Coca-Cola beverages
A key part of Coca-Cola's transformation will be its approach to innovation.

ATLANTA — How does a global company with category-leading brands develop needle-moving innovation at the local level? That is the challenge facing The Coca-Cola Co. as it continues to transform itself into what management is calling a “total beverage” company. A key part of that transformation will be the company’s approach to innovation.

Francisco Xavier Crespo Benítez, Coca-Cola
Francisco Xavier Crespo Benítez, chief growth officer of Coca-Cola

“A lot of the fast-moving consumer goods were built on the average because they were worshiping economies of scale,” said Francisco Xavier Crespo Benítez, chief growth officer, Nov. 16 during the company’s annual investor day. “Economies of scale gave you mass media, mass distribution, relevance in front of your customers and low cost. That was the game. So, average was the game. Now the problem is that allowed for a lot of local small players to capture premium niche spaces.”

James Robert B. Quincey, president and chief executive officer, likened the company’s original approach to innovation as a quest for perfection. The company would place big bets on a few product launches that were developed and executed over a long period of time.

James Quincey, Coca-Cola
James Quincey, president and c.e.o. of Coca-Cola

“The future is not going to be like that,” he said. “We must be more agile, get things to market quicker … test (and) learn. If they don’t work, they don’t work. Move on. If they do (work), take them to the next stage.”

In addition to being more agile, Mr. Quincey said the company is becoming more open source.

“(We are) trying to leverage the scale of all the supply base rather than just do everything ourselves, trying to do it more in a test-and-learn approach …,” he said.

Changing the company’s approach to innovation will require a change in culture as well. Future leaders in R.&D. will need to demonstrate curiosity and empowerment.

Coca-Cola portfolio
The Coca-Cola Co. is is seeking to become a “total beverage" company.

“The culture we want is one in which the values of curiosity, experimentation, learning and excuse-less delivery are the values that are rewarded,” Mr. Benítez said.

Mr. Quincey added, “If we're not curious about how the consumer is changing, if we're not curious about the customer's strategy on how they create value, we're not going to come up with the right ideas. It's no point just being curious on your own. If you're not bringing in divergent ideas, if you're not looking out across the broad world of Coke, where something is probably already being done that you need, then you're missing a chance. We also need to underline empowered.

“In a large institution, a successful large institution, sometimes, people in the field think there are more rules than there actually are. They have just assumed that they can't do things. Now we need to turn it around.

“If we can't become faster, more experimental, cycle faster through ideas, experiments, insights, learnings onto the next iteration, we won't be able to expand not just across the categories but across the number of countries we need to succeed in.”

Coca-Cola premium beverage brands: Royal Bliss in Spain, Schweppes in Great Britain, Blue Sky in the U.S. and Appletiser in South Africa,
Coca-Cola is looking to capitalize on opportunities in the premium beverage space with its Royal Bliss, Schweppes, Blue Sky and Appletiser brands.

With such brands as Royal Bliss in Spain, Schweppes in Great Britain, Blue Sky in the United States and Appletiser in South Africa, the company is looking to capitalize on the opportunities management sees in the premium beverage space.

“We may have been leaving money on the table because we were chasing volume and not revenue,” Mr. Benítez said. “We do know how to reinvigorate, following the right trends and understanding consumers. We do have an opportunity to have recipes that customize, capture better value because they connect better with local consumers. And we have a lot of premium spaces that we can and should occupy.”

One component to improving innovation efforts globally will be the expansion of Coca-Cola’s Venture and Emerging Brands (V.E.B.) initiative. Started in the United States, the program is slated to be utilized in markets around the world.

Brian Smith, Coca-Cola
Brian Smith, president of Europe, Middle East and Africa for Coca-Cola

“We've launched V.E.B. in the Central and Eastern Europe (C.E.E.) business unit with Hellenic,” said Brian Smith, president of Europe, Middle East and Africa. “It's a joint effort between us and the bottler. And we've launched three products: smartwater, Zico and Appletiser ... And it's a dedicated sales force, it's a dedicated set of people, and all they do is that. So, it's kind of like the Mini-Me of the North America V.E.B. because we're much smaller. But the intent is in the future that we'll be able to build that not only in C.E.E. but in other business units as well.”

Through 2020, Coca-Cola management sees $150 billion in additional sales in the global beverage market. Earning a significant share of that growth opportunity will require breaking down barriers and simplifying the process of innovation.

“ … we operate in 200 countries-plus,” Mr. Quincey said. “Having a success in one country, unless it's a couple of countries, frankly, almost doesn't move the needle. The needle only really moves when it's a big success in more than one of the big countries.

“So, lifting and shifting. Whether it ends up being the same brand or a bad idea reinterpreted under an existing brand elsewhere, our ability to lift and shift the best ideas and the most successful ideas around the world is absolutely critical to our ability to create more billion-dollar brands on a diverse portfolio.”