Retail Days Keynote Address

Muhtar Kent, President and Chief Executive Officer, The Coca-Cola Company
Istanbul
November 22, 2008

Hello, everyone, and good afternoon.

What a great pleasure to be here at Retail Days and back in my home town.  This wonderful city is not only the birthplace of the shopping center,  it's also one of the historic nerve centers of the retail industry. A legacy that dates back almost 2,700 years.

When I talk to people in my travels around the world and mention where I am from... inevitably... one of the first things they say is "Ah, Istanbul... wonderful shopping!"

Last year, I'm told the Grand Bazaar alone attracted more than 100 million visitors and shoppers.  Visitors representing virtually every nation in the world. They come for the sights and sounds.  The excitement.  The thrill of finding the unexpected.

They come because shopping is... and always will be... one of the world's great social exchanges. Shopping in Turkey is not only about business, it is an experience. Whether or not your bargain will end up with a purchase, most of the shopkeepers in the Grand Bazaar or elsewhere will still happily welcome you with a tea.

Retail, at its core, is about people... socialization... and connection. If we take away just one thing from this conference, I would hope it would be the reminder that this great industry does more than sell goods, it connects people.

Connecting with people in new, meaningful and lasting ways has long been one of the core competencies of The Coca-Cola Company and system which is where I have spent the vast majority of my career.

In the conference agenda, my talk today is entitled: "Managing a Company on which the Sun Never Sets." Now, I must admit that title might sound a bit imperialistic.  It conjures up images of Charles the Fifth who first used it to describe his Spanish empire in the 16th century.  Later it was used to describe the British Empire during the Victorian Era.

In terms of business, though, it pretty much does describe Coca-Cola's global ubiquity.  With operations in over 200 countries around the world... with 1.4 billion beverages poured every 24 hours... one could say the sun never sets on Coca-Cola's business.

But I'm not speaking just about Coca-Cola today. I'm talking about your business as well. Whether you're a small domestic retailer or an expanding multinational chain, in today's environment the sun really never sets on your business.

Thanks to the Internet, the loosening of trade restrictions, and the corresponding growth in the exchange of goods, information and funds around the globe -- we live in a world where traditional boundaries are disappearing.  Markets, consumers and competitors are largely no longer confined by physical, technical or political barriers. Competitors can launch a business in the time it takes to build a web page. Consumers can now shop and compare, globally, 24-by-7. If shoppers can't find what they're looking for in your store on Taksim Square or Champs Elysees or 5th Avenue, they can almost certainly find it after a minute or two of surfing the web.

No retailer today can afford to sleep. 

While the challenges are great, so too are the opportunities. The world's economy by 2015 ... just over 7 years from now... is expected to grow by more than $15 trillion dollars. That's the equivalent of adding a new market that's larger than North America.

This, of course, is creating unprecedented wealth -- and nowhere is this being felt more than in emerging economies like Turkey. By 2015, 700 million new middle class consumers --  will emerge in markets around the world.  That's larger than all of Europe. Many of these consumers will reside in cities like Istanbul, which have seen massive influxes of workers and residents relocating from rural areas.

All of this has profound implications on retail. So, in that spirit, I was asked to spend a few minutes today talking about some of the major trends we see in working with our retail customers around the world.  I was also asked to share some of the big lessons we've learned in operating a global enterprise for a century now at The Coca-Cola Company. And finally, I was asked to share a few thoughts about Turkey and her prospects for growth in the coming years.

Let me preface this discussion by defining what we mean by retail customers at Coca-Cola.  They are the 14 million retailers... yes, that's right... 14 million retailers, restaurants, entertainment facilities, sporting venues and other outlets that actually sell our 400 plus brands and 2,600 beverages to shoppers and consumers around the world. A retail customer can be anyone from a one-person kiosk in the most remote corner of the globe, to the mass retailer found in the largest urban center.

The vast majority of these retail customers face the same challenges as you.  They're looking to innovate, grow and provide a better retail experience for their shoppers.  Many want to expand their brands internationally and are looking for trusted partners to help them do this. Most of the current retail trends we see can be grouped into three thematic areas, beginning with what I call "the great shift to the point-of-sale."

Just as communications channels and technologies are changing for our advertising and promotional messages, so too is there a great shift going on at the point-of-sale -- the first moment of truth. Engaging consumers as shoppers inside the store is absolutely critical.  In our case at Coca-Cola, about 70 percent of purchase decisions for our products are made at the point-of-sale.

There is a severe competition to win, in each of those moments of truth, when the consumer decides which product to pick for his or her shopping basket. This is why our retail customers are asking us to be more imaginative and innovative inside the store.  Quite honestly, this has required some change in thinking on our part.

