Developing a Broad Portfolio
President, Asia Pacific
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Good afternoon to everybody here. And good morning to the brave few who are listening live from my part of the world in Asia. My name is John Murphy, and it’s a great privilege actually to be here to represent those people on the other side of the world. I’d like to talk about three topics. First of all, the runway for growth that we have across Asia Pacific. Secondly, to talk about some of the lessons that we are, not only learning, but applying in many of our markets. And thirdly, I’d like to talk about the playbook that Francisco is leading, and how it can be applied differently, depending on the market context.
So with that, let me start, like my colleagues have done, with little context on Asia Pacific. 52% of the world’s population live here, Brian’s impressive 2.5 billion consumers pales in comparison to my 4.5 billion consumers. They live in 32 countries of every shape, size and stage of development. We service – we service The
We’re organized into five business units and we work with a handful of pretty good partners, about whom I’ll talk a little bit as we go forward. Our core business, like the other guys where we have 60% of our business, is in sparkling, but the other 40% tells you we’re not immaterial when it comes to the other categories. The runway for growth ahead is significant. Over the next three years, the industry will add $50 billion of retail value, all the core categories will grow, somewhat different rates of growth than you’ve seen in some other parts of the world. And if that’s not an advertisement for beverages for life, well then I don’t know what is. If there was one slide I was going to rip out of my deck and make sure I had on my desk every morning is this one, the beverage landscape in Asia Pacific is very different today than you see in other parts of the world. 7 out of every 10 beverages consumed in Asia Pacific today is non-commercial, that compares into developed world for 7 out of every 10 beverages is commercial. If we were just to get to the global average, we would create $100 billion -almost $120 billion of value. I’m pretty excited about that chart and I have it close by, in the good and the not so good days.
To better understand though the why of that chart, and to tap into what does it take to make it different as we go forward. The obvious place to start is with the consumer. And far be it from me to sort of broad-brush the Asian consumer. But there are common traits that one can pick up whether you’re talking about the Japanese, whether you’re talking about India or whether you’re talking about China. Home rituals are important. Hence the prevalence of homebrew teas, homemade juices. They love a lot of stuff, sweet, un-sweet, hot, cold, gooey, un-gooey you have, you name it. They are very trend conscious increasingly in today’s environment and those trends are influencing the repertoire of beverages that they’re trying, and they love to try, they love to try new stuff, and they love to try it frequently.
And with the adoption of digital technologies, the rate of trial is even higher, because of the access that digital is creating. We’ve got a pretty decent portfolio today. In fact over the last three years, we’ve launched in Asia-Pacific alone over 500 new products some of which you’ve seen in the booth earlier, I’ve got three or four favorites,
Coca-Cola Plus is got some fiber, it’s scientifically stamped with the approval of the Japanese Government, which only takes two years to secure, and it helps to absorb the fat in your blood. So the signup sheet is outside. We also are excited with what we’re doing in India, James and I launched middle Minute Maid Mosambi with the Chief Minister of Maharashtra a few months ago. Mosambi is the second most popular local fruit in India. It’s a sweet lime, and marrying a locally desired fruit to a global brand creates value and we’re pretty excited about what we’re doing.
And the third one Chun Yue. Chun Yue is a water we have launched in China in the last couple of years with a view to bring in the consumer up to the value curve in their ongoing pursuit for more quality and for more purity. The reality though is, we’re really just getting started.
The size of the gray bars tells you that, that’s all that we do not own and participate today. Keep in mind, we still have just 15% value share. But we’re not starting from scratch is the good news. And in one of our markets, Japan we have what has now become an example. And indeed an inspiration for not only for those of us in Asia, but for across the world with what has evolved in Japan over the last 20 years, 25 years.
I was actually in Japan, in my first assignment in the early 1990s. And at that time, the business there launched the strategy to become a total beverage company, with a simple vision to provide consumers a superior choice for every beverage occasion. And in those days we were primarily a sparkling business, with some momentum in coffee.
Fast forward to today, and we’ve got a very diverse portfolio. We have leader positions in three of the largest categories and strong number twos in two of the other ones. As a side point, it’s interesting that even with that evolution, even with following the consumer, the brand, the product that generates the most retail value in Japan today is
I thought it’ll be instructive to share with you just a few of the lessons that we have learned, and we are applying from the experience in Japan. Not only in Asia Pacific, but around the world and some of these fuse nicely actually with the playbook that Francisco has been talking about. Firstly, it’s critical to anchor the portfolio around a few leader brands.
Today in Japan, we have a stable north of 30 brands. And yet of those 30, 7 of them represent the lion share of both, revenue and profit. Scale is critical. As we know, this is a proof point. And innovation actually paradoxically works better on scale brands. But it doesn’t happen by chance. It requires a long-term commitment to selecting the categories you want to play and win in . It requires consistent multi-year investments and it requires a systematic approach to learning how to build categories.
Once you have brands, you can’t rest on your laurels. Keeping brands relevant is a 24x7 job. My first visit to Japan, Georgia coffee was available in one can. It was a 250 milliliter long can, and it was called Georgia original. It was a sweetened, it basically was a flavor, a flavored milk with coffee sweetener. Today, we have a stable of sub-brands built for different consumer segments. Within those segments there are flavors and pack variance to meet needs on specific occasions. And underneath that, we have tactical extensions. I was talking to somebody earlier today about in Fukuoka, they prefer a sweeter coffee, so we got one there. We leverage the seasons, we leverage the rhythm of the country, and this is a 365-day job. Okay. Yeah. We have big time failed, but persisted.
