Leadership in an Age of Transparency

J. Alexander Douglas, Jr., President, North America Group, The Coca-Cola Company
Leadership in an Age of Transparency
Washington, D.C.
March 30, 2011

As prepared for delivery

Thank you very much for the kind introduction, Richard, and thanks to all of you for that warm reception.

It's indeed an honor to be here with so many of my industry colleagues and other distinguished leaders.

It's also great to be here in Washington, where many important things happen and critical decisions are made.

I'm sure what I have to say won't make a too large ripple in the huge information pool that spreads out from Washington... but I hope it's of some value to you.

Actually, Washington's role as an epicenter of news, information and influence makes it an apt setting for what I'll talk about. As we all know, there isn't much that goes on here that we don't see and hear a lot about... instantly.There are so many news media, opinion leaders, policy makers, lobbyists, NGOs, legislators, analysts and bloggers, that it's really a sort of transparent place... at least most of the time.

And I think it's wise to be careful about what you do and say here - because the reporting, analysis and commentary come hard and fast.

Washington symbolizes our transparent. real-time society. And I submit we're all now practicing our leadership trade in an increasing Age of Transparency - not just here or in other national capitals - but everywhere on our planet. Or, at least everywhere that has a cell phone and an internet connection.

And this transparency doesn't only concern what media reporters and critics have to say. It's what people know and believe about a company's products - and communicate about it in social media as well as among their neighbors. It's what manufacturers. retailers and suppliers - everyone in a supply chain - can do with that instant knowledge. It's what activists with an agenda say and do with what they believe about an industry. It's what political leaders decide to do with data in shaping their policies and initiatives. And on and on.

It's literally an explosion of information, accessible at the touch of a finger in the palm of your hands - everyone's hands... an epic power shift from institutions to individuals, right here, right now.

So as I prepared for our conversation today, I decided it might be worthwhile to discuss, and then show visually, some thoughts about "Leadership in an Age of Transparency." Because, as you all know, demonstrating leadership today - and being able to do so tomorrow - are absolutely essential for any organization to survive and prosper.

During an era in which a company or a brand is riding high one minute, and yesterday's news the next... and we're all under the incessantly-probing microscope of global communication and socially conscious scrutiny - we all need to be mindful of how to stay ahead of the game and show we're leading the development of solutions.

Today I'll concentrate on how our Company, The Coca-Cola Company is doing this... here in the United States.

In truth, we're all operating against a backdrop of exponential change... whether you talk about transparency... or economic turmoil... or the reshaping of our marketplace. It's a little frightening to some. But we think it's an exciting challenge and opportunity.

Amid these changes, what will enable businesses like ours or yours to thrive?

At Coca-Cola. we see it this way: we must start with a profound commitment to build on the inner strengths - the fundamental purpose and integrity - that we already have in our brands, customer and consumer relationships... and be equally committed to make bold changes to ensure that those strengths are protected, enhanced and kept relevant for a more dynamic future.

And I should re-emphasize that our Company and our main brand have always stood for positive values like healthy, active living... being part of a wholesome, balanced diet... protecting the environment... and positive involvement in our communities - we're not just discovering these things now.

Before going deeper into our thinking and actions, however, I can't expect you to already know everything about my Company.

So... here's a little background.

As the world's leading beverage company, we market 500 brands in 206 countries. Coca-Cola is the world's most recognized and valuable brand. In addition to Sparkling drinks, we're a leader in Still beverages including juices, waters, sports and energy drinks, coffees and teas. We rank as Number 6 on Fortune magazine's list of the world's Most Admired Companies. And we're 14th on Corporate Responsibility magazine's ranking of the 100 Best Corporate Citizens.

Let's click down from our global Company to North America.

We're number one in non-alcoholic beverages in the U.S. and Canada, with a broad Sparkling and Still portfolio that features brands such as Coke, diet Coke, Coke Zero, Sprite, Fanta, Dasani, vitaminwater, smartwater, Powerade, FUZE, Minute Maid and Simply. Our total North America business achieved volume growth in 2010 in spite of a difficult economy.

We go to market through 70 independent Bottlers, and we also own a large bottler ourselves - following last year's acquisition of the North American business of Coca-Cola Enterprises - which is called Coca-Cola Refreshments, Inc. or CCR. And our integration efforts in North America are proceeding as planned.

OK - those are the basics of our business. So, where are we trying to go with it, and what light are we trying to shine on it?

Simply put, we're guided by a clear long-term global Vision - a Vision for the year 2020. It's a global Roadmap touching every part of our business.

Now, I won't go into detail on our Roadmap. I believe the important point is that we're focused on this Mission: to refresh the world, inspire moments of optimism and happiness, create value and make a difference.

This is and always has been the core Mission and purpose of Coca-Cola.

