1452ehow cocacola manages strategy in 90 emerging markets

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How Coca-Cola Manages 90 Emerging Markets The world’s largest beverage company has delegated major decision making to individual markets, but it maintains its global brand strategy through collaborative practices. by William J. Holstein Photograph courtesy of the Coca-Cola Company Ahmet C. Bozer, president of the Coca-Cola Company’s Eurasia and Africa Group, has spent his career demonstrating how a large international company can build a strategy and structure itself to compete in emerging markets. Coca-Cola is one of the most globally active international companies, deriving 80 percent of its sales from outside the U.S., and it is therefore one of the most experienced in tackling emerging markets, including Egypt and Pakistan, where political tension renders the business environment uncertain and Coca-Cola’s strategy has proven resilient. Bozer, who was born and raised in Turkey, has worked for Coca-Cola since 1990 in various capacities, including operations and finance, as well as leading the Coca-Cola bottling company in Turkey. He is currently based in Istanbul, where he oversees 90 markets, ranging geographically from India and South Asia through the Middle East and all of Africa, across Turkey and the Caucasus into the countries of the former Soviet Union. This territory accounted for 16 percent of Coke’s sales last year, for a retail value of US$10 billion, and Bozer expects that number to grow rapidly during the next decade. Like four other regional presidents, Bozer reports directly to Coca-Cola Chairman and CEO Muhtar Kent in Atlanta, Ga. Bozer sat down with us at the Coca-Cola offices in New York. S+B: Your late CEO Roberto Goizueta charged the company to “think global, act local” in its strategy. How do you accomplish this?

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Page 1: 1452eHow Cocacola Manages Strategy in 90 Emerging Markets

How Coca-Cola Manages 90 Emerging MarketsThe world’s largest beverage company has delegated major decision making to individual markets, but it maintains its global brand strategy through collaborative practices.

by William J. Holstein

Photograph courtesy of the Coca-Cola Company

Ahmet C. Bozer, president of the Coca-Cola Company’s Eurasia and Africa Group, has spent

his career demonstrating how a large international company can build a strategy and

structure itself to compete in emerging markets. Coca-Cola is one of the most globally active

international companies, deriving 80 percent of its sales from outside the U.S., and it is

therefore one of the most experienced in tackling emerging markets, including Egypt and

Pakistan, where political tension renders the business environment uncertain and Coca-Cola’s

strategy has proven resilient.

Bozer, who was born and raised in Turkey, has worked for Coca-Cola since 1990 in various

capacities, including operations and finance, as well as leading the Coca-Cola bottling

company in Turkey. He is currently based in Istanbul, where he oversees 90 markets, ranging

geographically from India and South Asia through the Middle East and all of Africa, across

Turkey and the Caucasus into the countries of the former Soviet Union. This territory

accounted for 16 percent of Coke’s sales last year, for a retail value of US$10 billion, and

Bozer expects that number to grow rapidly during the next decade. Like four other regional

presidents, Bozer reports directly to Coca-Cola Chairman and CEO Muhtar Kent in Atlanta,

Ga. Bozer sat down with us at the Coca-Cola offices in New York.

S+B: Your late CEO Roberto Goizueta charged the company to “think global, act

local” in its strategy. How do you accomplish this?

BOZER: I wish it was as easy as repeating the slogan. The key for international companies is

finding the right mix of global and local in their operations. The Coca-Cola brand is global,

but it must be locally relevant. We may be giving the same happiness message, the same

brand architecture may be communicated, but it has to be done differently in each country.

Page 2: 1452eHow Cocacola Manages Strategy in 90 Emerging Markets

S+B: Your structure has strong regional managers such as yourself, but

headquarters in Atlanta maintains global responsibility for sales, finance, and

marketing — and for specific product lines like water or juices. How do you manage

this?

BOZER: We are a franchise system. Our bottlers are primarily local. In Turkey, for example,

we have a Turkish bottler. So the effectiveness of our company depends on the effectiveness

of our relationships with the bottlers and our brands. To manage franchise relationships, you

have to have a geographic orientation. Therefore our organization is primarily geographic.

Globally, we have five operating groups: North America, Latin America, Europe, Eurasia and

Africa, and Pacific.

At the same time, the juice business requires a different organizational structure than the

sparkling beverages business. The raw material costs are high and fluctuate a lot, and there

are opportunities to innovate more quickly; we may introduce four or five new variants of a

juice in a given year. Thus, there is a matrix. A functional group in Atlanta is in charge of

juices worldwide, but they work through the geographic organizations.

