 Remarks by Neville Isdell at The Coca-Cola Company's
2008 Annual Meeting
Neville Isdell,
Chairman and Chief Executive Officer, The Coca-Cola
Company
Wilmington, Delaware
April 16, 2008
 The
meeting opened with a TV commercial.
View "It's Mine"
NEVILLE ISDELL, CHAIRMAN OF THE BOARD & CEO: Good morning,
and welcome to The Coca-Cola Company's 2008 Annual
Meeting. As you just saw, and I'm pleased with the applause,
we began this morning with a commercial that first aired at
the Super Bowl. I chose that ad because it reflects how our
marketing efforts, like the other pillars of our business, are
back at the top of their game. I also like that message: The
person who works hard, who believes, who persists, is ultimately
rewarded. Of course, I therefore see some parallels to the men
and women of the
Coca-Cola
system. Their hard work, their beliefs and their execution
are being rewarded in the marketplace. As a result of that,
The Coca-Cola Company is winning again. We've built
a solid foundation to deliver long-term, sustainable growth
for you, our shareowners, and to create value for our partners,
our customers and our communities.
We have a clear strategy. We've energized our people. We've
aligned our system, and we are executing effectively. We still
realize that ours is a long-term journey and we are by no means
declaring victory, but today I am confident that the future
of the Company is based on a very solid foundation.
First Quarter 2008 Results
Let me talk about Quarter One. We just announced this morning
the results
for the first quarter, which have built on the success of
2007, and we are off to a good start in 2008.
- We achieved volume growth of 6 percent in the quarter, successfully
cycling 6 percent in the prior year. This in fact is now the
12th consecutive quarter when we've achieved volume growth
of 4 percent or greater.
- Revenue growth was a very robust 21 percent. The acquisition
of bottlers contributed five points to that growth, such that
even excluding this impact, revenues grew a very strong 16
percent.
- Ongoing operating income increased 19 percent, but currency
was a significant contributor to that -- 11 percent -- so
taking it on a currency-neutral basis, our operating income
increased 8 percent; plus we continue to make investments
behind our brands for the long term.
- We reported a 20 percent increase in ongoing earnings per
share, making that our sixth consecutive quarter of double-digit
comparable EPS growth.
As I mentioned earlier, these strong results follow on strong
results for the whole of 2007.
In a moment I'll invite our President and Chief Operating
Officer, and our CEO-elect, Muhtar
Kent, to take you through a review of the state of our business.
Then after Muhtar's presentation, I will come back and offer
some real context to those results and to the future.
Our Leadership Transition
But before I invite Muhtar up, I'd like to say a few words about
our leadership
transition, which we announced in December. As you know,
this is my last meeting serving as both Chairman and CEO. Starting
this summer on July 1, Muhtar will assume the responsibility
of CEO. I intend to continue if elected as Chairman of the Board
through to our next annual meeting. I would also like to note
that Muhtar will be standing for election to the Board today.
When I came back to the Company in 2004, I was determined there
would be a smooth and well-planned succession. In fact, I started
discussing succession planning with the Board back then in 2004.
As a result of that planning with the Board, I believe you will
see a textbook case of smooth managerial succession. Our transition
is working because we planned it, because we have the right
strategy, and more importantly because we have the right leader
-- Muhtar Kent. I've worked closely with Muhtar for nearly 20
years. The skills he's already demonstrated as our President
combined with his vast industry knowledge, his own drive for
operational excellence, his strategic vision and his commitment
to our people will, I know, help move our Company forward to
the next level of growth. So let me now hand over to Muhtar
Kent. [applause]
Read
Muhtar Kent's remarks on the State of the Business.
Becoming a Successful 21st Century Business Enterprise
CHAIRMAN ISDELL: Thank you, Muhtar. It was indeed a
very good year, led by you. I think from that presentation you
now understand why I have so much confidence in Muhtar coming
in to succeed me as CEO.
Now I want to step back and look at part of that broader perspective
Muhtar mentioned, which we share. We know if we only focus on
the results from last year, you will miss the much larger and
more important story of what we've been doing over the past
four years to build a sustainable future for our Company and
for our shareowners.
A New Environment with New Expectations for Businesses
We recognize, like all businesses, that we've entered a new
era with new challenges, expectations and opportunities. We
are committed to winning in this new environment. We have set
the very clear goal of becoming a successful business enterprise
in the context of the 21st century. We're transforming our business
very simply because the world in which we operate has changed.
Our planet and its resources are facing increasing pressures.
Consumers today expect so much more from businesses, and increasingly,
consumers are basing their purchasing decisions on how they
feel about a company.
We recognize the old way that we defined business success is
no longer sufficient. In the last century, Milton Friedman argued
that the only social responsibility of business was to increase
its profits. Today, however, business leaders who continue to
define social responsibility so narrowly, in our view, risk
leading their businesses, our society and our planet down an
increasingly unsustainable path. The 21st century therefore
brings a whole new set of expectations. It is no longer sufficient
to be profitable and provide a high-quality product or service.
