NOTE: This interview was published in Welt am Sonntag, a German newspaper, on July 2, 2017. Coca-Cola Journey is publishing a translated and edited version of the Q&A here with permission.
For many decades, Coca-Cola was extremely successful by selling a single, mostly unchanged, product. When the company wanted to be bold in the eighties by launching a variant, New Coke, it didn’t work out. Fear of failure is said to have been limiting the Atlanta-based company’s willingness to experiment since then. Experts often speak of the "New Coke Syndrome."
With James Quincey, this will most likely change. The Coca-Cola executive, who became CEO in May, not only imagines that the product portfolio of the company may look "radically different" in the future. He also wants Coca-Cola to adopt the "mentality of a technology company."
Welt am Sonntag spoke with Quincey in what is the first interview of a Coca-ColaCEO in Germany in 10 years.
Coca-Cola is an uber-brand, turned into a legend by Andy Warhol and others. How much do you feel the power of this brand? And is it particularly difficult to change, when a brand has such a power?
Coca-Cola has been around for 131 years. It is still an amazing brand. We spent 100 years selling Coca-Cola in the same iconic glass bottle. Today, more than 500 different brands are part of our company's portfolio. We have initiated a major transformation. This applies to both The Coca-Cola Company and our bottlers, with whom we have a close relationship. In Germany, that‘s Coca-Cola European Partners. The soft drink industry is growing around 4 percent globally, on average, each year. Whoever wants to be successful in this business needs a broad and commercially compelling portfolio of strong brands. The company will be bigger in the future than the brand that historically marked it. This is certainly a difficult journey, including for our employees who all love the brand.
What is the future beverage portfolio of Coca-Cola likely to be?
We are considerably expanding our product portfolio. We focus on beverage categories and brands that promise strong growth. Most people consume, on average, eight drinks a day. Many of them consume eight different beverages. From the first sip of water, tea or coffee in the morning, to a soft drink for lunch, to an isotonic beverage after exercise, and so on. We want to offer people for each of these moments different beverages from our portfolio. That’s why we continuously launch product innovations, like the very successful ViO BiO lemonades in Germany.
How is Coca-Cola committed to reducing sugar?
Sugar is a challenge for many communities. We accept it. In many countries, there are people who overconsume sugar, both in beverages and in foods. This is where we, as well, need to act. We support the World Health Organization (WHO) in its goal that people should not consume more than 10 percent of their daily calories from added sugar. In Germany, we are backing the commitment of the European beverage association, UNESDA, to bring down the sugar content of our portfolio by a total of 10 percent by 2020. This requires major efforts. We are changing recipes, focusing increasingly on smaller packages and, last but not least, providing clear product information for consumers.
For a long time, Coca-Cola accounted for 100 percent of the sales of your company. At present, it is only 50 percent. How much lower can this go?
Let’s put it this way: We have made great progress in broadening our portfolio. Some companies make the mistake of trying to sell, by all means, what they make. But you want to make what consumers want to buy. If you are successful with this, there are completely different business opportunities. To be more concrete: 15 years ago, non-sparkling beverages accounted for 10 percent of our business. Today, it's 30 percent.
Can you imagine The Coca-Cola Company without regular Coke?
No, because I think many consumers would not want that. Now, could the shape of our portfolio look radically different in the future? Yes, it absolutely could. In Japan, for instance, one of our very successful markets, red Coke accounts for less than 20 percent of our business. Ready-to-drink tea, cold as well as hot, is the strongest beverage segment there. In the future, I could absolutely foresee our portfolio including several brands the size of red Coke.
Is the soft drink sector the new tobacco industry? After all, the latter succeeded in remaining profitable despite strong political headwinds?
There’s no amount of tobacco that is healthy for people. The first cigarette is bad for you. Moderate consumption of non-alcoholic beverages is, however, absolutely safe. As far as diet is concerned, it is all about moderate consumption and balanced nutrition.
I don’t think it works if people are restricted in their freedom of choice for foods and beverages through governmental intervention... via new taxes on certain products. People then get what they want from somewhere else. Governments, companies and civil society must develop intelligent solutions together.
Your company is agnostic: The consumer gets what he wants, regardless of whether it is healthy or not? Does this change now?
We believe in a diverse range of products and the freedom of consumers to choose in an informed way. At the same time, there has already been for some time a verifiable change in our company. We spend a larger part of our marketing and research budget on products with reduced or no calories. We want to offer for every brand we launch a reduced-calorie or no-calorie variant. For all our big brands – in addition to Coca-Cola, for instance, Fanta, Sprite or, in Germany, Mezzo Mix – this is already the case. We improve recipes. For example, Coca-Cola Zero Sugar, which tastes even more like regular Coca-Cola and comes completely without sugar. Consumers appreciate this. Coca-Cola Zero Sugar shows strong growth rates. Moreover, we have consistently extended our offering of smaller packages for years. In Germany, we offer, for instance, the 150-milliliter can again, which many consumers know from their plane travels.
Does headquarters in Atlanta instruct all local operations what to do?
Our strategy is marked by local circumstances. We produce locally in the countries where we sell our beverages. In Germany, we have done so for almost 90 years. We are convinced that local management knows best about our customers, consumer trends and market opportunities. Apart from that, there are of course worldwide trends. Identifying those and making decisions for the international business is a key task of our headquarters in Atlanta. We always focus on a balance between global and local perspectives.
What does that look like in concrete terms?
