also needs to consider innovation around its methods of connecting with consumers, Wollaert says. The company is considering how to best leverage global trends of connectivity, mobility and social media, he says. Social media is a large focus for the company’s marketing team, for more on that see (XXX)
Priorities for progress
In addition to the banner vision elements of Profit, People and Portfolio, The Coca-Cola Co. also outlined its intentions to better its service to customers (Partners), prioritize sustainability throughout its operations (Planet), and design and implement the most effective and efficient business system (Productivity).
To be the most preferred and trusted beverage partner to its suppliers, The Coca-Cola Co. outlined several goals in its Partners platform. Once again, the global scale of The Coca-Cola Co.’s system comes into play as it aims to think and act like an integrated global enterprise while intensifying its local focus. The company serves about 20 million customers weekly on a global basis in a range of channels, Farrell explains.
“You can easily get mesmerized by the portfolio of wonderful brands that we have. We have to earn the trust of our consumers every single day. It is said, ‘A brand is a promise, and a good brand is a promise kept.’ We have to absolutely live by those values, every single day and earn that moral contract every single day.”
- Muhtar Kent, chairman and chief executive officer
“We can literally get to pretty much everywhere in the world on a very, very regular basis and this has to be the only distribution system that carries that,” he says. “Thirty-five percent of our business is still in traditional outlets, the mom and pop. We also have very large scale customers of the Wal-Mart and McDonald’s variety. Another in the mix, 40 percent — almost 50 percent — are the immediate consumption variety, people who buy it to drink right then and there. We have 15 quarters of consecutive value share growth increases across the last several years.”
Immediate consumption remains a focus as the goals for its Partners platform include expanding investment in the channel. The company also set a goal to win at the point of sale by anticipating and serving local preferences and providing outlets with products and communications tailored to their specific shoppers.
Service at retail also links into its Planet platform of sustainability goals, Farrell says.
“One of the key things to selling these products is selling them cold,” he says. “We place about a million coolers, whether they’re vending machines or refrigerated equipment, every year. One of the things that you can do as a very, very large business is start to influence policy of industries that are actually beyond your own. So this year we placed about 162,000 [hydrofluorocarbon]-free coolers.”
The 2020 Vision outlines its sustainability goals under the company’s Live Positively commitments, which include initiatives for community, marketplace, workplace and environment. (For more on its sustainability initiatives, see page XX).
Productivity is the newest goal on the company’s list and it aims to design and implement the most effective and efficient business system across the corporation. Its initiatives touch on redirecting resources to drive profitable growth, standardize and simplify business processes, data and IT systems; as well as minimizing the company’s energy use.
As The Coca-Cola Co. continues its forward momentum to achieve the goals set forth in its 2020 Vision, Kent recognizes the lessons the company has learned in its 125 years in business.
“The single thing that keeps me up at night is arrogance,” Kent says. “Arrogance is what almost brought us down in the 1990s — being away from markets, not touching the consumer, not understanding the consumer. Today, the consumer needs to be understood even better than any time before.”
He highlights the brand’s interaction with consumers on its social media sites, including Facebook where Coca-Cola has 26 million fans and growing. The consumer remains the keen focus for the company’s growth, he says.
“We cannot afford in any way or sense to have a victory lap or become arrogant again,” he says. “We have to stay close to our partners and stay close to our 20-plus million customers around the world, which we serve so proudly every week, and also to our entire consumer network.
“That’s what keeps me awake, because you can easily get mesmerized by the portfolio of wonderful brands that we have,” Kent continues. “We have to earn the trust of our consumers every single day. It is said, ‘A brand is a promise, and a good brand is a promise kept.’ We have to absolutely live by those values, every single day and earn that moral contract every single day.”
|A changing landscape|
As it shaped its 2020 Vision for future development, the leadership of The Coca-Cola Co. and its system operations identified six major global trends that it believed had the potential to change the world — and its business — in the next decade. The following is an overview of the trends:
1. The emergence of a larger middle class around the world.
Forecast: The Coca-Cola Co. predicts 800 million to 1 billion new people will join the middle class by 2020.
2. A massive relocation to urban environments.
Forecast: For the next several years, an urban population is going to be created about every 90 to 100 days that is equivalent to the size of New York City, says Muhtar Kent, chairman and chief executive officer of The Coca-Cola Co.
3. Rebalance of economic wealth.
Forecast: The boom in the middle class in emerging countries will re-shape the landscape from one or two economic superpowers to several, Kent says.
4. Demographic shifts both young and old.
Forecast: Population growth on both sides of the spectrum — an increase in people older than 40 years old as well as the rise of the most sophisticated and engaged youth generation the world has seen — will impact The Coca-Cola Co.’s business.
5. Scarcity of natural resources.
Forecast: Once again, population expansion affects the company’s business model as more people place more strain on the worldwide supply of commodities and energy, Kent says.
6. A fundamental re-set of consumer priorities, values and expectations.
Forecast: Consumers are communicating more with companies in a dialogue and sharing their desires for products, packages, pricing and priorities, such as sustainability values, Kent says.
|2020 Vision Snapshot:|
In 2009, The Coca-Cola Co. defined its plan to continue refreshing the world and inspire moments of optimism and happiness in its 2020 Vision. The plan is organized around six goals, each beginning with the letter P. The framework builds off of the company’s “Manifesto for Growth” that was outlined in 2004, with the addition of a sixth goal of Productivity. The following is a brief look at the six visions and their main direction:
Profit:More than double system revenue while increasing system margins.
