Coca-Cola Struck CEO Gold
Muhtar Kent, CEO of Coca-Cola, is a reminder of how much a talented CEO can do for a firm in just a short amount of time. Since he took over in July of 2008, the stock has increased 50% over 5 times that of the S&P and 10 times that of Pepsi. Even more impressive is how he has transformed Coke and set the stage for its future growth and relevance. Let me provide a few reasons for this judgment.
He has a strategic vision for the company that has a visible social component. There is the audacious goal of doubling the sales by 2020 that has energized the organization. It is coupled with a headline goal of becoming water neutral by that date. For every gallon used, a gallon is replaced in part by innovation in factory processes, packaging and recycling. And there is much more. For example, the firm invests to build communities in China and elsewhere to provide a viable setting for its customers. And leveraging the polar bear icon, it has raised awareness and funding for the World Wildlife Fund’s polar bear conservations efforts.
The culture that was somewhat bureaucratic, siloed, and stagnate, is being changed to one more supportive of entrepreneurship and innovation in brands, marketing, packaging and operations. There is now an innovation executive. One of the innovations is Minute Maid Pulpy, developed in China. Another is the Coca-Cola Freestyle, a device allowing the user to mix and match over 100 various drinks. There is a policy of investing 70% behind existing businesses, 20% behind incremental innovations, and 10% behind game changers.
Under CMO Joe Tripodi, who actually arrived just before Kent became CEO, the marketing group has a lot of new faces, a clear vision for its brands (for example, Coke is about universal refreshment and moments of happiness), and innovation throughout. Coca-Cola was named marketer of the year in 2011 with a litany of visible successful programs including becoming the leading brand in social media with over 42 million Facebook “Likes.”
A major relevance and growth problem in the very dynamic beverage market was addressed with a host of acquisitions, such as VitaminWater, Honest Tea, and Xico coconut water. These helped provide Coca-Cola with a platform for growth for the future and the ability to be a leader in influencing and managing the emergence of new subcategories.
In the US, Coca-Cola was chronically underperforming, in part because the independent US bottlers had inhibited growth with their financial limitations and non-aligned incentives. That problem was solved by a delicate, difficult acquisition for which Kent deserved a lot of credit. As an aside, the bottlers were originally sold because of a misguided financial theory that all businesses within a firm should be run to maximize shareholder value. Operationally, that meant selling off assets to maximize return on assets – even if that meant a long-term drag on customer relationships, organizational synergy and strategy flexibility.
It’s reassuring when a great CEO emerges. It reminds us that it matters, that there are people with CEO talent out there, and that others recognize that talent.
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