Coca-Cola has used 2020 as a catalyst to “spring clean” its business as it looks to emerge from the pandemic in a stronger position for growth.
Speaking at Morgan Stanley’s global consumer and retail conference, Coca-Cola’s chief financial officer, John Murphy, said that “this year has been a year to do a spring cleaning”. He described how Covid-19 and its subsequent decision to cut back on spending worked as a “catalyst” for change.
2020 saw Coca-Cola restructure the company and make the decision to cut ‘zombie brands’ in order to put more investment and effort behind fewer, big bets.
Murphy explained: “We all have our garages and they all get full of junk over time and all of a sudden you can’t move. Well, that’s what happens in the innovation pipeline, it sort of almost creeps up on you.”
Despite culling some brands, Murphy noted that “by the same token then [we must] create a space that allows us to explore and experiment more successfully”.
He explained: “Exploration for the sake of being able to say, ‘this is not a great game to be in’ [is important]. And when you look at the rate of success in the industry, there’s I think less than 3% or 4% of innovations actually last more than three years.
“The success rate is not very high and so being smarter and having a higher bar as to what goes into the market makes sense.”
Coca-Cola’s leadership team has taken a step back this year to “challenge itself” to answer questions including, ‘How can we be more agile and be more nimble in the marketplace?’
Murphy said: “You’ve got to continue to be willing to explore and experiment while you drive and focus on the bigger players that can help fuel the overall growth equation in the near-term.”
Coca-Cola is still taking a fast-paced approach to innovation but is trying to strike a more nuanced balance when it comes to managing marketing. This means leveraging scale while staging “intimate and local” marketing where needed.
Murphy explained: “Some of our historic models have been a little bit one or the other; it’s been difficult to get both to work in unison together.”
He added: “When we think about the world of innovation, the notion of being able to drive a few big scalable initiatives and derive the value that is typically associated with scale, but by the same token say very local and intimate with an experimentation mindset.”
The decision to cut brands should also allow for more scope for marketing rather than less. He explained: “We’ve got to continue to raise the bar on how we do marketing. How do we build brands? How do we engage in a relevant and effective manner with consumers all around the world? And how do we optimise the investments that we put into that?”