Speeches

Remarks at the Investor and Analyst Event

Muhtar Kent, Chairman and Chief Executive Officer, The Coca-Cola Company
Atlanta, GA
November 16, 2009

As prepared for delivery

Are we ready for tomorrow, today?

That's the question we -- all of us in the Coca-Cola system -- have challenged ourselves with this past year. For the next day and a half, you're going to see, first-hand, how we are shaping the future -- today.

So, welcome -- all of you. We're honored that you have taken the time to join us and we look forward to an engaging and productive time together.

When we opened this wonderful attraction in May of 2007, we told the world that this is not just our house -- this is your house. Indeed, there would be no Coca-Cola without the consumers who reach for our brands 1.6 billion times each day. In that same spirit, I want you, too, to feel at home here as this is your house as well.

The film you just saw was designed to do many things. Inform. Provoke. Challenge. And Inspire.

I am especially fond of the quote at the end from Victor Hugo, who said... "The future has several names... for the thoughtful and valiant, it is the ideal."

We see a world unfolding over the next decade and beyond that presents ideal conditions for extraordinary growth of non-alcoholic ready to drink beverages. We also believe that our Coca-Cola system -- and the 700,000 associates who support our brands every day -- are ideally positioned to lead this "Growing World of Refreshment." We believe you will come to the same conclusions by the close of our time together.

When we gathered our top bottlers from around the world 14 months ago, we set out on a journey to create a system-wide vision for our business. We recognized the critical importance of being aligned as a system and laser-focused on executing a common set of strategies.

In that meeting, we had over 45 bottling partners representing more than 80 percent of our global volume. What came out of that meeting and subsequent meetings with our people across our system was this -- our 2020 Vision and Roadmap for Winning Together.  

Here, we've shaped a 'Roadmap for Winning Together' and set a number of key goals including:

The 2020 Vision we crafted is designed for growth and action. It's not lofty... it's not complicated... it's real... it's actionable and it's guided by goals that will stretch us and grow us for the better. Most importantly, it is being localized and activated as I speak.

Indeed, in recent weeks, I have traveled to markets as wide ranging as:

• Russia
• China
• Mexico
• Canada -- home of the Vancouver 2010 Olympic Games
• Brazil
• And Argentina.

Additionally of course, I have visited the new center of American commerce and industry, Washington, D.C.!

In each of these markets and many more, I have been encouraged by the progress we're seeing in advancing the strategies outlined in our 2020 Vision. In many of these markets I was privileged to announce significant new investments on behalf of our dynamic system, including:

• $1 billion dollars in Russia over the next three to five years

• $2 billion dollars in China over the next three years...
• $5 billion dollars in Mexico over the next five years...
• And, four days ago, $6 billion dollars in Brazil over the next five years...

This momentum is galvanizing our system. It's fueling our virtuous circle of value creation. And it starts with belief... which inspires our vision... which in turns drives investment... which creates growth and expands our leadership... which again sustains our belief -- and so the cycle repeats. All of which supports our next decade of value creation.

When we began our 2020 Vision and strategic renewal process at that first meeting in Boca Raton, Florida, last September, it was the first time we had come together as a global system since 1997. Now, think back with me for a moment to that date -- 1997. If you're like me, it seems like just yesterday. But think about all that has changed in the world since then. In 1997...

• China's economy was 20-percent smaller than Italy's.
• India's economy was less than half the size of Italy's.
• Less than 2 percent of the world's population was connected to the Internet.
• Less than 4 percent of the world was using cell phones.
• Google had yet to be founded.
• The creator of Facebook was just starting junior high school.
• And a Blackberry was something you picked off a bush and NOT something you wore on your belt!

In 1997, the late Roberto Goizueta, was at the helm of The Coca-Cola Company. Times were good. Our system was riding high. The Coca-Cola Company had once again been named America's Most Admired Company by Fortune magazine. And the future of our system looked bright…very bright.

