Coca-Cola eyes five ways to restore growth
Feb. 18, 2014
by Monica Watrous
ATLANTA — Five strategic priorities guide the Coca-Cola Co. in restoring momentum within a challenged category.
First, the company aims to accelerate sparkling beverage growth, led by its flagship brand.
“Indeed, in many markets around the world, (the) brand Coca-Cola remains magical, but we need to work even harder to enhance the romance of the brand in every market around the world,” said Muhtar Kent, chairman and chief executive officer, during a Feb. 18 earnings call with financial analysts. “Our global marketing community is laser-focused on doing their best work while reallocating resources to the most impactful campaigns and mediums.”
Driven by weakness in diet drinks, Coca-Cola’s sparkling beverage volume in North America slid 2% in fiscal 2013.
“We have implemented a multi-faceted approach to address category headwinds and the various misperceptions that fuel them,” Mr. Kent said. “This effort is targeting both obesity and ingredient concerns and increased aggressive sweetener innovation, transparent consumer communications, continued packaging evolution and new partnerships with credible third parties around the world who will use meaningful facts to defend and protect the sparkling category.”
Such strategic partnerships include the recently announced collaboration agreement with Green Mountain Coffee Roasters Inc. to develop Keurig Cold, an at-home beverage system.
“When you look at how beverages are consumed at home, and when you look at trends in the next 10 years, people are going to spend more time at home,” Mr. Kent said. “They’re going to work more from home. Home is going to be an even more important place for consumers. And I think we need to be present there with different technologies, different packaging, different ways to serve our brands.”
Coca-Cola’s second priority is to strategically expand its profitable still beverage portfolio.
“We are the world's largest still beverage company with $11 billion still brands and many more in the pipeline,” Mr. Kent said.
Plans include extending a winning approach in juices to other categories.
“This effort involves re-examining every stage of a beverage’s lifecycle and developing category-specific plans that balance organic growth innovation and acquisitions,” Mr. Kent said.
Coca-Cola’s third priority is increasing media investments by maximizing productivity. To increase brand investments by up to $1 billion by 2016, the company is generating savings from supply chain optimization, system standardization, resource and cost allocation and improved utilization of its global marketing network.
Fourth, the company plans to improve point-of-sale execution.
“As you know, execution in the global marketplace is about doing many common things uncommonly well and doing them in an aligned way across our great system,” Mr. Kent said. “It is about presenting our brands in the right package, in the right outlet, in the right channel, at the right price, and within an arm’s reach of our consumers. This is why we're calling 2014 the year of execution at the point-of-sale, beginning with brand Coca-Cola.”
The fifth priority is investing in future leaders.
“There is nothing more critical to our business than our people, and we have to continue to hire the best, retain the best, train the best and mentor the best,” Mr. Kent said.
Coca-Cola also is focused on innovation to meet consumer demand for reduced-calorie soft drinks without artificial sweeteners. The company launched Coca-Cola Life, a mid-calorie soft drink, in Argentina and Chile last year.
“We’re excited about the potential of Coca-Cola Life, as it has shown great promise in bringing people back into the category,” Mr. Kent said. “It’s another example of how we are working to be part of the solution to the obesity issue, giving consumers a blend of sugar and natural zero-calorie sweeteners.”
For the year ended Dec. 31, 2013, net income attributable to company shareowners declined 5% to $8,584 million, equal to $1.90 per share, from $9,019 million, or $1.97 per share, in fiscal 2012. Net income for the quarter fell 8% to $1,710 million, or 38c per share, from $1,866 million, or 41c per share, during the same period of the previous year.
Net operating revenue for the year dropped 2% to $46,854 million from $48,017 million the year before. Net operating revenue for the quarter decreased 4% to $11,040 million, compared with $11,455 million during the prior-year period. Excluding the effect of structural changes, primarily the deconsolidation of company-owned bottling operations, Coca-Cola posted comparable currency neutral net revenue growth of 3% for the year and 4% for the quarter.
Coca-Cola achieved global volume growth of 2% for the year and 1% for the quarter. Additionally, the company gained global value share in nonalcoholic ready-to-drink beverages and global volume and value share in core sparkling and still beverages for the year.
During the year, tea volume grew 11%, juice and juice drinks grew 5%, and sports drinks grew 2%. Packaged water increased 5%, as the company focused on growing premium water brands and expanding environmentally friendly packaging.