ATLANTA – Coca-Cola is speeding its transition to a total beverage company and has a renewed focus on innovation and growth, President and CEO James Quincey told more than 120 investors and financial analysts Thursday at the company’s global headquarters.

In Coke’s first major investor gathering since 2009, Quincey and other senior leaders explained how the company is expanding its consumer-centric product portfolio, quickly scaling wins from market to market, and embracing an experimental, test-and-learn approach.

“We must be more agile and get things to market quicker,” Quincey said. “We operate in 200-plus countries, so having a success in one country frankly doesn't move the needle. The needle only really moves with a big success in more than one big country. So lifting and shifting… the best and most successful ideas around the world is absolutely critical to creating more billion-dollar brands in a diverse portfolio.”

For example, the company will launch soy-based beverage brand AdeS – a top performer in Latin America – in Europe early next year. Similarly, Honest Tea and smartwater recently made the jump across the pond from the U.S. to the U.K. And the company’s central and eastern Europe unit recently adopted Coke North America’s Venturing & Emerging Brands (VEB) model, which takes an entrepreneurial approach to investing in, nurturing and incubating up-and-coming beverages.  

Over the last few years, Coca-Cola has been returning ownership of its bottling operations to independent companies around the world. This newly refranchised system returns the company to its core focus on building and nurturing brands and empowers a network of 250 bottling partners to bring the “total beverage company” vision to life in the marketplace.

“We’re driving a culture change in the way we operate, the way we engage with the bottling system, and the way we go to market collectively,” Quincey said.

Fransisco Crespo
Chief Growth Officer Francisco Crespo explains how Coca-Cola is taking a disciplined approach to building its brands. 

'Growth is not an objective... it's a discipline'

Chief Growth Officer Francisco Crespo introduced on a new concept for Coca-Cola: the discipline of growth. “Growth is not an objective… it’s a discipline,” he said. “When you practice that discipline, the outcome is growth.”

Taking a disciplined approach to growth includes building a portfolio of brands with what Crespo calls “quality leadership.” The end result: stronger profit margins than the competition.

“Rather than telling consumers what they should be drinking, we will humbly align our portfolio to follow their tastes, their needs,” Crespo said.

'Rather than telling consumers what they should be drinking, we will humbly align our portfolio to follow their tastes, their needs.'

Crespo outlined three broad categories: explorer brands, challenger brands and leader brands.

Explorer brands like Honest Tea grow by establishing a differentiating edge through startup-like incubation. “Quality leadership starts with edge… our competitive advantage,” he said, citing the Simply juice brand in the U.S. as an example. “Edge requires discipline and consistent over-investment and over-execution.”

Brands ideally graduate from explorer to challenger status. The biggest winners become leaders in their respective categories, like the iconic Coca-Cola brand in much of the world. “These are three disciplines: the discipline of entrepreneurial audacity, the discipline of the fighter that has the stamina to never give up, and it is the discipline of the wisdom of the leader.”

Developing and launching beverages based on consumer tastes and needs is paying off, Crespo said. For example, retail sales of Coke Zero Sugar, which launched recently in the United States, are up 13 percent in 2017. And Fanta, which was updated with a new bottle design, new formulation and new marketing, is up 8 percent year-to-date. “There is a lot of value to be captured on our leading brands,” Crespo said.

Senior leadership on stage
Senior leaders of The Coca-Cola Company take questions from investors.

Coca-Cola’s consumer-driven innovation also includes a growing presence in natural, craft, organic and premium sparkling categories, through brands like Schweppes (Great Britain), Appletiser, Vio and Blue Sky (U.S.). The company is also adding value to the Coca-Cola Trademark with extensions such as Coca-Cola Coffee in Japan and Australia.

Crespo said this focus on smaller, but highly profitable, categories aligns with the company’s shift from volume to value. “Instead of defining volume as the sole metric, we will find ways to empower our brands with the ability to capture transactions and revenue.”

