Fewer brands mean Coke is expected to continue growing.
The Coca-Cola Co. is ready to expand its business “through focused execution and targeted innovation,” according to chairman and CEO James Robert B. Quincey, after drastically reducing the number of brands it owns worldwide. At the Consumer Analyst Group of New York’s virtual conference on February 19, Mr. Quincey gave a speech.
In response to the COVID-19-related business disruptions, Mr. Quincey stated that Coca-Cola’s main goals were to manage the pandemic and get back on track with growth, gaining market share and “winning more consumers” in addition to maintaining the stability of the business’s “system economics.”
He listed a few specific priorities, such as reducing the number of brands in the company’s portfolio from roughly 400 to under 200. He went on to say that the cut was required so that the business could “really drive for quality leadership.”
According to Mr. Quincey, the endeavor will succeed.
“We think we now have a strong portfolio of brands that will allow us to address all drinking moments throughout the day,” he stated. “We will continue to grow these brands through targeted innovation when appropriate and focused execution.”
In the long run, emerging markets present the best growth prospects, according to Mr. Quincey. According to him, 75% of beverages consumed in developed markets are commercial goods. According to him, only 25% of the beverages consumed in emerging markets are commercial, despite the fact that these markets present numerous opportunities for market share growth.
“There is a greater chance to grow the sector in the region where 80% of the world’s population still resides,” he stated. “And we have the platform—the Coca-Cola system—to take advantage of that.”
Coca-Cola is “laser-focused” on its core beverage business, which includes sparkling, hydration, and teas, when it searches for growth prospects, according to Mr. Quincey.
He said, “And we have started experimenting in adjacencies, whether that be the launch of Topo Chico Hard Seltzer in multiple markets around the world or the Lemon-Do product in Japan or the Costa brand coffee.”
In addition to its product line, Gen-Z is the demographic that Coca-Cola is targeting for expansion. According to the company, this group is searching for methods to “refresh themselves so they can reset their unclear world with greater clarity and transparency.”
According to Mr. Quincey, Coca-Cola created a worldwide campaign for a single product for the first time with this demographic in mind, giving it a more effective and efficient marketing strategy.
He added, “And we accomplished all of this using a single network, one global campaign approach.” This is actually the first global Sprite campaign that we have ever run. Additionally This year, it will be introduced in about 50 markets. Our investments are primarily going toward a smaller number of larger, more effective integrated campaigns.
Regarding product innovation, Mr. Quincey stated that Coca-Cola must keep coming up with fresh and useful concepts for goods and machinery. He explained that the company was using “more rigorous objectives” as a lens through which to conduct its new product process.
He declared, “We have established clear routines and processes to evaluate the goal and appropriate degree of innovation in our pipeline for 2021.” “We need to innovate beyond flavor extensions, and our dedication to being customer-centric is the main force behind this. They must ultimately be focused on the needs of the customer, even though they can also be tech-driven, improve a package, or improve a formula.
A limited quantity of “intelligent experimentation,” as Mr. Quincey put it, serves as a counterbalance to the process-driven innovation efforts. In 2021, eleven of these experiments are planned.
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John Murphy, executive vice president and chief financial officer, reviewed the company’s financial statements and reaffirmed its long-term growth goals: 4% to 6% for organic revenue, 6% to 8% for operating income, 7% to 9% for earnings per share, and 90% to 95% for free cash flow.
According to Mr. Murphy, the general consensus regarding the state of the carbonated soft drink industry might be overly negative or gloomy.
“The sparkling business is still very healthy, despite its size and common perception of being saturated,” he stated. “Due to its lasting appeal to our global consumer base and the excellent work being done to revitalize and maintain relevant brands like Coca-Cola and Sprite that we previously discussed.”