An example for a global success with local roots is Fanta. It is an innovation from our European business, brought to market decades ago. Today, it is available in more than 190 countries worldwide. In contrast, an example of a strategy set by our headquarters that is all over the world is our "One Brand" marketing stretgy, which brings the entire Coca-Cola portfolio under one umbrella brand. We believe that Coca-Cola should be perceived as one brand with several variants, not as different brands.
When has Coke's headquarters been mistaken?
One of the most successful innovations in recent years is “Share a Coke”, where first names replaced the brand name on Coca-Cola labels. The idea came from Australia. Headquarters then tried several times to stop the idea. However, local management got its way. And it turned out that the idea was great. Consumers went crazy about it. We have since launched it in dozens of countries. It has been a big success in Germany, too.
You have an advantage in your industry in that you are only marginally affected by digitalization.
That's not true. It starts with internal information technology. When IT and digital took off 20 years ago, we first wanted to do a lot on our own. We even had our own e-mail program and were one of the first in this field. We have changed our approach now. If a particular IT program does not have any specific benefits, we use the industry standard. Moreover, we know today how important it is that software programs can be used intuitivel. For apps on your smartphone, you don’t need training. Robert Woodruff coined the motto that a Coke must always be within “an arm's reach of desire" for consumers. We now transfer this physical proximity to the consumer in the digital world. This means that in the future, our products must also be within a “click’s reach” of desire. In cooperation with our customers, there is digital change happening, too. Coca-Cola sales reps in Germany were among the first to work with iPads in the field, for example.
How does this work?
They go into bistros, cafes, retail stores and, thanks, to new software, can show every individual customer the beverage offerings and merchandising that will help them be most successful. Data is processed in real time. Our entire business development system can be viewed on the smartphone. We also support our customers through new developments such as the Get Happy app, which the team in Germany developed. This app is a digital loyalty card for kiosks, bakeries or restaurants. In the future, it will also allow for online ordering and reservations. We are experimenting a lot.
This is actually new for Coke, isn’t it?
Yes, that’s true. We need to allow for a period of divergence and experimentation. And then learn quickly what’s working and what’s not.
'Culture eats strategy' is what management consultants like to say. This means that even the smartest strategy does not work, if it does not take into account the peculiarities of corporate culture. Does this also apply in your case?
I agree. This is why the tone you set from the top is important. You have to be clear and consistent with your people. This is my aspiration. For me this means, for instance, to make it clear that we must not overinvest time and energy on making things perfect. In this new world, we need to get a version 1.0 quickly, from which we learn. If something doesn’t work, we stop it. And that’s perfectly okay. If something is good but not perfect, we need a 2.0 fast, and then a 3.0 version. We then scale what is successful. We must be bold and fast, and we have to execute and perform. This corresponds rather to the mentality of a technology company. In order for this cultural change to work out, management must set an example.
And how do you do that?
I am fostering a culture in which we take risks and pursue new approaches. I do not expect everything to be perfect. That said, I am aware that everyone watches me. In 2015, I took over the responsibility for all operating units of Coca-Cola. I do not think that after my first week anybody could exactly repeat what I said during those first days. But everybody remembered that I wore jeans in the office on my first day. Everything communicates.
How does the digitalization in your industry work at the end of the day?
Technology will change everything. Take restaurants that have only a limited space for a certain number of bottles. Fountains, in turn, have only the capacity to pour a few brands. With Coca-Cola Freestyle, we have invented a system which is at present largely used in the United States. The essence of the product is reduced to almost the size of a printer cartridge. There are 140 different cartridges. In this way, you as a consumer can mix your drink literally in any combination yourself.
Soft drinks from a cartridge – that’s an unusual idea.
In the United States, we use already tens of thousands of these machines. Our customers, restaurant owners, for instance, love them, because they allows them to offer a wider choice. At the same time, consumers benefit, too, because there have, for example, more low-calorie variants to choose from. In the future, it is possible to imagine that you can order your favorite drink and have it delivered using an app – for instance Fanta Lemon mixed with Coke Zero Sugar. This is, of course, still up in the air, but might become a reality in 20 years. The technology is already available; it is merely a matter of economic efficiency.
Is Coke still an American brand. Or a global brand?
Coca-Cola is an extraordinary brand because it’s a bit of everything. It’s a deeply rooted local brand. We produce our beverages on site and, therefore, create local jobs. But Coca-Cola is of course also American, because it all started there. The brand continues to radiate optimism and openness like the American dream.
Is there still an American dream?
The fact that parents always want a better life for their kids has not changed. At the end of the day, it is actually not an American dream but a universal one.
In a few days, the G20 Summit will take place in Hamburg. What are your hopes for the meeting?
Our position is clear: Diversity, openness and global trade create more growth, and that’s important. Because without growth, there would be less resources to create a better life for more people. However, we must not ignore the fact that not everyone has benefited equally from globalization. We must find ways and means to take those along who have not been so fortunate so far.
What are you as a company doing?
We are amongst the largest employers in Africa. We have been engaged together with partners for years in many initiatives. We are committed to fighting AIDS, support governments and NGOs in the delivery of vaccines... to empowering millions of women on their way to economic independence. Because mainly female micro-entrepreneurs play a key role in the development of local communities: they support their families, they invest in the education of their children, and they allow other women to find their way into the world of work.
You sell Coke in almost every country in the world. The only exceptions are North Korea and Cuba. Which one will be the last country in which Coke will not be available?
There has been a slow thawing of frozen relationships with Cuba over the last decade. If I had to bet, I would say North Korea.