Within this context, in North America, our job is to deliver sustainable profit and volume growth for our Company and... in this high profile market... that we call our flagship market... that's not all. We must also exemplify leadership in everything we do!

As I said, we work hard to protect and polish our existing strengths, but we also must adapt to stay relevant, vibrant and responsive to consumers' more demanding needs and expectations.

We're guided by a belief in the mantra, " Be it, Do it, Say it." That is, first, you must Be a strong, successful company that delivers on its promises, represents the right things and acts with integrity... then, not just relying on past achievements, you must Do the right things as the world changes and makes more demands on you - including acting as a good corporate citizen... and then, finally, you are able to Say it - you can and should tell the world what you're doing and what you stand for.

And a big part of this is in ensuring that we earn an unquestionable social license to do business.

You may not be familiar with this expression, "social license to do business"... but you've probably heard of Warren Buffett. Berkshire Hathaway Inc., which he controls, happens to be our Company's largest shareowner. He has a device that gets to the need for addressing social license better than any I've seen.

He calls it the New York Times Test. The idea is that when you're considering an action, think and act as if the full story of this move, exactly as it was thought about, discussed and put into action, would be published the next day on the cover of the business section of The New York Times, by an unfriendly but accurate reporter. If you feel fine about that, then it passes the test, and you can feel more confident that - at least from a social license standpoint - you should consider taking the action.

And there's another leader I'll quote in this regard - Muhtar Kent. Chairman and CEO of our Company. Muhtar has said, "The decisions we make are related to building more sustainable communities and earning our social license to operate - an intrinsic value of sustainability."

I'm now talking, of course, about our approach to public issues in this, the Age of Transparency.

In a time in which the environmental, social and personal impact of our brands, our packaging, our ingredients and our business operations are all critically important to our consumers, we know a commitment to sustainability and maintaining our social license must ultimately guide everything we do.

Consider this.

We used to think of the typical beverage shopper - the people we mainly talked to - as a pretty homogenous person...usually a homemaker who shopped for the family once a week, and didn't think too much about the products he or she bought.

Now, our consumer and shopper - just about every one of us - is so much more. She or he has multiple roles in life: a parent, a consumer, a professional, a neighbor, a voter, a community activist - and we need to talk to him or her in all these areas. So, we work to connect with each of these roles through a diverse set of communities. both physical and virtual. We try to engage with people 24 hours a day, 7 days a week about our agenda and theirs... and most of all, about the fusion of both.

We call our efforts to make our brands and our business more relevant and responsive to people's needs..."Live Positively." These two words sum up our commitment to sustainability. Our "Live Positively" commitment, in fact, spans seven areas: 1. beverage benefits; 2. active, healthy living; 3. community; 4. energy efficiency and climate protection; 5. sustainable packaging; 6. water stewardship; and 7. the workplace.

And every one of our business unit plans must incorporate actions related to each of these seven commitment areas.

My time won't allow me to detail our work in each area. I believe I can give you a good sense of it, however, by discussing what can be boiled down to two key words: brands and solutions. And I say this because the brand and solution-related initiatives I'll mention touch on most of our seven commitment areas.

First, let's think about what we're doing with our brands.

Four to five years ago, we set out to revitalize our core Coca-Cola brand with an emphasis on rebuilding the brand's special connection with consumers...led by our three main products, Coke, Coke Zero and Diet Coke. And stressing Coke's relevance and credibility to today's changing consumer has been a big part of it.

For example, we've launched new, smaller packages to give consumers portion-size options. allowing them to enjoy a Coke without consuming as many calories. These include 16-ounce single-serve contour bottles...an iconic new 8.5-ounce aluminum bottle... and new 7-ounce mini-cans for Coke brands and Sprite.

And regarding packaging. we're also acting to meet the global need for less reliance on non-renewable resources. For example, we've introduced our fully recyclable PlantBottle® made from 30% plant-based materials, which is replacing some of our traditional PET plastic bottles. The PlantBottle® is now on the market here in the U.S. and nine other countries. We've produced over 2.5 billion PlantBottles and intend to more than double this number of bottles - and the number of countries it's in - this year.

We've also shared this technology with H.J. Heinz. who will begin using the PlantBottle® for all its 20-ounce ketchup bottles in the U.S. starting this summer, after which they will launch it globally. We're working toward a 100% plant-based, recyclable and biodegradable bottle... and we were glad to see PepsiCo recently announce they are also working to develop such a package for testing in 2012.

Getting back to calorie reduction - a primary concern for many consumers - we're also making great strides with our no-calorie colas.

Our two major brands are Diet Coke and Coke Zero. Both are leaders and play unique roles in our portfolio.

Diet Coke is by far the nation's number one diet drink, and after years as the nation's third most-popular soft drink, in 2010 Diet Coke moved into the #2 position behind only number one Coke. So of the top two positions in the U.S. soft drink category, one is no-calorie. That's significant.

