BD talks to Coke chairman/CEO Neville Isdell, who outlines company's strengths and weaknesses. Says he's "going to do what's right for the long term" and declares: "People who are looking (for) silver bullets to emerge in the short term will probably be disappointed." Isdell also notes he's "getting an awful lot good advice about how to run the company" in analyst and press reports. CEO cites need to rebuild bench strength and says both training/development and outside hiring are key. Says Coke is "working on" new economic alignment with CCE "right now."
Interview. BD asks Isdell: Strengths and weaknesses at Coke: your view? Isdell: "On the strengths, we have the world's greatest brand. The specialness of Coca-Cola permeates the company and is part of the very positive elements of the culture. We do have a strong management team. The problem we have is lack of bench strength, and in the classic definition of the bench, it's the reserves. That's one of the areas for improvement ... We have tremendous global reach and strength, and a manufacturing and distribution system which is the envy of everyone. We have a strong balance sheet. And, with the cash flows that we have, we're very well positioned to do what we need to do. Now, as you look on the weakness side ... we have lost the growth engine. We have to turn that back on. We have been affected by the layoffs that have taken place in two different batches; mainly, though not only, here in Atlanta. That really has broken the trust that existed within the organization around what one might call 'lifetime employment' -- I'd call it 'lifetime career.' That has had immense impact on people and the level of trust in the company. I think where we are right now, as we try to rebuild that, is we're in an era where people now have hope. I don't think I've translated that yet into belief ... That is a longer term job. It's what I call cultural re-generation. We have very strong values. I also believe that providing clear direction and clear accountability -- we're working to sharpen that up right now -- allows us to do those millions of things that we need to do very well every day in a cohesive matter. Pulling that together is very important ... It's about the guts of how you run an effective, efficient and fast-moving organization."
How will you rebuild bench strength? "One of the primary ways is by building up our training and development ... The feedback we've had from our employees and our own observations tell us we haven't been doing enough to develop our own talent and our people. That's job one. Number two, we'll do what we've always done, which is selectively look at skills that we need from outside and bring in people. There's a myth out there that we're not effective at bringing in people from outside and making them successful. In some high profile instances, that may well be true. (But) a large number of our management team have been recruited over the last seven to eight years ... They're now Coke people which is wonderful, but they came in from outside. Over the last 10 to 15 years, we have brought new talent into the system to build up that base. We'll do that as well as the training piece."
Need for new concentrate model with CCE? Is exploration of that going on? "Talking about concentrate models in general is, in a way, too narrow a focus. One of the first new models that was put in was about five years ago with CCB (European bottler formed in 1990s, run by Isdell and later merged with Coke Hellenic) when I was the bottler. I've been on both sides of this equation. It was not just about a concentrate model. It was about a whole operating framework as to how we went to market together. Concentrate pricing was a part of that. But it was not the only driver. The way that I would phrase it is that we clearly need to have a strong economic alignment with CCE. That covers a much wider discussion and a much wider debate. We are working on that economic alignment with them right now. But to just say we need to change the concentrate model is too narrow a view."
With SGI and SMF eliminated, does Coke need funding leverage mechanism with North American bottlers to motivate them to grow volume? "Let me challenge the premise of the question. I think volume is good for both Coca-Cola Co and the bottlers, particularly -- and I'm speaking globally -- when we're sitting with a majority of our bottlers today exceeding the weighted average cost of capital. It is a high fixed-cost business. And volume -- once you have the right base -- is what's it's all about to drive the bottom line. Those last cases that you're selling -- once you've covered your overhead -- are the golden cases. That's what drives the profitability of the business. There's a fundamental alignment that takes place about volume between (Coke and the bottlers). Pricing also benefits us, as we look at concentrate pricing. It's not to say we don't benefit from pricing that's put into the marketplace. That's why we're working in a broader context at getting this revenue management initiative working better than it has. We all recognize there's some science behind it, but it's an art as well, and we haven't mastered the art yet. I don't think we need leverage -- or incremental leverage. I think we need to get down to analyzing what the core facts and issues are, and then externalize our efforts. When we spend too much time on internal debate -- and I've been involved in that in the past myself -- we're not serving our customers and our consumers the right way. So, we're having discussions with all our bottlers right now around a much broader debate about how we effectively externalize our efforts and spend less time on how we carve up the pie between us. However, let me repeat, economic alignment between Coca-Cola Co and the bottlers is clearly very, very important."
View re senior management team? Any changes in next three to six months? "(Re) operating management, my view is that I have a strong team out there, and how you put a team on the field is something you always look at ... It's all about leadership of that team. That's where I'm focused, on providing that leadership. Issues we have -- as in Germany -- are not something you'd relate to a management issue. They are structural issues that need to be resolved ... In North America, we're looking at the broader issue of the whole competitive set -- where we are competitively against private label and Pepsi. That comes back to the overall strategy of how we go to market. My focus is more on what we do than on changes in the management team per se. Changing assignments is always something one looks at, and I'll keep evaluating that."
Other thoughts? "It's clear as you read the press and the analyst reports that I'm getting an awful lot of good advice about how to run the company, and I read it all. But I do want to say that this is a medium to long-term plan that I'm evolving. There are no silver bullets. I am focused on the long term. People who are looking for those silver bullets to emerge in the short term will probably be disappointed. I'm willing to take the arrows that are fired at me as a result of that, because I'm going to do what's right for the long term. That's what I came back to do, and that's the focus that I have. It does not mean that I won't be doing things in the short term. Clearly I need to and will. But those will all be undertaken in a way which does not damage our long-term growth prospects."
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