For most of our history -- and rightly so -- The Coca-Cola Company thought of itself primarily as a consumer marketing company.  In many regards, we pioneered consumer marketing and along the way created the most recognized brand the world has ever known. We will never lose that heritage.   But it's also becoming essential that we think more and more like a business-to-business marketing company.

This is why this past summer we combined our consumer marketing and commercial leadership groups into one integrated function. We are now, in essence, taking a more holistic view into how our consumers and our customers relate to and derive value from our brands. Instead of thinking of the retail shelf as the last point in our products' journey... we've inverted our thinking.  We're now starting at the shelf and rethinking all our processes and strategies upstream accordingly.

Retailers expect that from us and from our entire system. You, too, should demand the same thing from your suppliers.

This leads directly to the second trend we're seeing and that is retailers and suppliers moving from a purely transactional relationship to more of a strategic partnership. Our customers need solutions that can help them attract not just more customers... but also more share of wallet.

When we talk about commercial leadership at The Coca-Cola Company, we're really talking about doing whatever necessary to become one of the top three-value producing suppliers for our customers. Again, this requires some new thinking on our part. We're asking ourselves how can we execute more... better... and faster?  How can we enhance the enjoyment of the shopper experience... while creating greater demand for our brands and more sales for our customers?

One important solution lies in a concept we call The Perfect Store.  It's about having the right mix of products, in the right place, at the right time, in the right packaging, with the right pricing and supported by the right advertising and in-store merchandising. The Perfect Store is not just an aspiration... it's the future of our business and we think the future of our retail customers' business.

It means re-engineering the occasion-brand-price-pack-channel architecture... rethinking routes-to-market... being part of the collaborative up-front planning process with our customers. In other words, everything we can do to be a more strategic partner in the business. This, too, is something you can demand of your suppliers.

The third trend we're seeing with our retail customers is the growing awareness of corporate social responsibility. I talked earlier about helping retailers attract more share of wallet.  Equally important is helping our retailers attract more share of hearts and minds.

Heightened awareness in recent years over climate change, natural resource depletion, workers' rights, population growth and other issues is changing expectations about the roles of business, government and civil society. Increasingly, we're being called upon, and rightly so, to work together to ensure the sustainability of the communities in which we operate.

Whether it's Tesco or Carrefour in Europe... Wal-Mart in North America... or Migros, Tansas or BIM, right here in Turkey... we're seeing more and more retail customers demanding socially responsible behavior from suppliers.

This impacts everything from how we hire and manage people, to the packaging we use, to the full environmental imprint of our manufacturing and operations. We, in turn, are asking the same from our suppliers. In both developed and emerging economies, I see more and more consumers gravitating towards brands that share their values. And the larger the business, the higher the expectations. This is an encouraging trend for all of us.

So far, I've talked about three major trends we're seeing at Coca-Cola in our relations with retailers -- the shift to the Point of Sale... the shift to strategic partnerships ... and the shift to social and environmental responsibility and accountability. Now, I'd like to touch on some of the big lessons we've learned in managing an enterprise that spans six continents.

The first lesson we've learned is that there is no global template when it comes to expanding and operating your business internationally. We've come to learn that all markets are different.   What works in Turkey may not fly in Tunisia or Thailand. This applies more today than ever.

One of the great paradoxes of globalization is that as the world comes closer and closer together economically, we're seeing an equally strong reassertion of local cultures and values. In other words... more global, more local.

And while you may have the luxury of a global brand and global scale, it's imperative to be viewed as a local business... in tune with local values, tastes, customs and preferences. In the case of Coca-Cola, this impacts how we interact with retail customers... suppliers...  bottling partners... government leaders and NGOs from market to market.

Let me give you a couple of quick examples of how it's manifested in our portfolio.  Take Japan.  It's a huge market for Coca-Cola.  One of our most profitable markets as well.  Now, guess what the number one Coca-Cola product in that market is?  It's not Trademark Coke.  It's actually a coffee-in-a-can designed specifically for that unique market.  It's called Georgia Coffee.

In China, another massive market for the Coca-Cola system, our number one product is Sprite.   In some sub-Equatorial markets, the number one brand is regional-flavored Fanta beverages.

In all, we have 2,600 different products that make up our portfolio.  Many of these are tailored for local tastes and sensibilities.  It's a metaphor of sorts for how you have to approach the business. In the end, all business... and all retail... is local.

Another important lesson that we've learned in managing a global company is that it takes the right people with the right mindsets.

I'm often asked... What does the global business leader of tomorrow look like?  The simple answer is we want people with a worldview.  People who can truly connect with all cultures and manage outside their comfort zones.

