Fernando Fischmann

What Coca-Cola’s Leadership Changes Tell Us About the Future of the Company

7 April, 2017 / Articles

Coca-Cola has unveiled a senior leadership reshuffling that will take effect when President James Quincey becomes CEO later this spring, a shakeup observers say indicate the soda giant will focus more on beverage innovation.

On Thursday, Coca-Cola (KO, +0.35%) announced the changes will take effect on May 1, when Muhtar Kent steps down after serving as CEO for eight years. Among the changes: Coke’s Mexico President Francisco Crespo will ascend to the newly created role of chief growth officer; research and development executive Robert Long will become chief innovation officer; and current chief information officer Barry Simpson will remain in that role but be elevated as a direct report to Quincey.

“We are moving quickly to structure our organization for faster growth and to ensure we can respond to the fast-changing needs of our consumers,” said Quincey in a statement.

Coke also announced three executives would depart the company as part of the senior leadership shakeup. The most notable of those exits was the decision by chief marketing officer Marcos de Quinto to retire after a 35-year career at Coke. He helped steer the “Taste the Feeling” campaign and at last year’s Beverage Digest conference, lauded Quincey as a leader, saying he was “not only probably the best professional we can have in this moment. As a person – he is fantastic.”

The changes come as Coke and other major soda manufacturers like PepsiCo (PEP, -0.12%) and Dr Pepper Snapple (DPS, -0.65%) confront a prolonged decline in soda volume in the U.S. as consumers buy more bottled water, flavored waters, teas, and newer innovative beverages like plant-based drinks. As a result, Coke has pivoted to remake the portfolio to concentrate more on brands liked bottled water Smartwater, flavored water Vitaminwater, and dairy brand Fairlife. That work to remake the portfolio helped net revenue grow by 4% in the flagship North America market last year, at a time when many Big Food manufacturers are posting declines as consumers ditch legacy brands in favor of startups that are disrupting the grocery store aisle.

Observers say the leadership changes at Coke imply that Quincey and his newly formed team will focus more on innovation to better position the beverage giant for growth. “By including three new direct reports to the CEO role focused on growth, innovation, and digital, Quincey’s priorities are clear: to reaccelerate growth in [Coke] through new products and better engagement with customers and consumers,” wrote Wells Fargo analyst Bonnie Herzog in an analyst report. She added the company appears poised to continue to transform the portfolio to place bigger bets on juices, waters, energy drinks, and plant-based/dairy offerings.

“In the end, what are we aiming for as a company? We’re aiming to grow faster than our industry,” Quincey said at CAGNY, an industry event held in February. He explained some of the actions Coke planned to pursue in that hunt for growth includes reformulations that lessens the amount of sugar found in Coke’s beverages as consumers say they want to consume less of it. Coke also wants to increased focus on selling smaller packs, which have been successful in the market.While growth in North America is encouraging, Quincey will steer Coke after years of underperforming peers on the stock market and after the company’s 2017 targets fell short of Wall Street’s expectations. The company is facing challenges abroad, most notably a poor performance in Brazil, Argentina and Venezuela, all markets that are suffering economically. Coke has said that macroeconomic and geopolitical challenges this year would look similar to last year.

The science man and innovator, Fernando Fischmann, founder of Crystal Lagoons, recommends this article.



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