As The Coca-Cola Company continues to increase its presence as a total beverage company, major emphasis is being placed on innovation and growth. But not just any type of growth –disciplined growth. For Coca-Cola, disciplined growth involves building a portfolio of brands through quality brand leadership, ultimately accelerating profit margins and driving past the competition.
“Growth is not an objective, it is a discipline,” explained The Coca-Cola Company’s Chief Growth Officer, Francisco Crespo, during a recent Coca-Cola Investor Day, the first the company held in eight years. “Rather than telling consumers what they should be drinking, we will humbly align our portfolio to follow their tastes, their needs, their wills. Instead of defining volume as the sole metric of growth, we will empower our brands with the ability to capture transactions and revenue.”
The consumer-centric, guided portfolio and “value over volume” principles Crespo cited are directly tied to two of the five strategic growth priorities Coca-Cola introduced in 2017. The other three are ensuring competitive advantage across the company’s value chain, digitizing the Coca-Cola system and shaping and encouraging a culture that enables change.
Categorizing Our Brands
Crespo believes building quality brand leadership requires focusing on and activating three brand categories: Disruptive Explorers, Patient Challengers and Purposeful Leaders.
Disruptive Explorer brands have entrepreneurial audacity and the ability to disrupt markets where they are not the leader. They include brands such as Honest Tea® and POWERADE®. As a result of discipline and persistence, adjusting pricing and packaging to meet consumer needs, and an integrated marketing campaign, POWERADE rose to market leader in Mexico in 2015, now owning 54 percent of the sports drink market in the country.
Patient Challenger brands are identified as having the endurance of a marathoner. Coca-Cola works to amplify these brands’ competitive edges by focusing on consumer segmentation that matters, like behavior, values and lifestyle, and investing in experiential brand building. Simply Beverages™, which includes Simply Orange®, is a Patient Challenger brand. It pushes its edge with distinctive packaging, carafe-style bottle, fresh taste, simplicity and powerful marketing that elicits a close-to-nature feeling. Over the past six years, Simply Beverages™ has been successfully closing its value share gap with the competition.
The next step up from Patient Challenger is a Purposeful Leader, representative of wisdom and courage. The best-known Purposeful Leader brand is Coca-Cola®. But, according to Crespo, just because a brand has become a Purposeful Leader doesn’t mean its work is done. Purposeful Leaders have the opportunity to expand growth, capture value and nurture the competitive edge—exactly what the company has done with Coca-Cola.
Brands Responding to Consumer Demands
With consumers seeking to manage sugar intake without giving up the brands they love, Coca-Cola Zero Sugar™ was introduced in 2016. This new and improved no-sugar recipe is even closer to the taste of Coca-Cola Original Taste and is experiencing positive retail sales. In the United States, sales of Coca-Cola Zero Sugar were up 13 percent in 2017. Other countries have experienced even greater growth, with Germany up almost 20 percent, Great Britain at 50 percent, and Mexico at 90 percent.
Beyond delivering a taste closer to the iconic brand, Coca-Cola Zero Sugar has realized success because the company understands that one exact recipe can’t be applied to every market in the world and produce maximum value. Markets vary in culture, characteristics and tastes, so the company experimented and customized Coca-Cola Zero Sugar for different markets—all part of how the company is letting consumers guide its portfolio.
“There is a lot of value to be captured on our leading brands. When you see margins improving here, there is a lot of discipline behind making that happen,” said Crespo. “The discipline of growth will allow us to accelerate growth. The discipline of growth will allow us to build quality leadership in more spaces. And as we do that, we will get better margins.”