Coke Zero has been one of our Company's greatest success stories. With its authentic pitch of delivering Real Coke Taste and Zero Calories, it invented a new zero-calorie sub-category, with strong appeal to younger, active consumers. Coke Zero has achieved 19 straight quarters of double-digit growth - and that's simply phenomenal in our business.

Thanks to these brands, 41% of our total trademark Coca-Cola business is now in zero-calorie drinks.

OK, those are some ways we're making our core brand, Coca-Cola. more relevant - along with our highly integrated and effective marketing programs.

But it's not enough.

Our second front has been and is to dramatically expand our Still (or non-carbonated) beverage portfolio - giving consumers many more options.

A few years ago, we lagged behind in Still. We had great and growing brands - like Minute Maid, Simply, Powerade and Dasani - but we knew we had to make bold moves. When we saw the burgeoning growth in ingredient-enhanced beverages, we acquired glaceau, the maker of vitaminwater and smartwater, and FUZE, a line of juice drinks and teas.

As a result, we now have a broad portfolio that meets more of today's consumers' needs. In fact, we've been the fastest-growing major Still beverage company in North America over each of the last three years.

Furthermore, we weren't content with only Vitaminwater - we also launched vitaminwater zero to deliver similar attributes as the main brand for people who don't want the calories. And we not only put a big push behind innovating with and growing Powerade - we also brought out Powerade zero - creating a broad, growing lineup with the glaceau brands in the sports and functional hydration category.

In juice, we've made "never frozen, never concentrated" Simply - which we created only eight years ago - into a billion dollar brand that combined with Minute Maid. makes us number one in juices and juice drinks.

We also recently completed our acquisition of Honest Tea - the leading organic bottled tea company - allowing us to provide consumers a line of organic, lower-calorie teas and zero-calorie drinks that appeal to consumers who desire these attributes.

OK, so that's how we're helping consumers Live Positively with our brands and their beverage benefits.

The second focus that I'll talk about is creating solutions to the public issues facing all of us - working in partnership with government, civil society and others in our industry. This is another vital way that we "Be it, Do it, Say it," and we're committed to this 100 percent.

We work hard to forge these partnership-based solutions and to get the word out to consumers about them. To do so. we follow a model that centers on three words: Inspire, Empower and Advocate. We strive:

•  First, to INSPIRE consumers - Meaning, to reach them through branded connections, from TV ads about what we're doing about recycling and supporting education... to social media communications on such topics to targeted groups.

•  Second, we strive to EMPOWER consumers - by providing people with facts and tools to co-create solutions to issues like obesity. One example is opinion shaper education programs reaching over 250,000 medical professionals. Through them, important facts about our products get shared with their patients - our consumers.

We also do this by communicating calorie and nutrition information right on the front of our packaging, our vending machines and fountains. We were the first to do so on packages, and we've built on this commitment through programs like "Clear on Calories" supporting First Lady Michelle Obama's "Let's Move" efforts to reduce childhood obesity. Last month, we joined the American Beverage Association to announce that "Clear on Calories" label information is now in the marketplace on our packages as well as others' in our industry.

•  And third, we invite consumers to ADVOCATE with us. We want them to be active supporters of efforts like our online virtual gift activity for the Boys and Girls Clubs during the Super Bowl we called "Coke Cheers." Fans posted "Cheers" for their favorite team, and we matched each one with a donation to the Triple Play youth development program, ultimately generating $150,000 for this cause.

In summary, we want consumers to understand what we're doing to be part of the solution to social and environmental issues.

We will continue to partner with government, business and civil society to find solutions that work. The PlantBottle® initiative with Heinz that I mentioned is just one great example. We believe that these partnerships are really the best way to maximize our talents and serve at a higher level.

To illustrate, I want to show you two commercials that focus on Living Positively. The first features recycling - please roll it.

The second commercial features the Coca-Cola Scholars Foundation, a program of our Company and Bottlers that for the last 25 years has awarded college scholarships to thousands of worthy students.

Please roll that spot.

So those are ways that we're building on our brand strengths while also embracing bold new solutions to public issues. demonstrating why we believe we've earned a strong social license to do business.

Is it working? Recent results say "yes," both in terms of our volume and share growth performance as well as brand preference ratings among our consumers.

But we also know we're only getting started. We continue to work on new solutions, whether in terms of advances in greener packaging, new products and sweeteners, new ideas to promote active lifestyles, and increased consumer education related to obesity and other issues. We know these responsibilities will only grow for us and our industry alongside the demands for more transparency - they all will continue.

We're nowhere close to what we believe is our future best - but we are confident that we're moving in the right direction. And I hope I've mentioned a few ideas and themes that might have some value in our joint discussions about moving our industry forward toward 2020.

Thanks again for inviting me, and I look forward to our open conversation.