People:Be a great place to work.
Portfolio:More than double servings of Coca-Cola products to more than 3 billion a day. Also, to be the No. 1 non-alcohol ready-to-drink business in every market and every category that’s of value to the company.
Partners:Be the most preferred and trusted beverage partner.
Planet:Global leadership in sustainable water use as well as industry leadership in packaging, energy and climate protection.
Productivity:Manage people, time and money for greatest effectiveness.
Freestyle creates a dispensing reinvention
The Coca-Cola Co. understands the importance of dispensed beverages since it began as a dispensed beverage mixed on-site in pharmacies. In the United States, roughly one-third of its business is in dispensed beverages, says Gene Farrell, vice president and general manager of the Coca-Cola Freestyle for Coca-Cola Refreshments. However, it saw a need to refresh the platform, he says.
“The fundamental reason why we chose to innovate here was that dispensed beverages are a very large and important part of our overall business, and it’s an area where technology was becoming a barrier to growth,” Farrell says.
Through research, the company found that its dispensed platforms did not provide the options that consumers demanded, he says.
“Consumers wanted more variety than what our traditional choices were — lots more,” Farrell says. “We thought initially they’d want 20 to 30 different choices, our research came back and said they wanted over 100. They also told us, ‘If you’re going to innovate, I want to pour it myself, I want to play.’”
The Coca-Cola Co. then began a six-year journey to create a new dispenser, but it became more than that, as Farrell explains, “this was a business reinvention story for us. It required innovation in product, in package, in supply chain, route to market, consumer interaction — really all elements of how we go to market in the dispensed space.”
The Freestyle machine features an interface designed by former engineers from Apple computer, uses medical-inspired microdosing technology to deliver concentrates in precise doses, and uses wireless communication technology to “call home” each night to The Coca-Cola Co. and report the performance of the machine and popularity of certain flavors.
The company initially launched the machines in Georgia and Southern California in June 2009 and has since expanded availability to 40 markets in the United States with a plan to double availability by the end of the year, Farrell says.
In honor of its 125th anniversary, the company increased the options on the Freestyle from the initial lineup of 106 options.
“We added 19 new flavor choices and we did it all through a software upgrade, we didn’t have to add a single new cartridge to the machine,” Farrell says.
The new options, which bring the machine’s total to 125, include Cherry Vanilla flavors of its Coca-Cola family, new Minute Maid Lemonade varieties, Barq’s and Diet Barq’s Vanilla root beer and Seagram’s Lemon Lime Seltzer.
The success of certain options in the Freestyle might have an impact on future new packaged products released by the company, Farrell says.
“In a lot of ways Freestyle kind of turns the product development cycle upside down,” he says. “…With Freestyle we can look at the trends of what’s selling on the machine today, so for example a Raspberry Coca-Cola may turn out to be a very popular brand that we decide in certain markets or regions of the world that we want to go ahead and put that into a package. Or we can even use it as a test platform, so if we have ideas about new brands, we can roll it out relatively affordably in dispensed format and get an almost instaneous read on what the consumer take-away is.”
The company also is adding interactivity, with a Facebook page that counts nearly 28,000 fans and a free app, the Coca-Cola Freestyle Push! + Play. The app features a memory game based on the hundreds of flavor options on the machine as well as a radar to locate the nearest Freestyle machine. Farrell says the company also has plans to integrate the My Coke Rewards system into Freestyle machines so consumers can accumulate points from purchases on the machine.
In its goal to double servings of its products by 2020, The Coca-Cola Co. remains dedicated to its core portfolio of Coca-Cola and no calorie options Diet Coke and Coke Zero. The company positions the brands as the centerpiece to lead growth in the sparkling beverage category it says.
Trademark Coca-Cola represents 50 percent of its sparkling beverage business, says Muhtar Kent, chairman and chief executive officer of The Coca-Cola Co. In addition to Coca-Cola’s average 3 percent growth rate, the company continues to report gains for Coke Zero around the world.
“Basically, it is critical for us to ensure that we maintain growth of our sparkling portfolio with innovations like Coke Zero, packaging innovations, and equipment innovations,” Kent says. “We see that there is still tremendous potential in the world when you have our total per capita at an average around 80, and when you have markets that are already at 400 to 500 per capita around the world. We have really truly just scratched the surface of that.”
To invigorate the portfolio, The Coca-Cola Co. looked at the opportunities to engage consumers, explains Sandy Douglas, president of Coca-Cola North America.
“We embraced innovation that gives consumers what they want in products, packaging, portion control and inspired innovative markets,” Douglas says. “All those words are sort of buzzwords, but it’s in the combination of all of those. We believe that health and wellness is about transparency and choice and information, it’s about small changes. All of us who struggle to live healthier, active lives either ourselves or our families know that if you make a series of small, but sustainable changes, you can make a big difference.”
In this platform, packaging plays a key role in providing options to consumers, Douglas says. The company has created 8.5-ounce aluminum bottles with 100 calories in each serving and 7.5-ounce Mini cans that contain 90 calories in each serving.
“A smaller, cooler package of Coke is a healthful choice for folks who love Coke, as is Diet Coke and Coke Zero,” he says.