Now consider all the massive changes that have taken place across our business since 1997…

• We've either introduced or acquired over 300 new brands in markets around the world.
• We've seen consumer preferences expand to a wider variety of beverage choices, needs and occasions.
• We've experienced an onslaught of new competitors and brands.
• We've watched many of our key retail customers grow in size and scope.
• We've navigated our system through the greatest economic downturn since the Great Depression.
• And we've more than doubled the size of our system revenues, from $50 billion to $100 billion U.S. dollars.

For the most part, we've transformed along with the world. I say "for the most part" because we've also had our missteps along the way.

There was a period there when our Company lost its way. We were too internally focused and not focused enough on the changes taking place with our consumers and customers. In essence, we were too busy looking at the dashboard, but were not sufficiently paying attention to the world outside our windshield.

Since 2004, however, our momentum and direction have returned along with the belief that we can win again. We know that winning in 2020 and beyond is going to require new capabilities, new models and new innovations.

• It's going to require new strategies to better address the external forces shaping our business.
• It's going to require a sharpened focus on execution and priorities.
• And it's going to require strong system alignment guided by shared values and vision.

As you saw in the film, the changes coming our way over the next decade will make the last 10 years seem tranquil.

What I would like to do over the next few minutes is talk about these changes and the implications they pose for our entire Coca-Cola system. I want you to see -- from our perspective --

• how the world is shaping up
• what it means for our business
• and what we are doing to ensure we capture these new growth opportunities and drive long-term shareholder value.

I know many of you were at the CAGNY conference earlier this year when I spoke about how we are positioning our business through these perilous economic times. I am not going to repeat that discussion here, but I do want to reiterate that the global financial crisis was not the trigger for our strategic renewal at Coca-Cola.

We planted the seeds of our 2020 Vision several months before the roof fell in last September. What we saw coming down the pike was far more powerful, encompassing and long-term than the recession that has gripped markets around the world for the past year and a half. Indeed, looking out just beyond the horizon, we see a number of important global trends emerging that will have an enormous impact on our world and our system over the next decade.

Specifically we see five massive global forces unfolding:

1. A powerful shift in the epicenter of global economic growth.
2. Rapid urbanization as people move to cities for opportunities.
3. A world wrestling with energy and resource scarcity.
4. A reset of consumer attitudes, values and expectations... and...
5. An emerging new era of innovation brought on by these first four trends and fueled by sustainability imperatives.

These are the 5 Forces Reshaping the World... reshaping the beverage industry... and reshaping virtually every industry. This is our world for at least the next 10 to 20 years, if not longer. Let me just quickly describe each trend in a little more detail beginning with the shift in the epicenter of global growth.

1. By the year 2020, the world's economic power will radiate from many nations and not just a few. Despite the current economic woes, we're going to see 20 trillion dollars of global GDP growth created in the next 10 years. Most of this will be in the emerging and developing economies of the world. Of course, we're already seeing this shift as China, Brazil and India are leading the rest of world out of the current economic crisis. In the next 10 years, we're going to see a billion new consumers rise to the middle class. Our estimates on this number, by the way, are conservative.

2. With this surge in global economic power and middle class growth, we're also seeing a huge influx of urban migration -- the second defining force shaping the world. Today, the world's cities are growing by 70 million people each year, and that will continue for at least the next decade. That's the equivalent of adding a metropolitan area the size of Atlanta to the planet every 30 days for the next 10 years.

3. The third force we're seeing is a world of energy and commodity scarcity. In the coming years, as wealth grows and consumer demand increases, we are going to be faced with constant scarcities and cost pressures. Demand for fuel, food and other commodities will expand significantly. This will have long-term cost implications for all of us. In a world of constant cost pressures, it is essential that we achieve a low-cost structure and that productivity is embedded in everything we do.

