BOSTON — A priority of The Coca-Cola Co. in the coming year is to accelerate growth of its non-carbonated beverages, which include such brands as Gold Peak Tea, Powerade and Smartwater. The Atlanta-based beverage company holds the No. 1 position globally in juice and juice drinks and ready-to-drink coffee and the No. 2 position in water, sports drinks and ready-to-drink tea, said James Quincey, president and chief operating officer.
|James Quincey, president and c.o.o. of Coca-Cola|
“But even those No. 1 and strong No. 2 positions in those various stills categories still doesn’t add up to anywhere near the same sort of market share that we have in sparkling,” Mr. Quincey said during a Sept. 6 presentation at the Barclays Global Consumer Staples Conference in Boston. “In sparkling, we have about 50% of global revenue in that category, but in stills, all those ones and twos only add up to a 15% position. So it’s still a more fragmented set of categories, where there is ample opportunity for us to follow a very similar game plan and path of gaining market share steadily over the years as we have done in the sparkling beverage industry.”
Coca-Cola plans to pursue growth through a combination of innovation, bolt-on acquisitions and global expansion of premium brands.
“Simply put, we do of course use our own innovation, use our own R.&D. to try and drive local innovation … whether that be Simply Orange in the U.S., Georgia coffee in Japan, and even Gold Peak tea here in the U.S.,” Mr. Quincey said. “So, driving innovation, growing the local winners and expanding those distributions is the foundation of what we’ve been doing. But in this world we find the opportunity to make value-accretive bolt-on M.&A. We’ve had a series of those in the juice drinks industry, in some of the plant protein industries here.”
In June, Coca-Cola acquired Unilever’s AdeS soy-based beverage business for $575 million. The company also recently bought a stake in Chi Ltd., a Lagos, Nigeria-based dairy and juice business, and in L.A. Aloe L.L.C., a Manhattan Beach, Calif.-based maker of a line of certified organic aloe water beverages called Aloe Gloe.
“And then, when we see the resonance, when we see the potential to tap into truly global consumer trends, then we scale as fast as we can some of those brands, whether that be the growth of Honest Tea, now exporting itself out of the U.S. as Smartwater did; or the growth of Innocent out of the U.K. into Western Europe, some 14-odd countries,” Mr. Quincey said. “Or even Del Valle, which was bought in Mexico and Brazil and now is the platform for a total holistic approach to juice and juice drinks across Latin America.
“If we build them steadily — the combination of local, bolt-on, and the global expansions — we can build profitable positions in each of these stills categories and continue the ongoing share gains.”
The sum of the actions, he said, mayproduce a dramatic result over time.
“So if I take, for example, the North American business and take the sum of those three actions and say, ‘How has that changed the portfolio since the turn of the century?’ In the year 2000, the sum of all the stills categories in the U.S. was 16% of the volume; last year it was 36% of the volume,” he said. “So we have added 20% of the mix of the North America business, a little over a point a year. That’s also more or less true globally. Every year we add about a point of mix in stills. That’s the average as it has been over the last 10 years or so.“So it doesn’t produce big step changes, but over time — a bit like gaining market share — those small amounts each year over time add up to a great deal of value creation.”