Coca-Cola CEO Muhtar Kent has played down the impact on his firm of higher prices for high fructose corn syrup (HFCS), after corn prices rocketed since mid-June to hit record highs following a severe US drought.
Interviewing Kent for Fox Business Network (FBN) yesterday – the network sent a pre-taped transcript to BeverageDaily.com – correspondent Liz Claman asked Kent how much the drought would hit Coke’s bottom line over the next couple of quarters.
HFCS offers manufacturers such as Coke better stability than sucrose in acidic soft drinks and lower prices. Supplies are generally more stable than sucrose (which is also subject to high import tariffs that boost local prices), while corn is widely grown across the US.
Mexican Coke dispute
Coca-Cola uses HFCS to sweeten Coke in the US but sucrose in Mexico, which has led to the Mexican Coke gaining cult status among some US consumers, with blind taste tests even conducted to try to ascertain which drink tastes better.
Kent told FBN's Claman that, compared with commodity headwinds over the past two years, Coca-Cola’s situation was better, despite the US new-crop December corn price hitting $8.19/bushel (25.4kg) today.
“Corn is certainly not the only commodity that impacts us. Sugar is much, much bigger. Much more important. But also many other commodities, like aluminium and others,” Kent said.
“Before, there’s been an environment where all the commodities that we use were going up. Now it’s more of a balance. So we are concerned, but we know we can manage through it.
Arrogance keeps Coke CEO awake…
Coke’s CEO told Claman the only thing that kept him awake at night was “arrogance”, and said he worked hard to encourage Coke’s 770,000 system members to remain “constructively discontent”.
Yesterday, Kent introduced Coke’s new operating structure from 2013 that he said would streamline reporting lines, intensify its focus on key markets and create a structure that ‘leverages synergies’.
Coca-Cola International, Coca-Cola Americas and Bottling Investments Group (BIG) will be led, respectively, by presidents Ahmet Bozer (52) Steve Cahillane (47) and Irial Finan (55).
Kent said Coke had adapted its business model over the last couple of years to address the demands of shifting world markets.
‘Fixing challenging markets’
“First, we addressed the issues facing our system in our flagship market through the acquisition of CCE North America,” Kent said.
“Second, we further built the relevance of BIG, evolving it from its initial role of fixing challenging markets to a more significant role in spearheading our progress in select strategic markets such as India and China.”
Coca-Cola International comprises the firm’s Europe, Pacific, Eurasia & Africa operations; Coca-Cola Americas consists of North America and Latin America; BIG oversees company-owned bottling operations beyond North America.