4. The fourth force we see is a fundamental consumer reset. A reset of priorities, values, and expectations. Consumers worldwide are focused on value. They expect to engage with brands in a dialogue as opposed to a one-way monologue. They do not want to be told what to do. Today's consumers are dictating what they want... how they want it... when they want it... where they want it... and what price they are willing to pay.

This is an important trend-- and one that threatens to break the traditional distinction between buyer and seller that has been at the cornerstone of modern business and economics. Increasingly, and just as importantly, consumers are judging us as much on the content of our character as the content and quality of our beverages. The work we are doing to embed sustainability initiatives across our supply chain and operations is important to the new consumer psyche.

5. In fact, this is foundational to the fifth major force we see -- the rise of transformational innovations. Most new breakthrough innovations over the next decade will spring from a world radiating economic power from multiple sources... from a world with more empowered consumers... and from a world where natural resource scarcity is the norm. New ideas and innovations will originate well beyond the four walls of a company. Innovation will be just as likely to come from customers, suppliers, and consumers. Innovations will be truly global. They will no longer just trickle down from developed to lesser developed nations. They will just as likely originate in emerging nations as well.

For our industry, these five defining forces will mean: more people... with more wealth... with more intense demand for choice... leading highly mobile, on-the-go, urban lifestyles that are conducive to the incidence and consumption of ready-to-drink beverages.

These five forces will also create increased environmental pressures, NGO pressures, global talent competition pressures, innovation pressures, and a host of other challenges. We see a world ahead that will be defined by simultaneous and constant headwinds and tailwinds. Many of the old rules and assumptions that we grew up with will simply no longer apply.

At the same time, we also know that some things must never change. We know that we must never think small or ignore growth. Profitable volume growth and organic growth is our lifeblood.

We also know that we must continue to grow the epicenter of our business -- Trademark Coca-Cola. It is our oxygen.

As I travel the world and witness what our system is achieving with Brand Coca-Cola in markets like China, Southeast Asia, India and Latin America, among others, I'm excited about the future of Trademark Coca-Cola -- the greatest brand name in commercial history. Globally, Brand Coca-Cola unit case volume has grown for five consecutive years. We're just getting started.

Of course, nothing has done more to reinvigorate Trademark Coca-Cola than Coca-Cola Zero, our most successful product launch since Diet Coke over 25 years ago. The tremendous success of Coca-Cola Zero and other brands only reinforces the enormous potential we see in expanding our global beverage leadership.

As a system, we have always been -- and always will be -- in the business of non-alcoholic ready-to-drink beverages. This is our heritage. This is where we lead, excel and create value. Most importantly, we've only scratched the surface.

Ours is a $600 billion dollar industry that is growing faster than all other consumer packaged goods, including cosmetics, alcoholic beverages, and household care. Between now and 2020, our industry is projected to grow by nearly 55 billion unit cases in volume and half a trillion dollars in revenue, pushing the industry well over the $1 trillion dollar mark.

These numbers aren't hard to imagine when you think about those trends I mentioned a moment ago. From the wealthiest economies to those that are just emerging on the world's economic stage, we see a lot of growth runway ahead of us. There's so much more opportunity out there to capture.

Now, against this backdrop of opportunity and challenge, I want you to imagine the world the film depicts... the world of 2020 where consumers are making purchasing decisions that are based as much on the content of our character as on the content and taste of our beverages.

A world where the vast majority of consumers identify themselves as environmentally-conscious and expect the same from the brands they use. A world where more and more of our marketing and communication takes place on digital platforms and at the point of sale.

A world where more outlets are customized to their neighborhoods and where our channel strategies have been refined down to a science.

A world where innovations in packaging, ingredients, equipment and transportation use less energy and leave a minimal imprint on the environment.

A world where route-to-market decisions are truly more about brand development and selling our brands to our customers than about how the product actually gets delivered.

It's a world where Trademark Coca-Cola continues to be more vibrant and relevant than ever before and remains the single most important driver of our portfolio.