In my travels, I still see too many expats trying to re-create their Paris lifestyle in Mumbai... or their London lifestyle in Shanghai ... or their New York lifestyle in Lagos. That doesn't work.  We're not looking for people who choose to surround themselves with others who see the world exactly the same way they do.

We look for managers who seek out a variety of diverse people, attitudes, beliefs and experiences. We look for managers who are able to take decisions, without being afraid of making manageable mistakes. But we also look for managers who are able and open to learn, so that they do not repeat those mistakes.

True innovation, we have found, comes from this beautiful collision and commingling of cultures, ideas, beliefs and experiences.  That's why in Atlanta we have over 50 different nationalities represented at our corporate headquarters alone. And it's why we have Asians assigned to top level jobs in Latin America... and Europeans in high level positions in North America... and Africans working in Australia.

Closely related to this, we look for people who can manage ambiguity and complexity by getting out from behind their desks and into the markets.  People who want to see and experience the world themselves and not just rely on reports.

I recently met with a group of high-potential young managers at The Coca-Cola Company who we deliberately picked for special stretch assignments.  We placed them far outside their comfort zones and deep into interesting new markets. They were put into cross-functional teams and given challenging assignments like going to Laos to develop a 5-year market-entry plan.  Another team came here to Turkey to develop a sustainable juice business model.  Another team was dispatched to Kenya to create a second-tier market strategy.

In all of these examples, building new relationships was critical to their success. Relationships are the lifeblood that flows through every product we serve... every community we touch... every bottler we partner with... every retailer we serve... and every consumer we refresh.

Building cross-cultural relationships, in particular, is why we are the largest beverage company in the world... and why nearly 80 percent of our revenue and profits come from outside North America. Relationships built on strong ethics, commitment and mutual benefit are truly what make the world go around.

Today's global managers also need to understand that relationships only work when you're there for people in the tough times as well as the good. In times of crisis, nothing shines through more than empathy.  When people feel like you're there for them in the tough times as well as the good, they will climb mountains for you.

In today's fast-paced global environment -- where the sun never sets -- burn-out is another thing we all have to watch out for.  That's why we also like to find people who have lives outside the company and who understand the importance of work-life balance. Personal and professional renewal are important elements of success.

One of my passions in life -- one of my own personal forms of renewal -- is tending to my family's olive orchard on the Aegean Coast of Turkey. November is the start of the harvesting season in the olive oil business... so if I look a little distracted today, you know why.

Creating the perfect olive oil is often a matter of faith, luck, skill, diligence and of course Mother Nature. It's really about the convergence of several factors, not the least of which is plenty of sunshine.  Then there's the iodine from the ocean.  The rocky soil.  The right amount of breeze and rain. And of course, the right blend of nutrients and fertilizers. When nature and man conspire to create the ideal conditions, world-class olive oils are born.

Similarly, several complex conditions must come together and align in order for nations and economies to mature and reach their full potential. Which leads to the last point of discussion today. Turkey's future.

Despite some of the regional and global tensions of the past year, I believe the conditions are emerging for Turkey and her great retail sector to prosper.

Personal biases aside, let me just say Coca-Cola is absolutely bullish on Turkey. We've identified this great market as among our top 22 globally. Turkey is young and vibrant... with nearly a third of her residents under the age of 15.

Turkey is increasingly urban.  Two thirds of our 72 million citizens live in cities. Today, Istanbul's population officially exceeds 11 million, which is larger than many countries in Europe. And in fact, we all know that the unofficial estimates put Istanbul's actual population at 12 million to 15 million.  Twenty years ago, it was about a fourth that.   Nowhere is the rural-urban dynamic playing out more than right here.

With that shift in lifestyle comes new economic opportunities. Turkey is growing.  Between now and 2015, GDP is expected to grow at a nearly 5 percent compounded annual rate -- outpacing all of Europe, North America, Latin America and the developed markets of Asia.

Turkey is entrepreneurial.   It's long been part of our national heritage and it still is.  Today, new business start-ups and foreign direct investment are on the rise.  According to a new study by the World Bank, Turkey and Eastern Europe have now eclipsed East Asia in terms of creating a pro-business environment.

That said, we know there's still much work to be done. That's why I personally applaud the retail industry and the leaders of this great conference for the tremendous work you're doing in this nation and this region.

You've been pioneers in promoting Turkey's and the region's extraordinary attributes, and I wish you all the best of luck as you grow and expand your businesses today, tomorrow and in the years to come.

Rest assured, Coca-Cola will be at your side... always.

Thank you for your time and attention today.

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