Coca-Cola: ‘Our 2021 innovation pipeline has been shaped and coordinated for scale and impact’

By Rachel Arthur

- Last updated on GMT


Related tags The coca-cola company Innovation Npd

Coca-Cola has been streamlining its portfolio: cutting down from 400 to 200 master brands. This doesn’t mean the company has abandoned NPD, says CEO James Quincey – rather, he sees the strategy as clearing the way for the ‘next generation of innovation’.

With the company releasing its FY2020 results yesterday, Quincey paints a cautious picture of optimism for the year ahead – noting that vaccination campaigns are still in the early stages and better visibility for the business will emerge in the months ahead.

But he says carefully targeted innovations – such as Topo Chico Hard Seltzer, Coca-Cola Energy and regional bets like Authentic Tea House in Asia – will be how the company does innovation in 2021.  

'We're not going to stifle innovation - quite the opposite'

Among the products cut in the US have been Odwalla​, Zico​ coconut water, TaB soda, Coca-Cola Life and Diet Coke Feisty Cherry, as well as regional offerings like Northern Neck Ginger Ale and Delaware Punch. In Coca-Cola’s international portfolio, Vegitabeta (Japan) and Kuat (Brazil) have also been discontinued.

The logic is to prioritise on stronger brands with clear potential. But does the company’s ruthless approach to ‘killing the zombies’ – essentially halving the number of master brands – create a company culture with an aversion to risk-taking?

“We don't think we're going to stifle innovation, quite the opposite,” said Quincey. “We're looking, actually, for innovation to continue where it was in 2018 and 2019 in terms of playing an important role in driving consumer engagement, interest to customers, and, therefore, revenue growth and on to profitability.

“And so, this is very much about finding a way to be able to identify the biggest bets within the innovation pipeline, understanding that there's still going to be a very important role for experimentation. There's just no way of knowing from the outset, no matter what one might think from a personal point of view, as to which ones are going to be the absolute best going forward.

“Clearly, we did less innovating in 2020. We'll be increasing meaningfully the degree of innovation in 2021, very focused on [questions like] are these attracting more consumers to our portfolios? Is it allowing them to enjoy our beverages perhaps more frequently?

“Ultimately, we're looking for more impact.

“We'll continue to learn more as we go through 2021. But none of this rationalization of the portfolio is about stopping anything, quite the contrary: it's about clearing away the least successful, so there's more room for the most successful, and for the next generation of innovation.”

What to look out for in 2021

Quincey highlights global bets like a new taste and design for Coke Zero Sugar, and regional bets such as the expansion of its Authentic Tea House franchise across Asia.

“We're still pursuing intelligent local experimentation, like adding functional benefits to some of our local hydration brands,” ​he added.

Topo Chico Hard Seltzer has already launched across markets in Latin America and Europe with the US launch set for this year. Coca-Cola Energy, meanwhile, is back on the US agenda for 2021 (the beverage launched in Europe in 2020 but its US launch was affected by the pandemic) – and Quincey says the product is one the company will double-down on in 2021 as it believes it can attract new drinkers into the energy category.

And there's also innovation in packaging, such as 100% rPET bottles in the US for smartwater and DASANI, along with a new 13.2-ounce 100% recycled PET bottle for Trademark Coca-Cola.

Setting up the company for 2021

With the hit from the pandemic, Coca-Cola’s global volumes declined 6% in 2020 while net revenues were down 11% for the year.

Coca-Cola highlights the fourth quarter continued to see improvements in trends compared to the previous quarters of the year (net revenues, for example, decreased 5% in Q4); but warns that the early weeks of 2021 have been under pressure as countries again introduced lockdowns or restrictions.

“There is no doubt the near-term trajectory of our recovery will still be impacted by the presence of the virus in most markets,” ​said Quincey. “It is still early days in the vaccination process. And we'd expect to see further improvements in our business as vaccinations become more widely available over the coming months.

“It's clear that the pace and availability of vaccines will look different around the world, and, therefore, we'll likely see some level of asynchronous recovery, depending both on vaccine distribution and other macroeconomic factors.

“Amidst this backdrop, we will ensure that the system remains flexible to adjust to near-term uncertainties, while, at the same time, continuing to push forward on initiatives we have championed to emerge stronger.”

Initiatives in 2020 involved restructuring to cut 17 business units down to nine hubs.

“Our ultimate goal is to scale our resources and capabilities to drive value and growth, including investing in new consumer analytics and digital tools," ​continued Quincey.

“Our long-term profitable growth will be powered by our optimized brand portfolio. We streamlined our portfolio, allowing global category teams to identify the greatest opportunities and allocate investments accordingly. These targeted investments will leverage our leader brands more effectively, and convert challenger and explorer brands into leaders more quickly and consistently. Additionally, our portfolio streamlining allows us to focus attention and resources on what we do best, brand building and innovation. This will make room for more consumer-centric products down the road.

“At the same time, we are optimizing our marketing spend, focusing on our strongest brands and most compelling opportunities. We have a global creative and media-agency review underway, which will improve processes, eliminate duplication and drive efficiency to fuel reinvestment in our brands.

“The global pandemic has undoubtedly expedited the shift to a digital world. And we're structuring the organization around this opportunity. We've been digitizing the enterprise for several years and have stepped up our evolution into an organization that can skillfully execute marketing, commercial, sales and distribution, both offline and online. We're also leveraging existing pockets of excellence in e-commerce around the globe.”

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