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The Coca-Cola Company (KO)
September 21, 2011 2:00 pm ET
Previous Statements by KO
» The Coca-Cola's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» The Coca-Cola's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» The Coca-Cola's CEO Discusses Q4 2010 Results - Earnings Call Transcript
Jackson Kelly - Vice President
Unknown Speaker -
Gary P. Fayard - Chief Financial Officer, Executive Vice President and Member of North America Business Integration Team Steering Committee
Brian P. Kelley - President of North America Business Integration (NABI), President of Still Beverages & Supply Chain - Coca-Cola North America and General Manager of Still Beverages & Supply Chain - Coca-Cola North America
Willis E. Lowe - President of Foodservice and Hospitality Division - Coca-Cola North America
Brian E. Wynne - Chief Revenue Officer and Vice President of Business Development & Revenue Growth Management
Alison Lewis -
J. Alexander M. Douglas - President of Coca-Cola North America and Member of North America Business Integration Team Steering Committee
Julie Francis -
Glen Walter -
Unknown Executive -
Katie J. Bayne - President of Sparkling Beverages for Coca-Cola North America and General Manager of Sparkling Beverages for Coca-Cola North America
Mel Landis - Executive Officer of National Retail Sales
Julie Francis - Former Vice President of Sales and Marketing
Carlos A. LaBoy - Crédit Suisse AG, Research Division
Judy E. Hong - Goldman Sachs Group Inc., Research Division
John A. Faucher - JP Morgan Chase & Co, Research Division
Unknown Analyst -
Please welcome Jackson Kelly, Vice President, Investor Relations.
Good afternoon, everyone. It's great to see all of you once again. I guess we haven't had a group this large since about 2009 when we had our last investor event in Atlanta. So on behalf of The Coca-Cola Company and our management team, we want to wish you a warm welcome to the Houston marketplace. Really great to have all of you here with us. We're also pleased to have many members of our media community with us, as well as our investment community. And we've got many numbers of our North America leadership team here with us, both in this room and a great number of people you're going to meet as you interact and engage with them in the marketplace tomorrow.
And of course, we have Gary Fayard, our Chief Financial Officer over here, as he's mopping up a Coca-Cola. And we also want to extend a very warm welcome to all of those that are joining us live via webcast right now. And of course, we appreciate that you've taken 2 days to be with us in the marketplace. And I think and we hope by the end of these 2 days, you'll have a better appreciation and understanding of the great work that our North America leadership team is doing each and every day to advance our momentum.
But before we hear from our team, obviously as the head of IR, I just want to remind you that the comments and the presentations that you're going to hear today may contain some forward-looking statements and therefore, we need to ask you to take just a moment and read the screens.
And then with that, it's my great pleasure to bring up Steve Cahillane, our President and CEO of Coca-Cola Refreshments, and Sandy Douglas, President of Coke North America.
J. Alexander M. Douglas
So good afternoon, everybody, and thank you, Jackson. I'm proud to share the stage this afternoon with my business partner, Steve Cahillane, and to be joined by the members of our North American leadership team, who will be independently reporting on many aspects of our strategy to continue to advance our momentum here in the United States and Canada.
But before we get into it, I wanted to take a moment to reflect back to the last time we gathered with all of you in Atlanta in November of 2009. Much like today, at that time in 2009, we were in the midst of significant economic volatility. We had a rapidly changing consumer and customer environment. We continuously saw changes in what our customers needed and wanted, and it challenged our system to respond in a nimble and competitively effective manner. And just like today and always here in the United States beverage market is a very competitive environment and one where we've got to be on our toes.
There was one other thing that I think is relevant to go back to in 2009 and that's the focus of the business, what we talked about as being our principal strategy and how we were going to approach growth in the United States and in Canada. And I wanted to go back just to the actual transcript from that presentation because I think consistency of strategy is an important element to what we're trying to do. What we said is that growth in North America would be a function of our ability to seize growth opportunities by delivering better value to consumers.
And we spent 90% of our time together in that meeting when we were talking about North America, talking about how the driver, the wellspring of growth would come from our brands. And we said at the time that we'll do this through innovation and by giving consumers value in the brands and the products, the packages and the functional attributes that meet their needs. And then we would take that brand value and translate it, work together with our system to translate it into customer value, working with our customers to serve the people who shop in their establishments and to meet their needs in their lives for how they eat, play, work, live and shop.
