Coca-Cola's 2013 revenue, volume results did not meet expectations, CEO says; company has conducted 'complete and thorough review of our global business'
February 24, 2014
– Calling Coke's business "dynamic" and "vibrant," Chairman and CEO Muhtar Kent outlined the strategic actions The Coca-Cola Company is taking to restore its momentum in 2014.
Addressing analysts last week at the annual Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Fla., Kent said despite a challenging 2013, the company remains committed to its 2020 Vision and is “no less enthusiastic about the future ahead of us than we were when we launched our vision four years ago.”
Kent acknowledged that while he is "not satisfied" with Coke's performance in 2013, he said the company was still able to deliver profit within its long-term growth targets for the year, and that the overall health of the nonalcoholic ready-to-drink (NARTD) beverage industry remains strong.
The fundamental long-term assumptions and economic trends underlying the industry’s projected growth through 2020 still hold true – including the explosive growth of the global middle class, rising personal expenditure rates worldwide, and the fact half the world’s population is projected to be under age 30 by the year 2020.
"That’s 3.5 billion people who will sit in the heart of our core demographic or who are in the pipeline to be future fans of our brands," Kent said on Feb. 21.
Given these and other factors, Kent expressed confidence that the global NARTD industry will continue to grow volume 3% to 4%, and value at 5% to 6% through the long term, and that the company is “uniquely positioned and very well poised” to capture sustainable growth across the industry.
Kent acknowledged our 2013 volume and revenue results did not meet expectations. He said the company has conducted a "complete and thorough review of our global business" and is acting decisively to accelerate growth through new investments across marketing, innovation, product development, equipment, infrastructure and more "feet on the street."
Kent said the company remains “laser focused on flawless execution” and five strategic priorities to restore momentum:
1) Accelerate sparkling growth, led by Coca-Cola.
2) Strategically expand the company's profitable still beverage portfolio.
3) Increase media investments by maximizing productivity.
4) Win at the point of sale by unlocking the power of the Coca-Cola system.
5) Invest in the next generation of Coca-Cola leaders.
In addressing the first priority – accelerating sparkling growth, led by Coca-Cola – Kent noted brand Coca-Cola is very healthy globally and growing. He said the company would work to accelerate additional growth by investing an additional $400 million in media to support its portfolio of brands in 2014, and will create a highly nimble and networked marketing organization to more quickly scale best practice capabilities.
Kent pointed to several current and upcoming programs that will support these enhanced marketing efforts, including the Sochi 2014 Winter Olympic Games, FIFA World Cup, and the successful Share-a-Coke campaign, which is being expanded to additional markets this year.
On the second priority – strategically expand our profitable still portfolio – Kent emphasized Coca-Cola is the global value leader in still beverages and has more leading still brands than any competitor, including 11 billion-dollar brands, and many more in the pipeline. Looking ahead, Coca-Cola is investing in the future and plans to grow its existing billion-dollar still brands to build scale. We will also target opportunities to strengthen our position across new categories, like value-added dairy, and build depth within our portfolio with products like Dasani Drops.
Addressing the third priority – maximizing productivity – Kent explained how we are working to increase our media investments through expanded productivity efforts. Earlier this week, the company announced the expansion of our productivity commitments to drive $1 billion in incremental productivity by 2016, savings that will be reinvested in our business and our brands.
"We know from experience that focusing on productivity and investing in our brands during turbulent times will ensure we emerge stronger and better positioned to win long-term," he said.
Regarding the fourth priority – win at the point of sale – Kent said we will remain "laser-focused" on execution, underscoring the point by calling 2014 "The Year of Execution."
He outlined $50 billion in systemwide investments since 2010 that have enabled the company to excel across multiple commercial execution points – including adding new plants, distribution capabilities, coolers and marketing; enhancing immediate consumption capabilities; optimizing in-store activations, advancing customers’ business strategies and putting more "feet on the street" to service these accounts.
"We know when we execute, we win," he said.
For the fifth priority – investing in the next generation of leaders – Kent said 31 percent of Coke's global senior leaders are women, a marked improvement from a few years ago, but said it only “a milestone” on the company's journey as it strives to engage the best talent and build the finest leadership pipeline in the industry.
North America Franchise Model
Kent rounded out his comments by discussing how these priorities drive execution across various markets, including North America. The company is making progress in its efforts to implement a modern franchise model in North America, he said, saying the model will leverage bottling partners’ local focus as well as provide the scale to work effectively with large national customers, optimize its supply chain and respond faster to changing market conditions.
Kent said the company closed on the first transaction of its 21st Century Beverage Partnership Model at the end of 2013 and signed Letters Of Intent to grant the territory of the greater Chicago area to Reyes Holdings, L.L.C. and a portion of Central Florida – including Tampa-St. Petersburg – to Troy Taylor, chairman and CEO of the newly incorporated Florida bottler.