ATLANTA – The COVID-19 pandemic disrupted businesses and markets around the world, but at least one food and beverage company saw an opportunity to use the disruption to its advantage. The Coca-Cola Co. used the need to streamline its supply chain to meet surging retail demand for its core products to eliminate such brands as Odwalla, Tab, Zico and others.
“If you go back to April 2020, demand of on-shelf SKUs (stock-keeping units) shrunk dramatically across the world for reference,” said James Robert B. Quincey, chairman and chief executive officer, during a Dec. 1 presentation at the virtual Redburn CEO Conference. “So, we stopped producing a number of these smaller brands SKUs because that was too complicated to the supply chain in the crisis. So, therein is the perfect moment to actually take a top-down decision rather than trying to go one by one over time.
“ … There were opportunities actually to seize the moment and bring forward actions that needed to be taken and get them done in a fraction of the time and a fraction of the pain if it hadn’t been for the opportunity afforded by the pandemic. So, we just went for it.”
Mr. Quincey said the parts of the Coca-Cola portfolio that were pruned represented 2% of company sales, but he compared not thinning out brands to high cholesterol levels. Over time they will clog arteries.
“Every bottle needs the same amount of space on a shelf,” he said. “And if you are not constantly pruning it, you start to fur up the system with things that don’t rotate and move through the supply chain and through the retailers as fast as the other stuff. So, ultimately, you end up selling less (and) you have reduced optimization.”
Without the pandemic, organizational inertia may have slowed the process.
“The year you get rid of them, someone has lost sales,” Mr. Quincey said. “Some brand managers lost sales, some country managers lost sales, the bottlers commercial director says, ‘yes, but they sell, and now, you’re making it harder for me to reach the budget.’”
It was also important for the decision to come from the CEO to signal to managers the level of risk the company is willing to take.
“If you’re a brand manager in country X, taking a risk and doing something with that brand in that country is your whole job,” Mr. Quincey said. “And if the goal is wrong, you start worrying about your career …, but for me, brand X in country Y is probably a rounding error. So, I think it’s very important that the CEO kind of set the risk appetite so that people further down can feel free to take these risks, which in a perverse way are bigger for them than they are for me.”
The portfolio reduction now means The Coca-Cola Co. can be more agile in terms of product development and innovation, said Mr. Quincey.
“Now, there’s space in the system, in the shelf, in the truck, in the factory; we can refocus again on innovation as consumers go out and about and the world reopens in fits and starts,” he said. We will be able to actually come back and drive the expansion of the total beverage company coming out of the crisis.”