And then finally, we talked about a third strategy, which was about capability and productivity and the importance of generating productivity so that we could create that virtuous cycle of value and reinvestment for growth in our overall business, funding consumer and customer initiatives by making our system more effective and efficient. And that's what we said in 2009 and it's what you're going to hear us talk about again today because the magic of this consumer and customer-focused strategy is not the strategy itself, but it's in the execution. And that's a key element of what we've been working on since we were last together. And a lot is still the same strategically, but also, Steve, there have been a couple of pretty big differences -- big changes as well.
Yes. Obviously, we're very proud of the things that have remained the same because they're working for us and we're figuring out how to do more of what's working for us. But clearly, there's a very large difference and that's the transaction that we executed nearly a year ago, a transaction that allowed us to align our North American businesses in a way that we haven't had to -- haven't had the ability to do in the past and a transaction that's also brought together what I believe is a world-class leadership team, Sandy's team and my team, working together each and every day to advance our momentum. And you'll get a chance over the course of the next 1.5 days to meet many members of this management team.
Last year, when we made the decision to put our company and our system together, we did it because we wanted to be in the best possible position to grow with our consumers and accelerate our progress and our momentum against our 2020 Vision. We are becoming one strong and aligned business system that is organized to execute a more focused, value-driven selling process, enabling us to take our brands to market in the right way better than ever before in North America, our flagship market.
And what makes North America so critical to our system? Well, as most of you know, North America is a huge nonalcoholic ready-to-drink market. In 2010, about 20 billion cases of NARTD beverages were sold, resulting in nearly $150 billion in sales for the industry. We believe the total market will grow slightly ahead of population growth between now and 2020, putting annual industry volume growth somewhere between 0.5% and 1.5%.
The teenage population is expected to increase to be over 30 million teenagers by 2020, 30 million teenagers by 2020, making North America the third largest teen population behind only India and China. And importantly, a lot of what's driving this is a strong and economically powerful multicultural demographic. And like Sandy said back in 2009, our ability to capture this great opportunity starts with our strong brands and our ability to translate that brand value into true customer value. And to sustain our success over time, we'll need to continue enhancing our capabilities to sustain and repeat success.
And importantly, at the end of the day, advancing our momentum in North America will take a system wide partnership. Our system we recognize needs to be faster, more nimble, more coordinated and more consistent in our approach. Advancing our momentum will require the full range of our investments, from capital to people, to insights and everything in between. To do this, our system must have one common set of global objectives -- goals and objectives. This is why here in North America, we have built our own roadmap for growth, which all of you should have received a copy of in your registration materials. This roadmap, which is rooted in the core principles of The Coca-Cola Company's 2020 Vision, will help us reach our destination of being the best brand sales and customer service system in North America.
And how do expect to achieve this? Let me give you 3 important headlines. First, by building commercial leadership capabilities centered on collaborative end-to-end planning and executing processes focused on creating the perfect shopper experience, one store at a time, where we deliver our products in the right package at the right time, at the right place for the right occasion.
Second, by building a flexible high scale competitively advantaged consumer and customer-centric selling and distribution system and reinvesting in sales and market execution including feet on the street, on-premise capability, commercializing new package architecture faster than we ever have before.
And third, by aggressively driving productivity across our system in everything that we do, eliminating waste, driving increased returns on our capital and delivering better product supply planning and execution to deliver a competitively advantaged product supply system.
J. Alexander M. Douglas
For we truly believe that it's a tremendous time to be in the Coca-Cola business and to be a part of the Coca-Cola family. And that's mainly because we're operating in a tremendous environment of opportunity, opportunity inherent in what is a growth market, as Steve said; opportunity to leverage the most powerful brands in the world and our industry and here in North America as well; and opportunity derived from having strong plans brought to life for customers by an even stronger operating model.
When we stood before you back in November 2009, we shared with you our expectation that our business in North America had the right focus and that it was on the right path and that it was beginning to show some momentum in the marketplace. Today, we're meeting with you at a time when despite a challenging macroeconomic environment, our business has clear momentum. And momentum isn't easily gained and it's not something that you want to relinquish, certainly not in a market like the North American market, the biggest beverage market in the world.