We need a revised business model that puts business in the broader
context.
First and foremost we must deliver the basics, including serving
a market need, being entirely legally compliant and delivering
increased profits to our shareowners by the type of day-to-day
focus on the core of our business that Muhtar has just outlined.
But there is more we must do in the 21st century.
- We believe we must support the sustainability
of the communities we serve.
- We must partner in new ways with governments and
civil society -- the new triangle.
- We must localize our efforts so we are a functioning
part of every community in which we operate.
- We must, of course, be a responsible
employer,
- and -- this is so logical -- draw on the diversity
of our people to win in the marketplace.
These really are the requirements of a truly successful and
more profitable company in the 21st century.
1. We Must Support Sustainable Communities
Let me turn to the first requirement, which recognizes that
if the communities we serve are in and of themselves not sustainable,
then we do not have a sustainable business. As the world's largest
beverage company, we have a presence in people's lives that
reaches beyond that magical moment of providing that simple
moment of refreshment. We're also an employer, a business partner,
a part of the community, a global citizen; and I believe we
must play our role in supporting sustainable communities.
I define "sustainability" in the way a United Nations
Commission defined it more than 25 years ago: It means "meeting
the needs of the present without compromising the ability of
future generations to meet theirs."
Sustainable Communities: Water
Let me share some examples to support our goal of sustainable
communities and what we're doing. Let me start with the environment.
We all know that in many communities a lack of public access
to clean water is a very serious problem. Of course, water is
a key ingredient in all of our beverages; so it's an area that's
relevant to our business and one to which we can bring significant
technical expertise.
Last year, we set a very aspirational target: a goal
of becoming entirely water neutral in our operations on a global
basis. That is something we know we will clearly be able to
achieve. In terms of the provision of water, our efforts span
the globe with some 100
community water projects in 49 countries.
In the past, some of you have expressed some concern about
our business in India that primarily revolved around water and
water use. I can you tell you not only have we listened, but
we've taken action. For starters, there are over 300 rainwater
harvesting structures across 17 states in India. Two months
ago, we won the prestigious Golden Peacock Global Award for
corporate social responsibility, which cited our work in water
conservation, in management and community development. Last
February, Coca-Cola India won the New Delhi government's
Bhagidari Award for the fourth consecutive year for its efforts
in water conservation and community development. I can give
you other examples, but the real rubber hits the road when we
get the recognition that we get from communities that now have
access to water again.
People have talked about our transparency in India, so we agreed
to an independent assessment of our water management. We conducted
that independent research with TERI (The Energy and Resources
Institute), headed by a Nobel prizewinner. The study, which
is the most in-depth ever conducted in India, found that our
practices, processes and results are generally in compliance
with Indian regulations and, in particular, with our own higher
standards. There were some areas that they identified where
can make some improvements; these were just recommendations,
and of course we will proceed with those. But all of that together
is one of the reasons why we've just been voted the number 2
most respected fast-moving consumer goods company in India.
Sustainable Communities: Well-Being
Another sustainability issue that we're working to support is
well-being -- healthy members of each community who we can support
to live active and healthy lifestyles. We do that in several
ways. We offer a wide variety, 2,800 different beverages that
provide refreshment, nutrition, hydration, and not least pleasure.
We provide choice, and we are proud of every single one of our
brands. A data point: In 2007, approximately 23 percent of our
unit case volume globally was either low calorie or reduced
calorie, and we introduced another 150 low-calorie or reduced-calorie
beverage products. We also now provide a variety of portion
sizes and where feasible significant fact-based nutritional
information about our products on the product label, so that
consumers themselves can make informed beverage choices. For
over 50 years, we've had a policy not to advertise sparkling
soft drinks on TV programming that targets children under the
age of 12, and that of course will continue.
Then there is our support for one of the real shortcomings
of our society today: Our support for physical activity and
nutritional educational programs. We do this with global industries,
government agencies, academic institutions, and with health
and advocacy groups around the world. Simply, our goal is to
make people more active to burn calories through a combination
of a good balance of diet and regular physical activity.
As I move on from sustainable communities, I see that is only
the first requirement of a 21st century business enterprise.
2. Partner with Governments and Civil Society Where Appropriate
Second, to succeed in the 21st century we must collaborate in
new ways with governments and civil society on issues where
it is appropriate and relevant for our business to play a role.
The challenges facing our planet are too urgent and complex
for governments alone, businesses alone, or NGOs alone to solve.
Working together, we can create a multiplier effect that helps
build sustainable communities and addresses the issues of our
planet.
I talked about the triangle: I believe this interconnected
triangle of business, government and civil society is the key
to accelerating sustainable development. Some examples:
- We're partnering
with the U.S. Agency for International Development (USAID)
on water projects in 17 countries. That is helping a quarter
of a million people around the world.
- We have significant partnering
with the World Wildlife Fund, one in particular to conserve
seven of the world's most critical freshwater river basins,
which span some 20 countries.
