Continuing the Growth Momentum in North America

Jim Dinkins

Continuing the Growth Momentum in North America

Jim Dinkins
Incoming President, Coca‑Cola North America

Full Transcript:

Good afternoon, everyone. It looks like we still got a lot of people enjoying their break. So I’ll just wait just a minute and we’ll get started. Well, as the announcer said, I’m Jim Dinkins, I’m the Incoming Group President for Coca‑Cola North America. I’ve had the chance to meet several of you while I’ve been here this morning as I’m looking forward to working with you. My official start date is January 1. So I’m looking forward to that.

How many of you are from the North America, live in North America most of you? Okay. Excellent. So we’ll be able to talk about the North American business and what I want to do is share a little bit information with you about the marketplace which I know you’re very familiar. But talk about our growth model and then talk about three key strategies that we’re focused on in North America to drive growth. The first is building strong brands. The second is creating customer value. And the third is building our capabilities to sustain and repeat results. So, as my colleagues have done here’s our forward-looking statement. And then here’s an outlook on a roadmap of the marketplace.

Coca‑Cola North America as many of you know is the flagship market for the Coca‑Cola Company. There’s over 350 million consumers in the marketplace, of which many of you are, so thank you for your business. Please drink a lot when you’re here. Really appreciate that. But it’s a big marketplace. There’s over $200 billion in retail value in the marketplace. And as you can see we’ve got a good business in North America, $10 billion in revenue in North America. And we’ve been able to maintain and grow value share for 30 consecutive quarters.

And as you can see our pie chart across our portfolio a little more diverse than some of you maybe you are seeing today, except for Japan. And we enjoy number one position across many of those categories. And the other thing that’s material as you’ve heard about as we have finished our map. So, James talked about finishing the map and you’ve probably heard from Sandy Douglas over the last few years about that initiative and a few weeks ago that was complete; so, really excited about that.

The other thing that might be new to you is how much growth opportunity there is in North America. You saw some of the developing markets. But let’s look at North America over $30 billion of growth over the next three years, $30 billion. And in that $20 billion of that growth is going to come from categories where we have a 25 or less year, and there will be over $7 billion of growth in categories where we have a leading share. So, I feel like coming into this role although I’ve worked in North America for 25 years, that North America is a big market with big opportunity.

So let’s take a minute and look at the growth model that we as a team developed a few years ago, and we affectionately call it the 5-4-3-2-1 strategy, maybe you’ve seen this before, our model. And it starts with our key metrics, five key metrics: incidence, margin growth, revenue, value share and transactions. And the key takeaway which you heard from a lot of my colleagues today is the movement from volume to value.

Where our brands come to life, is through our sales force.
 

The fourth element or the fourth number in the 5-4-3-2-1, is around categories, four category clusters around sparkling and hydration and juice plant and dairy, tea and coffee and our partnership with Monster. Three, and three advantage routes to market, which is really unique for our North American business. A strong food service business, a DSD business that most of you are familiar with our bottlers, but also having one of the largest warehouse chilled businesses in the United States.

Where our brands come to life, is through our sales force. Two large sales forces in the food service and on premise business and also with national retail sales. Now most recently, I was working in national retail sales and the Minute Maid business unit in chilled. So I enjoy doing that. That all comes together for one vision and one team, a vision and a team for Canada and for United States. And that team is focused on three key strategies, building strong brands, creating customer value, and building our capabilities to sustain and repeat results.

So I’m going to spend the rest of my time talking about those areas. Before I do that, I want to talk about what have been our results, how our results been. We can see that we’ve been driving growth. For the last three years, organic revenue plus 4%, price mix of plus 4% with a combination of movement in the categories, and also diversification of packages. And then profit before tax of 6% by doing the two things that I just mentioned and also leveraging productivity, which is translated into value share, value share across the categories above soft drinks, juice, dairy, plant, tea and coffee and energy, but some work to do on hydration. And we’re developing plans right now and implementing them in the marketplace to address that opportunity.

So let’s talk about building strong brands. North America is well positioned to execute the beverages for life strategy. And as you heard today, I’m going to talk about the leadership position and then the explorer position. And the leadership position around our sparkling portfolio and the explorer position around how you’ve heard about VEB or Venturing Emerging Brands, I’m going to talk more about that about how we build explorers by finding and nurturing early brands.

So let’s talk about sparkling. As you see in our part sparkling portfolio, we’ve been successful around base core Coca‑Cola One Coke with original Coke and Coke Zero growing at plus 1%. And you can see Fanta and Sprite at plus 6%. Now Diet Coke isn’t doing what we want so far as you can see it’s minus 4%, but we’re working hard on Diet Coke. We have plans to improve that number.

Now the model for success we’ve implemented in North America around our sparkling business is really comprised of four key elements. The first one is around media investment, having great content, where we can reach the target consumers in ways that they want and then invest at a double digit level investment in media to reach those consumers.

The second is around segmentation, having the right packages in the marketplace that meet consumers’ needs. The third is around innovation. Innovation not only in packaging and products and promotions but also in technology and equipment. So, you might be familiar with the Freestyle platform. The Freestyle platform is an excellent example of innovation in sparkling that unlock the choice barrier for us in sparkling, beverages and fountain. And it also gives us information about how consumers buy our products, so that we can then innovate around that information.

And last but not least is execution, making sure we work with our bottling partners in this example to meet the consumers’ needs quickly in the stores they serve.

