By Jennifer Maloney
ATLANTA -- Coca-Cola Co.'s new chief executive wants the company
to shake off a culture of cautiousness that has dogged the soda
giant for more than a century.
Nicknamed the "New Coke syndrome" -- after the company's
catastrophic 1985 decision to reformulate its namesake brand --
that fear of failure is counterproductive at a time when Coca-Cola
has to take more risks, James Quincey said in an interview this
week at his office.
The 52-year-old Mr. Quincey, who succeeded Muhtar Kent as CEO on
May 1, is taking the helm at an existential moment for the world's
largest beverage company. Fewer people are drinking soda. Sugary
drinks are being slapped with taxes in the U.S., U.K. and beyond,
as governments look to raise revenue and curb consumption of added
sugar, which has been linked to diabetes and obesity. And while
Coca-Cola has diversified into dairy, tea, bottled water and other
beverages, 70% of its global sales by volume is still soda.
Mr. Quincey's answer: Coke must become a "total beverage
company." And to do that, it must not be afraid to make mistakes,
he said.
"I'm not sure fear of failure is entirely wrong, except when it
leads to inaction," Mr. Quincey said, sipping occasionally from a
bottle of sparkling smartwater. "If you're trying to do something
different on Coke, failure is big and emblematic."
But on smaller, emerging brands, the company needs to be
experimenting more, he said. "If we're not making mistakes, we're
not trying hard enough."
Some company insiders and analysts say Coke should have moved
sooner to address the sugar issue and adapt to shifting consumer
tastes. At Mr. Quincey's urging, Coke in 2014 dropped its fight in
the U.K. against voluntary health labels on its beverage packaging,
which included a warning about high levels of sugar in its regular
sodas. The company has begun promoting smaller package sizes and
reformulating beverages to offer more low- and no-calorie
options.
In the U.S., where consumers now drink more bottled water than
soda, Coke is shifting from a volume-focused business to one in
which it shares profit with its bottlers, so it can sell smaller
cans and bottles at higher prices.
It is also in the process of selling off most of its bottling
operations to focus on its more profitable concentrate business, a
process that by next year will leave it with fewer than 40,000
global employees, down from 150,900 in 2012.
Mr. Quincey is cutting another 1,200 jobs, representing 20% of
the company's corporate staff. And he is officially giving
employees permission to say that Coke isn't their favorite brand in
the company's portfolio, an admission that would have been
blasphemous a year ago.
"If we are to be a total beverage company, it has to be OK for
consumers to say something else is their favorite brand. Therefore,
it has to be OK for an employee to say something else is their
favorite brand," he said.
In 10 or 15 years, he said, soda could represent less than half
of the company's global sales by volume, a shift he hopes to
accelerate by investing more in upstarts and acquiring new
brands.
Mr. Quincey was born and raised in the U.K. and studied
electrical engineering at the University of Liverpool, then decided
he was better at business than designing semiconductors. He joined
Coke in 1996 and led operations in Latin America and Europe before
being tapped as COO in 2015 and heir apparent to Mr. Kent.
Mr. Quincey cited a product stumble of his own, when rolling out
a drink in Argentina in 2003 modeled on mate, a local herbal tea.
It is traditionally made by filling a gourd with leaves and hot
water and consumed in a group, with everyone drinking from the same
straw. Coke's version, bottled and bubbly, missed the point, he
said.
"The mistake that we made was not to understand why people drank
it," Mr. Quincey said. "It's about the social occasion."
Coke is now under pressure to become more cost-efficient.
Analysts have speculated that within a few years, it could be a
takeover target of Brazilian investment firm 3G Capital Partners
LP, whose founders are controlling shareholders in brewer
Anheuser-Busch InBev NV. A 3G spokesman didn't respond to a request
for comment.
Improving efficiency will be "a critical success factor" for the
soda giant, HSBC analyst Carlos Laboy said. "Bottlers say head
count is a problem at Coke. Too many people are doing the same
redundant things."
Of 3G, Mr. Quincey said: "They're very clearly saying: We're
setting a new benchmark as to what running an operation efficiently
looks like. I think every company, including us and our bottling
partners, we need to look at those benchmarks." He added that Coke
would look to cut costs without sacrificing revenue growth.
As recently as 2015, Mr. Kent was doubling down on soda, a
strategy that analysts say failed. Mr. Quincey rejects that
conclusion.
"There's no road to the future without a successful red Coke,"
he said. "We need to be growing the sparkling revenue and expanding
our leadership in the other categories. You've got to do both.
That's the only way forward."
Write to Jennifer Maloney at jennifer.maloney@wsj.com
(END) Dow Jones Newswires
May 09, 2017 15:14 ET (19:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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