- Last year, I signed the CEO
Water Mandate, which is an initiative of the UN
Global Compact, of which we are also a signatory. The
Water Mandate recognizes the growing stress on the world's
water resources and serves both as a call to action, but also
as a strategic framework to address water sustainability in
our operations and our overall broader supply chain.
We recognize that these partnerships help us do good for our
communities while also being good for our business.
3. Be a Functioning Part of the Communities We Serve
The third requirement is we must be, both in perception and
in reality, a functioning part of every community in which we
operate. We have facilities in more than 200 countries around
the world, and in all of those countries we strive to be a local
business. We employ local workers, source our ingredients locally,
and support the communities we serve. Being connected to those
communities is truly a business imperative. We believe that
a 21st century company needs to be close to its markets and
continue to deliver what its consumers want, when they want
it, in the most efficient and effective fashion. You can only
do that if you're a functioning part of the local community.
Supporting Jobs and Economic Empowerment
We're also pleased to play a role in creating economic
empowerment everywhere we do business. We know that by creating
wealth in local communities we ensure there is a growing marketplace
for the consumers and also for our products. Our system enables
local businesses -- through the training we give to local entrepreneurs,
as one example, as well as what we do across the integrated
value chain - to create additional jobs up and down that chain.
At The Coca-Cola Company, we employ about 90,000
people; but if you take the
Coca-Cola system, it's almost a million people.
If you look at the multiplier along the value chain, you can
multiply that by anywhere around six or seven. That's the positive
impact we have.
Again I want to emphasize that by creating jobs and buying
goods locally, that helps alleviate poverty in the communities
we serve. In fact, it is the very real virtuous cycle everyone
is looking for, and it is also of benefit to our shareowners.
One thing we're doing this year that I'll talk about as part
of the Millennium Development Goals is starting a whole program
over Manual Distribution Centers. That means bringing along
new entrepreneurs who employ two or three people in very underprivileged
areas around the world - the pilots are in five countries in
East Africa - and building off our current strong distribution
to reinforce that and also create a greater level of economic
activity in areas there is significant unemployment.
4. Be a Responsible Employer
Of course, we need to be a responsible employer. A 21st century
business respects workplace human rights and provides a working
environment that is safe, healthy and open. That environment
allows our people and our Company to realize their full potential.
In January 2007, we announced our Global
Workplace Rights Policy and our Human
Rights Statement, which I reaffirmed earlier this year.
Last year, we also updated our Supplier
Guiding Principles to align with that. But we know it's
not enough just to have a policy; we have to implement it across
the system. Now we're beginning to build our Workplace Rights
Policy and our Supplier Guiding Principles right into our business
plans of each of our individual business units around the world.
Our Company is truly committed to maintaining a workplace free
from violence, harassment, intimidation and other unsafe or
disruptive conditions due to internal and external threats.
We provide security safeguards for employees as needed, but
also with true respect for the privacy of employees and for
their dignity. Having said that, we know we have more work to
do. It's a journey. We're still learning, and we're still looking
for more best practices. That is one of the reasons why we're
participating in the Business Leaders' Initiative on Human Rights.
5. Reflect Diverse Communities
Finally, a 21st century business reflects the diversity
of its communities in areas like gender, race, culture and geography.
It makes sense: The only way that we can succeed in so many
diverse marketplaces around the world is that reflection of
the communities we serve. So it's why our focus on diversity
is actually a business imperative. Again we're making good progress.
Last year the organization, Diversity Best Practices, presented
us with its Diversity Leadership Award. Just two weeks ago,
Diversity Inc., which conducts one of the most comprehensive
and prestigious surveys in the United States, named The Coca-Cola
Company number two on its list of the top 50 companies for diversity.
We are the only company to achieve a top-five ranking for three
consecutive years.
We exceeded our goal for supplier diversity spending for the
seventh year in a row. As part of reflecting that on the Board,
we welcomed the former Labor Secretary, Alexis Herman, to our
Board of Directors. We were also recognized by the Women's Business
Enterprise National Council as one of America's top corporations
for women's business enterprises. Again, these mark progress
on diversity, but we also recognize the work is not complete.
Requirements for Making a Profit in the 21st Century
In conclusion, therefore, all the efforts I've talked about
are "nice" things to do, but we're not doing them
just because they're nice. We've doing them because they're
steps that we must take to earn a profit and to return a profit
to you, our shareowners. They are a business imperative because
our entire business relies on consumers choosing us -- choosing
to invite us into their lives 1.5 billion times every day. We
understand consumers issue those invitations only to people
and businesses they like and who they see as part of the fabric
and culture of their own communities. That means, then, that
we're invited back into their lives the next day and the day
after-and over and over again. It's because of the quality of
our products, the true pleasure they bring, in certain instances
the nutrition they provide, and our connectivity with society.
We understand this critical dynamic of making a profit in the
21st century, and we are using that understanding to build a
business that will deliver long-term, sustainable growth for
years to come. Thank you. [applause]
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