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What’s behind Coca Cola’s biggest strategic adjustment in recent years? CEO’s first interpretation!

In the context of the epidemic crisis, Coca Cola, the world’s largest beverage company, seems to have finished loading its “upgrade strategy”.

“Has our company taken a step forward when global GDP levels return to 2019 (before the outbreak crisis)? Do we have more drinkers, more shares, better system performance, better interaction with shareholders and organizations? Can we become stronger when the global economy returns to its original state? “

James quinkey, chairman and chief executive of Coca Cola, threw out such a series of “soul torture” at the recently held global consumer goods conference of Barclays.

Obviously, the beverage giant already has a plan of action. “Our ongoing restructuring is also partly relevant. At the same time, in order to achieve this goal, we also need to drive the product mix. ” Zhan said.

Zhan kunjie, CEO of Coca Cola (information photo)

At the end of last month, Coca Cola announced the establishment of a new business unit and a global beverage category leadership team, as well as a new platform service organization to support business development, so as to better implement the “whole category” strategy and achieve business growth. Earlier this month, the company announced the list of leadership teams under its new structure, including the appointment of vamsi Mohan thatI, Coca Cola’s new commander in Greater China.

This is the biggest strategic adjustment measure in recent years. At the global consumer goods conference, Zhan kunjie detailed for the first time the ideas behind this major organizational structure change, as well as plans to accelerate product portfolio adjustment under the epidemic situation.

Let’s have a look.

Speed up adjustment of epidemic situation

In terms of product mix, Coca Cola with 500 brands should be “more focused” in the future.

Mr. Zhan said at the meeting that in the short term, it is obviously easier for customers to manage SKUs with less supply chain management due to the epidemic situation. For Coca Cola, this is actually a golden time to speed up the management of its product portfolio. “In any case, this is what we need to do all the time, and (the epidemic) actually pushes us to achieve our goal in a shorter time”.

“What I want to say about our strategy is that we realized that there are many problems to be solved in the next few years, and when the company performs well in the long-term growth model, when the engine is still running, when the flame is still flying, we know that maybe we still have time to fix these problems.” But the new outbreak is coming, and we say, no, we have to speed up our actions and speed up the adjustment of our product mix, “he said

“We know very well what is an effective strategy for Coca Cola – when we have a product that has a leading position in the brand or category, it can bring scale and profit.” Zhan said.

He pointed out that Coca Cola, which currently has 500 brands, has become very good at “marching, experimenting and innovating.” these efforts are also driving growth, but it is not disciplined enough to “focus on some of the winning products in the category.”.

“So we’re going to step up in this. We have 500 brands, some of which are alliance brands, but we need to be more focused in the future. ” He said.

At the same time, Mr Zhan said it would be combined with Coca Cola’s plan to accelerate its marketing transformation.

“In any case, there has been a digital or experiential trend. In essence, the way consumers interact, the way they want to interact, has been developing. We also need to keep up with the trend of investment, including how to spend money, how to organize employees so that the money we spend can achieve better results, and how to reduce losses without even spending money on consumers. ” He said.

Therefore, he believes that Coca Cola needs to speed up the management of its product portfolio and accelerate its transformation to a more modern marketing model. “We believe that as we come out of this crisis, it will give us a stronger brand and more driving force for development.”

In addition, Zhan kunjie mentioned that Coca Cola has made good progress in platform services and digital services.  

“In terms of shared services, we have made a lot of attempts in the past few years. I think the team has completed the bridge construction and finally formed a really effective (shared services) platform. With the development of global digitization, we need to have a common “backbone” more than ever before. Moreover, we see an opportunity to cooperate with bottling partners to create a strong backbone network to provide highly digitized services for the whole system. We call it platform services. ” He said.

 

“Not so many people making decisions”

Under the arrangement, from January 1, 2021, Coca Cola’s nine operating divisions will replace the existing group and business unit structure. The beverage giant believes that its recent major organizational restructuring will help promote the implementation of the above strategy.

“Take the example I just talked about. We need to speed up the adjustment of product mix, accelerate the transformation of marketing methods, and provide platform services. Let’s see how we can organize to achieve this. Fundamentally, if you want to push these agendas forward, you can’t have as many people making decisions. To exaggerate, every country has the right to launch any category of brand Zhan said.

Therefore, in order for Coca Cola to achieve its strategy and manage its product portfolio fairly, the company needs to adjust its organizational structure so that it can continue to experiment and seize local opportunities, while “focusing more on the biggest opportunities in the regional market or globally,” he said.

