Coca-Cola is holding back on acquisitions, refocusing innovation and prioritising ecommerce as it looks to “emerge stronger” after coronavirus.
Speaking at the RBC Capital Markets global consumer and retail conference yesterday (27 May), Coca-Cola’s chief financial officer John Murphy loosely laid out the company’s plans for the next year, although promised there would be a “clearer update” at the end of the second quarter in July.
Eemerging stronger is something that has been a key deliverable in crises of the past and doing so maybe ahead of the economies that we’re operating in. And emerging stronger and staying true to our overall purpose are both guiding us with some of the decisions we’re making,” he said.
Murphy said that despite the impacts of Covid-19, “investing in the business is the number one priority”. The focus in on ecommerce and recovering retail stores, while the M&A “lower priority at the moment”, which he admitted was “a slight change” in tactics.
Before the crisis hit, Coca-Cola had invested heavily in acquisitions as it looked to diversify its portfolio, including buying Costa in the UK for £3.9bn, as part of CEO James Quincey’s plan to become a total beverage company.
Since Quincey became boss in 2017 he has focused on building a company fit for the future, which also includes pushing the company to work more online. Murphy acknowledged this approach has helped the company during the pandemic making the “move to a virtual workplace relatively seamless”
He added: “I don’t think you go out and run a marathon without having some form of training beforehand. And so in the same vein, entering a crisis like this, you’re better served when you’ve got a lot of good stuff happening and you’re well-positioned and well-poised.”
With most of Coca-Cola’s head office staff working from home and under lockdown across various countries, Coke has seen an opportunity for marketers to better understand consumer buying habits.
Murphy explains: “You learn a lot by practicing yourself. You learn a lot about the different ways you can order. You can order online. You can collect it somewhere. You can have it delivered. You can have it placed somewhere else for delivery later. So there’s just lots of opportunity out there with these new solutions being created.”
With lockdowns causing a rise in ecommerce, Murphy noted that it’s more important than ever that its brands “become as good in the online shelf as we are in the offline shelf”.
He explained: “There are both opportunities and challenges to address as to how we go to market with a shopper that’s now got multiple options for each step along the path to purchase.”
Even with the rise in online sales, ecommerce remains a small percentage of Coca-Cola’s business. But Murphy believes “this period will prove to be an inflection point for it to become a much larger period in a shorter period of time”.
Looking to the future, Coca-Cola plans to streamline innovation to focus on bigger, more effective product launches. With that in mind, it will be putting the innovation pipeline “under scrutiny”.
“There will be more demand from our customers for bigger, more scalable solutions than to have a plethora of small exploration projects. There’s an opportunity in that regard to rebalance the innovation pipeline to deliver against that expectation,” says Murphy.
He added that both Quincey and the leadership team were focused on not only mitigating the business challenges but also “taking a step back” to “not lose sight of those opportunities”, while being mindful that affordability is likely to become a key factor in buying decisions in the next few months.