As you imagine this world, I want you to also think about another very important paradox. A world where consumers are getting older and younger. By 2020, more than two-thirds of the world's elderly population will be found in the developing world. You saw the statistic in the film -- 25 percent of the world will be over 50 -- and they will have more wealth than any previous generation.

And this is why we are actively exploring

• new ingredients
• new functionality
• and new occasions -- all focused on this aging and affluent segment.

At the same time, we're seeing parts of the world that are getting much younger. The youth market is set to explode across Africa and Asia. Within the next decade, four-fifths of the world's population under 18 will be concentrated in Africa and Asia, and more than 20 percent of this youth market will be in one single country -- India.

With our 2020 Vision, we're creating new strategies to introduce and win over a massive new generation of young people to Brand Coca-Cola. Nothing will be more important than making Coca-Cola #1 with these new consumers.

Considering these important demographic trends, we know that our marketing and innovation will play a bigger role than ever. We are a marketing system. We are fast at work ensuring that our marketing is not only the best in our industry but among the most innovative and effective in all industries.

Our 2020 Vision calls for bringing new innovations to the market faster.

• Product innovations...
• Packaging innovations
• Equipment innovations
• and Merchandising innovations, just to name a few.

In a world of increasingly fragmented media, we are laser-focused on targeting the right consumers. We know, for instance, that the true success of our "open happiness" marketing campaign won't be the results of a few great television commercials. It will instead be the combined power of a fully integrated global campaign that works on many levels, across many geographies and cultures and leverages a rich variety of media and channels.

Our 2020 Vision also calls for us to think and act like an integrated global enterprise while intensifying our local focus. In this world, we firmly believe -- more than ever -- that the franchise model in its broadest sense is still the best way to win in the marketplace -- every single day.

The franchise model gives us the focus we need... the global breadth and scale... and the local leadership. The franchise model requires that we be held accountable for connecting with the consumer and winning at the point of sale.

That said, we know the franchise model cannot rely on its past success. We remain "constructively discontent" -- never satisfied with the status quo. The hallmark of our franchise structure is the entrepreneurial spirit of our local bottlers around the world who anticipate and serve local tastes, traditions and expectations. We are focused on maintaining and enhancing that special connection with our consumers.

We are equally focused on ensuring that we have the scale and flexibility to run the industry's lowest-cost and most-efficient manufacturing and logistical operations... while never compromising the quality and equity of our brands.

Our franchise structure wins when we are aligned with serving our customers' best interests. Our 20 million customer outlets are the gateway to billions of consumers around the world.

We know the true picture of success for us -- and for our 2020 Vision -- can only happen when we are the undisputed leader in the non-alcoholic ready-to-drink beverage business globally and in every local market. That means being No. 1 across all sparkling and still categories where we can create and realize tangible value.

We've reset our sights higher, and we've done this amid some radically shifting demographics, consumer preferences and market economies.

Over the next day and a half, you're going to hear from -- and interact with -- a number of system leaders who are doing more than just thinking about the future... they're shaping it -- today. Working hand-in-hand with our great bottling partners, my team and I are fast at work building a unified and aligned system equipped for long-term sustainable growth. A system that is among the most admired not only in our industry but all industries... A system that attracts the best and brightest talent -- associates who work smart, embrace our values, focus on the market and act like owners.

As we look ahead to the year 2020, I'm convinced that these next few years will be defining moments for The Coca-Cola Company and our great system. In a "Growing World of Refreshment," the opportunities before us are tremendous.

As Mr. Hugo reminded us, the future is indeed ideal. We are not dreamers. We are driven by a clear, compelling and actionable vision.

WE ARE READY FOR TOMORROW--TODAY.

And make no mistake -- The World of Coca-Cola is more than just this beautiful building. The World of Coca-Cola is a destination just beyond the horizon... a global enterprise driving the industry and shareholder value like never before.

Our journey has begun and it continues today with all of you.

Thank you very much.