'Clear destination, great foundation in an attractive industry'

Coca-Cola is embarking on its total beverage company mission from a position of strength, Quincey said, citing its global category leadership positions in sparkling, juice/dairy/plant, hydration tea/coffee and total nonalcoholic ready-to-drink (NARTD) beverages. Since 2007, the company has more than doubled its portfolio of billion-dollar brands to 21.

“We have a fantastic strong foundation of brands, distribution and know-how,” he said, adding that the growth of NARTD beverages is outpacing most other CPG categories. “We have got a clear destination, a great foundation, and we're in a very attractive industry,” he said.

'If we're not curious about how the consumer is changing and we're not curious about the customer strategy and how they create value, then we're not going to come up with the right ideas. If you are not bringing in divergent ideas… then you're missing a chance.'

The company’s projected organic revenue growth of 4 to 6 percent between now and 2020 could drive $150 billion in revenue.

“We know there is a lot of value in our leadership positions that we can and will capture by chasing revenue, not volume, by better connecting our brands with those consumers and by going after niche and premium spaces,” Crespo added. “That money is good growth for us and will help us fund the experiments we need to explore.”

The discipline of growth will require Coke to build muscle in several key areas, including segmentation, supply chain and experiential marketing, to digitize its entire ecosystem. “The journey is only beginning,” Crespo said.

It all starts, Quincey said, inside the four walls of Coca-Cola.

“We have to be curious,” Quincey said. “If we're not curious about how the consumer is changing and we're not curious about the customer strategy and how they create value, then we're not going to come up with the right ideas. If you are not bringing in divergent ideas… then you're missing a chance.

“If we can't become faster, more experimental, cycle faster through ideas, experiments, insights and learnings – and on to the next iteration – then we won't be able to expand not just across categories, but across the number of countries we need to succeed in.”


 

Note

This article includes certain "non-GAAP financial measures" as defined under U.S. federal securities laws. Refer to our third quarter 2017 earnings release issued on Oct. 25, 2017, and related supplemental information, available on the company's website at www.coca-colacompany.com (in the “Investors” section), for full financial results and a reconciliation of non-GAAP financial measures.

Forward-Looking Statements

This article may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company’s historical experience and our present expectations or projections. These risks include, but are not limited to, obesity and other health-related concerns; water scarcity and poor quality; evolving consumer preferences; increased competition and capabilities in the marketplace; product safety and quality concerns; perceived negative health consequences of certain ingredients, such as non-nutritive sweeteners and biotechnology-derived substances, and of other substances present in our beverage products or packaging materials; an inability to be successful in our innovation activities; increased demand for food products and decreased agricultural productivity; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand operations in emerging and developing markets; fluctuations in foreign currency exchange rates; interest rate increases; an inability to maintain good relationships with our bottling partners; a deterioration in our bottling partners' financial condition; increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters; increased or new indirect taxes in the United States and throughout the world; increased cost, disruption of supply or shortage of energy or fuels; increased cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the marketing or sale of our products; an inability to protect our information systems against service interruption, misappropriation of data or breaches of security; unfavorable general economic conditions in the United States; unfavorable economic and political conditions in international markets; litigation or legal proceedings; failure to adequately protect, or disputes relating to, trademarks, formulae and other intellectual property rights; adverse weather conditions; climate change; damage to our brand image and corporate reputation from negative publicity, even if unwarranted, related to product safety or quality, human and workplace rights, obesity or other issues; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; changes in accounting standards; an inability to achieve our overall long-term growth objectives; deterioration of global credit market conditions; default by or failure of one or more of our counterparty financial institutions; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest; future impairment charges; multi-employer pension plan withdrawal liabilities in the future; an inability to successfully integrate and manage our Company-owned or -controlled bottling operations; an inability to successfully manage our refranchising activities; failure to realize the economic benefits from or an inability to successfully manage the possible negative consequences of our productivity initiatives; failure to realize a significant portion of the anticipated benefits of our strategic relationship with Monster; inability to attract or retain a highly skilled workforce; global or regional catastrophic events, including terrorist acts, cyber-strikes and radiological attacks; and other risks discussed in our Company’s filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2016 and our subsequently filed Quarterly Reports on Form 10-Q, which filings are available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.

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