Coca-Cola reported second quarter earnings today. While earnings are a report card on short-term results, they also say a lot about progress toward longer-term strategies.
We asked Francisco Crespo, the company’s chief growth officer, to talk about the big picture at
How do you describe your job as chief growth officer?
Growth is the number-one priority for our company, and therefore it’s a priority for every one of our associates. Not just growth for the sake of growing, but growth that translates into solid returns. We – the growth team and me – are helping the company develop clear pathways for growth. We believe that growth is a discipline. Sustainable growth will occur only when we play with discipline using a few, focused capabilities.
Our role is to define where we have headroom for growth and identify the simplest, fastest and most efficient ways to capture more growth. Because strategy is all about choice, we also attempt to continuously identify what not to do, as much as we are excited about the possibilities of what to do more of.
How has the company changed over the last year or so?
Coca-Cola has a relatively new CEO in James Quincey, plus many leaders in new positions, including you.
We’ve really made a lot of cultural and operational changes at the company overall, including in the growth organization. Under James’ leadership, we have been truly agile with our changes. As an example, the growth function itself is new and was created with unprecedented speed. Over the past year, we named new leaders for many of our business units – a combination of brilliant internal talent and promising external talent we brought in from elsewhere.
We have simplified a lot of our processes, including bringing clarity to our business units on specific areas of governance and guidance. Our strategy and insights team has worked to evolve our business planning process, simplifying reporting requirements and deepening our understanding behind areas where we have the greatest opportunities. We are automating recurring business tools, like scorecards and innovation reports. And a lot more is happening to ensure that we move faster, focus on big bets and continuously develop our talent.
We are experimenting more, with higher tolerance of failure, so that we can learn and change faster. Our number of experiments in the first quarter of 2018 went up by more than 30%. We are hunting and killing zombies, which are products, packs, processes or ideas that have not worked or are not working but are still using our resources.
The company’s foundation rests on sparkling beverages. Can this category keep growing?
Undoubtedly. And not because it’s a politically right thing to say in a company where sparkling is the core of the business but because the math reflects the tremendous growth headroom in sparkling. Beyond the math, we know that people love to drink sparkling beverages. In fact, we are already driving an acceleration in the sparkling soft drinks category through investment and innovation, with 5% retail value growth globally in our sparkling portfolio during the quarter.
After more than 130 years – and doing business in every country and territory in the world except two – it’s still the case that only 1.3 billion consumers drink a Coke. We have identified more than 600 million people who can and would drink a Coke – whichever variant they choose. It’s inexcusable if we don’t go and find these potential drinkers. They are all around the world, including some of our largest markets, like the United States and Mexico. And this is just Coke. Imagine the opportunity behind Sprite, Fanta and Schweppes.
There is no reason why sparkling cannot grow strongly across the planet consistently over many decades, while we also grow the rest of the portfolio.
Can you talk more about what you mean by 'discipline of growth'?
The discipline of growth is the ability to envision opportunities that provide headroom to grow and the ability to capture a disproportionate amount of this value. With 7.5 billion people getting thirsty, say eight times a day today, that’s 2.5 billion unit cases of liquid consumed every day. We are only capturing about 3% of this daily liquid consumption. As we say, after more than 130 years, we are still at the first sip. Therefore, we don’t have a growth headroom challenge.
We believe that, for our company, growth is a discipline that is embedded in capabilities. For example, one of our disciplines is defining and building what we called “edge,” which is a unique and differentiated set of properties that are relevant to a brand and the consumer.
The growth function is uniquely positioned to instill and drive these disciplines holistically. We are no longer working in silos. As an integrated team, we are addressing the disciplines through a multi-function lens: the consumer, the customer, commercial teams and digital ecosystems, embedded in an edge-based strategy.
Is innovation mostly about launching new drinks?
Innovation is more than launching new products. It’s about ingredients, too. Today, we are also being most successful through innovation in packaging and that, too, is primarily in extending packaging solutions for new occasions or price points.
Innovation is often confused with imitation, copying benefits in the form of features already accessible to consumers. Real innovation is providing benefits that are highly relevant to consumers and delivered via proprietary solutions by the brand.
Innovation is also about bringing delight and value to our consumers and stakeholders in everything that we do, not only in packaging and products but in every single touchpoint. Innovation is about capabilities that help strengthen our competitive advantage.
For example, our Freestyle system has allowed us to bring a unique advantage to customers and exceptional delight to consumers in fountain and, in the process, is winning new business. Another example is Honest. As a platform, Honest innovated with a combination of several key features, including tea being organic and just a tad sweet.
We view all innovations from a dual lens of being new to the world and new to
True innovations help deliver tangible benefits to our consumers in ways that no other brand can. Great innovations have multiple edges that they continue to sharpen to keep ahead of competition.
How will you know if you’re successful?
It’s pretty simple. We’ll grow our consumer base. We’ll gain value share in nonalcoholic beverages. We will realize pricing in line with our edge and ahead of the industry. We will create brands with impenetrable edge. But, most importantly, we will have world-class talent in every area of our business, which will reshape the next generation of growth for our business.