Now importantly, while we think we're accomplishing some momentum, we also believe that it's very precious and we're extremely focused and you'll hear this from the team that what progress we've made is small in comparison to the opportunity for improvement that remains. We don't see anything that's happened today or yesterday as any guarantee of tomorrow. And so we remain extremely enthusiastic and focused about the work that we have to do ahead to get better and better every day.
Now the chart that you see offers a glimpse of what winning looks like. And it wasn't too long ago that this same chart had a number of yellow and reds and some arrows pointing down. But right now, it looks pretty good. And in fact, when you look backwards and think about our journey to this day, a few years ago, we had to acknowledge that in order to make it work in North America, we had a lot of work to do. Our brand portfolio needed to be strengthened. Our marketing capability from brand concept to shelf needed to be upgraded. Our customer service and our relationships with our customers needed significant attention. Our supply chain needed modernizing, and our system collaboration needed to be better. And today, almost a year into the formation of Coca-Cola Refreshments, Steve and I and our leadership team feel that we've made some real progress and that we're actually indeed beginning to make it better.
And what does it look like when we really do make it better and when we get this right? I'd like you to take a look at a quote from a very important customer of ours just recently. This is the type of comment and the type of theme that we all hope to eventually hear from many, many more of our customers. But as we look towards tomorrow, we have to ask ourselves some very important questions. Are we all the way there yet? What you'll hear both of us and our leadership team say is no, we are not. Do we still have a lot of work to do to make it best? Emphatically, yes. But are we moving in the right direction? Yes we are. But do we have even more, even bigger volume, profit and value growth opportunities ahead of us? Is there more value to create in North America? Absolutely.
J. Alexander M. Douglas
Our path to making it best will center around 3 core marketing and business strategies that were created over the past few years and have remained consistent, and they are relevant and consistent today and will be for the months and years to come. And the strategy has 3 parts: building strong brands; translating brand value into customer value; and building the capabilities to sustain and repeat our success. And we believe as a strategy, it's on target, it's sustainable and may even be a little bit timeless as you think about the times when The Coca-Cola Company is at its best.
Importantly, our team will be talking about this strategy, not as a conceptual matter but in action. Yes, we are very focused taking action every day with intensity, clarity, building confidence and yes, with some success. So as we talk about the strategy this afternoon from brands and categories, to customers to sales execution and capability, we hope -- Steve and I hope that you'll see the action of it, the growth of it and the potential of it. And that when you go out into the local Houston market tomorrow, you'll see what good looks like to us and then index that against the average that exists and you see the size of the opportunity that we see. But let me just start, and Steve and I will cover the 3 buckets in summary fashion, and I'll begin with brands.
Our brand strategy really breaks into 3 parts as well. And the first is by far the most important: to accelerate growth of our core Coca-Cola trademark and our other iconic core brands. This is the essence. Our boss, Muhtar Kent calls it the oxygen of the business. And it is essential to the overall algorithm. That done well. Then, second is to grow the fastest in the rapidly growing still[ph] categories, an objective that we set several years ago that we've been achieving for a while. And then finally, to develop, test and deploy innovative new brand and business options.
You really look in this whole effort to do 2 things: to create great brands with distinctive and competitively advantaged equities; and then to be able to merchandise and execute it through a key strategy that we've been working on for the last couple of years that we refer to as OBPPC. And we take the time to have 5 letters because each step is important: occasion, brand, package, price and channel. This is part of the magic of The Coca-cola Company because this strategy was not born here in the United States, although you could say it was.
We were a fountain business and then somebody got a brilliant idea to launch bottles and cans. But it got refined and innovated in Latin America over the last decade, and we have copied and begun the journey in the United States as well. And it's rooted in the simple idea that consumer occasions can be merchandised and marketed to with segmented merchandising. As Steve said earlier, to have the right brands and the right packs at the right price in each store well activated to the occasion wherever consumers make beverage choices. And for the operation of a multi-category brand offense, it's simply vital. And Katie Bayne and Brian Wynne, who lead our category units, will take you through how the brand strategies tie to OBPPC and you can see how the value is created through an integrated all the way to the shelf marketing effort.