We are still evolving in finding the best local and global combination that works for us. When

it comes to franchise relations with the bottlers, that is local. We have to make decisions in

the local context with the right speed. Quality standards are both local (we adhere to all local

government safety regulations) and global (we have our own global, rigorous, quality control

standards). But we take advantage of our global properties and collaborate as a global team,

bringing the best resources to bear on a specific issue.

S+B: How do you manage disagreements between the field and headquarters?

BOZER: We have been working on it for many years. We all understand that nothing is as

black-and-white as we’d like. Let’s say I’m hiring a function leader. I am the ultimate decision

maker, but I know that any function leader must operate as part of the global team. He or she

must be able to collaborate globally, and the global organization has to be comfortable with

that candidate. This is where maturity is important. We emphasize a collaborative process

because it makes the decision better. But our culture is purely focused on making the right

choice, rather than defining my turf versus your turf. That allows us to make these decisions

quickly.

S+B: How do you manage the dramatic variations in cultures and politics among

your 90 markets?

BOZER: It’s not as difficult as it might seem. I have six business units, based in South Africa,

Kenya, Turkey, Russia, India, and Dubai. And I have a functional team in Istanbul with

finance, marketing, and strategy capabilities. The functional team works as part of the global

team to come up with strategic plans for each market. We share those with the business

units, and we expect them to enrich [the plans] and add value to them by adapting them to

their own needs.

Russia might say, “Well, iced tea is a big category here, so here’s how we are going to

compete [with that product].” There is a clear thread of consistency among all the regions; we

stay connected to the global team in Atlanta through the finance and marketing communities.

Page 3: 1452eHow Cocacola Manages Strategy in 90 Emerging Markets

S+B: What do you see as the greatest opportunity in your 90 markets?

BOZER: If you project the demographics of today into 2020, you will find that about half of

the favorable changes will be located in Eurasia and Africa: new entrants into the middle

class, an increase in the number of teenagers, urbanization. A few of these countries have

very high per capita consumption of our beverages. South Africa is about 250 drinks per year

per person, which is above the global average. Turkey is higher than 150. But when you take

those relatively well-developed markets out and look at India, Pakistan, sub-Saharan Africa,

Russia, and central Asia, those markets have very low per capita consumption — for the

whole industry. In India, just 4 or 5 percent of the beverages consumed are packaged. People

drink tap water, tea, and dairy; vendors squeeze juice on the street. When people start having

a bit more money and a middle class emerges, demand for packaged beverages will increase.

In that context, our strategy is not very complicated. We know how to grow “Brand Coke.” It’s

about locally relevant brand building with consumers — the right pricing and packaging, with

small packs, large packs, or take-home packs. We place new coolers in the market and invest

in people, putting “feet on the street,” and activate outlets one by one. At the same time,

there is a flourishing juice business and a flourishing water business, and in some of our

markets, teas and energy drinks are developing.

S+B: How do you make yourself “locally relevant?”

BOZER: We have very strong consumer marketing teams. We invest a lot in understanding

the psyche of the local consumer. In Egypt, during the Arab Spring [uprisings], our marketing

people were able to tap into the psyche of the public — especially the teenagers. We

understood that despite the uncertainty they were going through, they wanted to create a

bright future. Our brand promise is happiness and optimism. Our team quickly put together

some excellent consumer communication with the message that if everybody came together,

the Egyptian people could build a better future. That message was delivered in a wonderful

ad in which the skies over Tahrir Square in Cairo are quite overcast and dark, but people get

together and throw ropes to the clouds and start pulling the ropes. The clouds open up and

the sun appears. That type of communication resonated extremely well. We tapped into the

feelings and emotions that were most relevant to the Egyptian people.

We try to do this kind of thing everywhere. We have good marketers in each country who

have access into consumer insight data, and who work with very good agencies, while at the

same time working with robust global processes.

S+B: Doesn’t political and social upheaval create a problem for you?

BOZER: Not really. I was in Pakistan recently. When you read the papers and watch

television, you hear about terrorism, earthquakes, floods, and sectarian violence. It’s all

negative. But we’ve been there for more than 50 years and we have not experienced any

problems in running our business. In fact, our business is thriving there. Over the past four

years, we have been growing extremely well. The same holds true for the Arab Spring

countries.

In our external environment, we may have many headwinds, but we sell simple moments of

pleasure that get consumed a million times a day, and that business continues to be vibrant.