“This means that we need to start with marketing motivation to seek breakthroughs.” “For example, we’ve always had someone in charge of soda,” he said. Now, we separate Coca Cola from the soda category. “

He would never spend a lot of time with Coca Cola and sprite. In any other company, Fanta and Sprite will be the number one brands. They are only second and third in Coca Cola.

Zhan kunjie said that through such adjustment, not only can the development of Coca Cola be really promoted, but also the company’s category change will be clearer, such as clarifying the focus of each category business.

 

“For Coca Cola, we have more than 50% of the global Cola category market, we have a leading position, and we can continue to promote this advantage. For Fanta, Sprite and other categories, our market share is not so high, and these categories will have different tasks. ” He explained that it was therefore important to break the existing structure in order to make fair and appropriate arrangements for each category.

At the same time, Zhan kunjie believes that Coca Cola no longer needs so many marketing organizations.

“We have more than 20 business units and they all have a complete marketing team. We see (Simplified) opportunities here, and marketing is essentially around the biggest consumer groups. ” He said.

 

In Europe, for example, Coca Cola has historically organized its marketing around bottling partners, in a sense. In other words, if Coca Cola wants to “integrate its products with other consumers, it will not be the first driving force for consumers to develop their products together”.

“So it’s easier to think of European consumers as a whole, rather than splitting them up.” “Similarly, there are many similarities in Latin America,” he said. We have four business units and we don’t have the most effective plan for the category. We do well in Coca Cola, but not necessarily in other categories. We have already occupied a place in fruit juice and other categories, but we have not made the profits we should have, because we have scattered our efforts. “

The reason why Chinese market is listed separately

 

As a result, Coca Cola has reorganized its operating department structure around a larger consumer group, which is divided into North America, Latin America, Europe, Africa, Eurasia and the Middle East, India, China, ASEAN, Japan and South Korea.

“Once you want to make fewer marketing decisions around your core consumer group, you have fewer operations. That’s why we have effectively downsized from more than 20 divisions to nine. This goal is the root cause of all of our organizational changes. ” He said.

 

As for the new platform service organization, Zhan kunjie said that it was extracted from the functions of the local operation division.

“We need to be able to deliver more value through the digital platform. In this way, we not only provide more value to the company, but may also be able to work with bottling partners to create value for all of us. ” He said.

Previously, Coca Cola said that due to the need of structural changes, it would reallocate some personnel and resources, and formulate relevant programs and voluntary resignation plans: first, about 4000 employees in the United States, Canada and Puerto Rico who started on or before September 1, 2017 (calculated on the date of their last entry), while similar plans will be implemented in other countries / regions around the world It is expected that it will involve us $350 million to US $550 million globally.

Focus on Disruptive Innovation

The snack agent noticed that when talking about product portfolio management, Zhan kunjie also talked about Coca Cola’s latest thinking on innovation.

“When we talk about innovation, what do we need to do? We need to attract new drinkers, we need to attract existing drinkers to consume more frequently, or we need to do something about the price. What we’ve learned over the past few years is that we need to be clear about which task this innovation is actually targeting. ” He said.

In this process, he says, there needs to be both agility and prudence, which sometimes restrict each other, but also work together. “If we need to innovate something, we need to learn and move on to the next iteration. In this process, no one wants to completely decentralize power, that is, “anarchy”, and no one wants to be completely centralized, that is, “dictatorship,” because the center cannot know everything. “

In between, he said, “democracy.”. But there is also confusion if you ask for a constant return and refinement of the process in order to strike a balance between “agility, divergence, discovery and experimentation” and “prudence, focus on products that can gain market share, produce scale effects and generate profits”.

So what does Coca Cola do?

Zhan kunjie gives a recent example. “We have expanded the brand of Coca Cola into the field of energy drinks. We launched coke energy. The idea is that we’re trying to innovate, select an existing brand and make it more attractive, so as to attract more consumers of the Coca Cola brand. Therefore, in terms of innovation, you will have great advantages and available resources to do some interesting things, so as to attract more drinkers. ” He said.

That is to say, one of the paths of Coca Cola’s rapid and prudent innovation is to make prudent use of the scale and resource advantages of its existing big brands to launch “subversive” and potential large-scale innovation.

“I think our innovation now is not only to introduce more flavors, but also to be truly subversive, breaking the boundaries of brands or categories and bringing new things to consumers.” He said.

Finally, Zhan stressed that the risk of innovation is that it may have done a lot, but it is not conducive to business growth. As a result, Coca Cola needs to focus on new products that are “disruptive and ultimately bring substantial scale growth to the company.”.

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