So I want to double click on Coke Zero Sugar, we’ve talked about that a lot today, but now I’ll talk about what we’re doing in North America, and specifically the United States. So we talked about sharing information between countries. Well this is an example of how we’ve imported the best practice from the UK. And we imported that best practice around a lot of things you see at the bottom linked to the model that I just explained. So first, we had significant media investment. Media investment where the core target lives and the platform we use for that was ESPN College GameDay. The second area was segmentation, so you can see mini cans, you can see glass packages, you can also see a frequency pack, and 12 packs.

Innovation, changing the recipe, having the product taste more like original Coca‑Cola with zero sugar and zero calories. And then execution. Making sure that we develop the stores and hit the stores quickly and get that up to speed quickly with our new bottling system – our new franchise bottling system.

And what have been the results, a +7 point increase in trends since we’ve implemented in this process. So really, really great success on Coke Zero Sugar.

So let’s pivot to explorer brands, you heard about VEB during the day, but I want to give you some more detail and dig into that a little closer. So Venturing & Emerging Brands is a group we have that goes and finds explorer brands and they have a model that they implement around four key areas. The first one is leveraging the industry knowhow that we have across our system. And a lot of that has to do with insights about the business and insights about consumers.

The second area is around leveraging our world class commercialization capabilities across lots of areas of the business, but specifically brand building, helping these young brands, understand their consumer and understand the opportunity.

The third area is around the business model, and you can see we use a venture approach or either a minority investment or either – actually an outright acquisition. And then lastly, what’s really great about our model in North America is our multiple routes to market. We can leverage these brands and leverage those routes to market to drive these brands faster.

So let’s look an example that we feel like is a brand that has real edge in Francisco’s terms, and that’s fairlife, has everybody tried fairlife on the back, if you don’t please get a chance to do it, it’s an amazing brand. And Venturing & Emerging Brands, we’re able to find fairlife and find it in the marketplace and see that edge that it had. An edge that it had really fell in three areas. One is that one of the founders was a veterinarian and that veterinarian believed there was a better way to run a dairy farm. The second was a patented filtration system where we could actually take the best parts of milk and provide them to the consumer. The third was state-of-the-art manufacturing to make sure we could get to market quickly with these brands, and the fourth was leveraging the model in the marketplace that we talked about with our Coca‑Cola brands.

So, we looked at information, we looked at brand building, we looked at the routes to market that we have. So, for example the chilled products are distributed through our warehouse business. Our ambient products are distributed through the bottlers. And then we have natural channel distributors and foodservice distributors as well. So thus – that’s where we can really build our brands and bring those brands to life in North America, which is a key strategic pillar for us.

Let’s pivot to customer value creation. Having strong brands is a great way to build customer value, but having great customer relationships is a great way to build strong brands. And some of you said to me, how is it working in a tough market environment with customers today. And really, what I tell you the key is a couple of things. When you’re growing faster than your customer, you’re accretive to their business and you’re in a different position.

So, how do you get that way? Well, the way that we do that in Coke North America has art and science too, and here’s the science. The science is, we have a collaborative planning process that we use business planning process that we use with customers that really digs in deep with them to understand their objectives, understand their strategies, developing joint plans often beyond beverages. Then we go to our value proposition, which we call the Coca‑Cola commitment, and that value proposition brings out unique elements to the customers’ needs – that provides customized solutions to their needs against growth and that helps us drive our growth faster than them, and makes – and we’re accretive to their business.

So, what’s happened, well you can see that, we’ve been the number one NARTD in driving retail value growth for customers. And we’re doing it in a way that they feel really good about, because they’ve ranked us at the top quartile of people that do business with them. So, we’re going to continue to build strong brands and continue to build customer value in North America.

And the third element I would say is around – that we’re focused on is around building our own capabilities to sustain and repeat results. And the first starts with our refranchise bottling system, you heard James talk about that earlier, you heard some of my colleagues talk about that, but the map is complete, and with that map as complete, we have an energized bottling system that’s investing in the market both in people and capital to drive results; so we’re going to leverage that.

The third area hopefully we get a chance to see to the right here today with our – with our showcase is around digitization and accelerating that. The first example, sip & scan. You familiar with My Coke Rewards, it used to be on top of a cap, you punch in codes, we’ve digitized that. Now it’s a package to mobile interaction with consumers right away for them to interact with our products and receive rewards.

In the other areas around eCommerce. So you’re able to see that as well in the eCommerce space which is a broad definition, I think James talked about, but we’re really focused on e-commerce from click-and-collect, we have white papers on that with our customers to make sure we help them in that space. We’re working on things such as meal kits, so in the foodservice how we participate in meal kits that come to bear. And also forward looking things like voice, we’re actively involved in that and with our pure-play players the digital shelf, so we’re really focused on eCommerce.

And then last as a productivity mindset. And a productivity mindset that challenges every $1 that simplifies how we work; that makes sure that we’re leveraging technology to do those things as well; to invest back in the business for growth and drive margins.

So, as you think about Coke North America there’s a couple of things that I’d ask you to think about. One is, it’s a big business with big opportunity. The second is, there’s a proven growth model of how we plan to drive growth in the marketplace. And three, key strategic pillars to do that, building strong brands, creating customer value and then building our own capabilities to sustain and repeat. But the consumer is in charge, and the marketplace is evolving, and we’re going to continue to evolve in North America to make sure that we’re capturing all the opportunities.

So I look forward to working with all of you in my new role, and to seeing you out in New York or wherever you might be. And as I close I want to leave you with a clip from a campaign we’re running now, and hopefully you’ve seen it in your own homes, but it’s a clip that we believe pulls together many of the elements that I’ve talked about today, and helps demonstrate how in North America we plan to bring beverages for life, to life. Thank you and let’s roll the clip.