Page 4: 1452eHow Cocacola Manages Strategy in 90 Emerging Markets

It’s a very simple product. Yes, growth slows when you go through major political changes,

but things settle down and life goes back to normal. Then you start building from there.

S+B: You have a tremendous variation in the type and sophistication of bottlers you

work with, ranging from a giant like SABMiller in South Africa to mom-and-pop-type

bottlers in other markets. How do you adapt to their different styles and

capabilities?

BOZER: This is the bread and butter of our business: being effective with our partnerships.

Our partners may be multi-country bottlers, or they may operate within a single country. They

may be public or private. In some countries we work with multiple bottlers. We have all kinds

of relationships.

With each one, we first establish a shared vision. We have a one-page road map that portrays

a very clear destination for 2020, a clear framework about our strategic pillars and metrics.

That road map is actually prepared with our bottlers. It guides all our business planning.

Then it comes to capability. Does the bottler have the capability to execute these plans with

us? At the end of the day, we’re trying to create value for the overall system of the Coca-Cola

Company and its bottlers, not just ourselves. Otherwise, the system won’t be sustainable in

terms of our results.

One of the best examples is our bottler in Turkey, which I used to run. The bottler was built

by the Coca-Cola Company and sold to a local shareholder who now owns a majority. It’s a

public company with a market value of more than €2.5 billion (US$3.5 billion). It has great

alignment with the Coca-Cola Company. It is now 10 times the size of when it started in 1994.

This model really works.

S+B: How do you support your partners? Do you train them or lend them money?

BOZER: It depends on the needs of the bottler. The bottlers that operate in multiple

countries tend not to need our help. But there might be some emerging area of knowledge —

for example, about how to do better category management, in which case we have centers of

excellence that the bottlers can access. We have websites where they can download best

practices or get our help in building their capabilities. We sometimes support bottlers

financially as well, if we are aligned on a fairly aggressive growth plan and want to invest in

marketing to build the brands with more intensity. And let’s not forget, we own about 30

percent of our bottlers around the world.

S+B: How do you allow a local bottler and local business unit to differentiate the mix

of products they offer?

BOZER: We don’t work in a way whereby every time a business unit wants to launch a

product, they have to get my approval. Instead, we share the strategic framework. We have

strategy discussions and business plan discussions, and we have other guidelines and rules.

For example, it is understood within the group that I want to know your top three priorities. If

you want to launch a new product, but you need to take away [resources] from one of those

core priorities to launch that product, then you shouldn’t do it. And if your bottler doesn’t

have the capabilities to handle that product, you shouldn’t launch it. But if you can figure out

how to do all of that in a way that still funds your core, if you have followed the right process,

Page 5: 1452eHow Cocacola Manages Strategy in 90 Emerging Markets

and if you are in the right marketplace with the right capabilities on the marketing side, then

by all means go ahead.

We have Maaza juice in India, for example. The local team wanted to launch a Maaza

milkshake, which is a wonderful mango dairy product. Dairy is a very relevant category in

India, and Maaza milkshakes were received extremely well by consumers. My group function

heads and the global function heads contributed to this by supporting the local team. This is

not a bureaucratic approval–based system. Of course, there are approvals, but once the

strategy and business plan are approved, local teams can execute.

S+B: Have you had much reverse innovation, in which a local group comes up with

an idea that you take to other markets?

BOZER: Yes. One innovation that came out of India is the solar-powered coolers. We’re

looking to expand that to other markets. There’s great engineering talent in India. Another

product that shows promise is Minute Maid’s Pulpy, an orange juice with pulp that did

extremely well in China. We expanded it into many countries. We have also taken

communications elsewhere. Turkey, for example, had a very successful Ramadan

communication to celebrate the holy month in Muslim countries. We took that to other

Muslim countries in our group.

S+B: How do you recruit the talent you need?

BOZER: We look for critical experiences and functional competencies. And we ask about

candidates: Do they represent the values of the company? We’re about optimism. A

pessimistic person wouldn’t work out.

The nationality and gender don’t really matter. On my group leadership team of 18 people, I

have 12 nationalities represented, including individuals from Zimbabwe, Scotland, the United

States, Turkey, South Africa, India, Croatia, and elsewhere.

The most important competency is leadership. It takes very strong leadership to be able to

explain the environment, establish a vision, and rally the troops. Command and control, in

most cases, does not work. If you try to control everything, the system won’t work.