One year ago, Coca-Cola announced a five-point plan to reignite growth through a focus on execution and reinvestment. And, according to Chairman and CEO Muhtar Kent and President and COO James Quincey, the company’s third quarter results show the strategy is taking hold despite ongoing macroeconomic volatility.
In the third quarter, the company posted 3% global organic revenue growth and gained global value share in sparkling, still and total nonalcoholic ready-to-drink (NARTD) beverages. Additionally, both unit case volume and price mix were up 3% in the quarter.
“Our company has undergone a significant amount of streamlining and change these past 12 months,” Kent said today during a conference call with financial analysts. “And while we are encouraged by our progress, we know we need to do more.”
Kent and Quincey provided a brief progress report against the company's five strategic initiatives. Here are highlights from the call:
- Coke is driving revenue and profit growth with clear portfolio roles across its markets. “We segmented our markets to develop long-term revenue growth strategies based on clear volume, price, investment and profit expectations, which were built into our 2015 plans and strategies going forward,” Kent said, adding that annual incentive metrics have been revised to include revenue growth.
- The company is making disciplined brand and growth investments. In 2014, Coke significantly boosted its media spend and is doing so again this year. Efforts to improve advertising quality and rewire the company’s global marketing organization to drive speed, efficiency and effectiveness are helping to accelerate revenue growth in key markets including North America. The company also continues to invest in new growth platforms – from energy drinks (via the recently closed transaction with Monster Beverage Corporation) and at-home beverage dispensing systems (Keurig KOLDTM), to plant-based protein drinks (via the pending transaction with China Culiangwang Beverages Holdings), to cold-pressed organic juices (Suja). “All these are long-term investments we believe will allow us to add profitable new transactions in the nonalcoholic beverage industry,” Kent said.
- The company is driving efficiency through a more aggressive focus on productivity. Coke’s $3 billion productivity program, which spans the entire business, is on track. “Ultimately, it's about building a culture that is focused on getting better every day and challenging every dollar we spend,” Kent explained. Recent actions include implementing “zero-based” work (a disciplined approach to funding work that is essential to driving growth and eliminating less productive programs and tasks) across the company’s corporate center and operating units; cutting marketing agency costs; and introducing a new approach to drive cost of goods savings in everything from formulas to packaging to day-to-day plant operations.
- Plans to streamline and simplifying the organization are ahead of schedule. Kent said the company has standardized key processes, linked its business units directly to the corporate center, and eliminated group functional roles to speed decision-making and enhance focus at the local level to drive growth.
- The company is refocused on its core business model of building the world’s greatest beverage brands and leading an unmatched global system. Over the last year, the company has taken steps to evolve its bottling system. In the U.S., the newly formed National Product Supply System NPSS) “embodies the best of both worlds,” Quincey said “by encompassing a national production system that generates efficiencies and scale for our system with regional production that leverages the expertise and local knowledge of our longstanding bottling partners: Coca-Cola Consolidated, Coca-Cola United and Swire Coca-Cola.” The company continues to refranchise U.S. distribution territories, today signing non-binding Letters of Intent on additional distribution territories in seven states. This brings total volume in territories transitioned to-date, or covered by agreements, to over 30 percent of U.S. bottle/can volume. In Europe, company-owned German bottling operations, Coca-Cola Iberian Partners and Coca-Cola Enterprises recently announce a three-way merger to form Coca-Cola European Partners, establishing the world’s largest independent Coca-Cola bottler based on revenues. “The creation of a larger, unified bottling partner in Western Europe represents an important step in our global system’s evolution as we continue to adapt our business model to innovate, invest and grow along with the changing demands of the marketplace,” Quincey said. The company is also making bottling system changes in key emerging markets, Kent noted, citing plans to create Coca-Cola Beverages Africa and recent investment in Indonesia’s Coca-Cola bottler.
“Our third quarter performance marks another positive step towards achieving our goal of accelerating our topline growth, with the company delivering solid pricing and unit case volume growth,” Quincey concluded. “We are confident in our strategies and execution and remain on track to deliver against our expectations for the year.”