In my second tour of [indiscernible] (02:15:50) Japan, we thought we’ve cracked the code in green tea. The paradoxical thing about expect failures, you don’t actually set up to fail. You don’t say, okay I’m going to fail gloriously next month. You set out with in search of those unique insights, you set out in search of the ability to convert those into product solutions.
And we thought we had it with Marocha. We filled every vending machine in Japan in one night, best – biggest product launch in the history of Japan. And six months later, the consumer said, no thanks. We don’t like you, and we were out of the market. It’s important to set realistic expectations on these exploration journeys. It’s important to have the ability to have many irons in the fire. And perhaps the most important lesson we’re religious about at the moment is, never stop searching for those unique insights.
Consumer-led is not for the fainthearted. Following them is Olympian in task and in persistence required. This thing here is not designed for this presentation. This is a copy of the Japan plan from last year. This is our launch calendar.
To be able to execute that launch calendar, it’s a different skill. It requires us to embrace complexity and not be afraid of it. And in order to embrace complexity, you need to build sophistication into how you work end-to-end. It requires the courage to invest ahead of the curve before the consumer has actually got there, and more importantly, before your competitor has gotten there. And it requires, yes, in that pursuit of the new, it requires incredible discipline to stay with it.
When I had my first bottler meeting in Japan, we needed a room around this size to house all of the attendees. We had a big, big system, lots of bottlers. Today, we would need one of the small meeting rooms over there. But the journey to get from where we were to where we are, it’s a never ending pursuit. It’s, about leadership, it’s about trust, it’s about shared vision alignment for what’s required, what will win in the longer term and it’s something that we can never forget, no matter where we’re operating or with whomever we’re operating with.
So, as we search for the path to quality leadership in Asia-Pacific and as I segment all of our markets, we’ve got about 90 countries, important country category combinations, most of them are in the left-hand side of the chart and the objective over the next few years is to have most of them on the right-hand side of the chart. As James alluded to earlier, we have very different starting points. India, we have leader brands, but we have a industry that is very underdeveloped. On the other hand in China, we have a 9% value share of an industry that is actually quite huge. And the good news about both beverages for life and the playbook and the lessons from Japan is that we can apply them differently to different contexts.
Take China for example. In China, it’s a stretch, frankly speaking, to say that we have for you to take away that these brands here are leader brands. You know when you’ve got a 9% share, it’s a bit of a stretch. But what we are clear on is, we believe they will be and can be leader brands and we’re doing the things that Francisco and the other guys have talked about to get there.
We also recognize that there is a couple of other categories that we need systematic place in and we’re excited with some of the work we have in our pipeline. We’re investing in really understanding the Chinese consumer.
When you’ve got a country, where you’ve got a 100 cities with a population of more than one million people, you need to take pretty deep to really understand the rhythm of the nation, what’s happening and why we’re investing significantly in there. We have rewired completely our supply chain with our R&D center in Shanghai.
I would invite any of you, if you are in China, to let us know, I’d love to show you around some of the things we’re been building and developing. And with the refranchising that took place earlier this year, I believe, we have in place a tremendous, tremendous platform with COFCO and Swire to really drive our business in China towards this vision of being a total beverage company.
India is a different story. We have leader brands. Sprite, Maaza, Thumps Up, in particular, [ph] on (02:21:33) their categories tremendous equity. Our job now is to leverage those brands to help grow the industry. And we’re excited with the work we have underway to do that. In addition, we have a couple of other categories that we believe we have tremendous room for growth as we go forward. And the good news is there are not too many there yet who’ve cracked the code on leadership in those categories.
The triangle in the middle. The bottom half of the pyramid in India, almost 300 million people, we have tried so many times in my time in the
And finally with Bottling Investments Group, we’ve a really great partnership there to make sure that we build the right foundations over the coming years. And we do so in partnership with the 13 other smaller bottlers we have there. With BIG we can now do one system, one voice communications and planning with our customers. We have a one infrastructure plan and most importantly, we have the executional excellence mindset being applied at the same levels across the country.
I’ve been asked more than once, since I’ve taken on this role just over a year ago, I’ve been asked, look, what’s different John, like we’ve had many here and they’ve tried it and they’ve either been promoted or they’ve moved on. So what’s different. I’d offer you four thoughts to take. The first thing is that beverages for life for me is about opening the lens. And opening that lens creates just in the next three years, the opportunities that we talked about earlier, $50 billion and if we move the needle from noncommercial to commercial the sky is the limit with that broader lens.
Secondly, I’d say is we have without question, the most aligned and motivated group of fairly small – a small group of partners in Asia Pacific, today. I believe we’ve got a shared vision for the future, we’ve got investors who are willing to take the risks that are needed to build demand ahead of the curve. And we’ve got the same beliefs and the importance of building world-class capabilities up and down our respective organizations. We have a great playbook on growth that we are now applying with discipline across our 32 markets.
And last but not least, as James alluded to, we have a culture that’s changing. Growth is a discipline, but it’s also a mindset and we’re instilling that within our people. Capabilities is a broad word, but understanding the distinctive ones, the differential ones that are needed, are equally important, we’re clear what they are. And giving people belief that they can win is incredibly, incredibly motivating and powerful.
In fact, I invited our top 75 people to join me at a meeting earlier this year to help roll out the beverages for life down to the Asia-Pac level. I asked them to come back to me with a slogan for the meeting and this here’s what they came back with, they said John this is our time to win and I really believe it is.
Thank you, pleasure being here. Thank you.