Struggles abound for Coke CEO
Muhtar Kent may be losing a little bit of his swagger.
When he took the reins of Coca-Cola in 2008, Kent seemed poised to take the beverage giant to the next level. He turned the company’s dismal sales in North America around in 18 months, began laying the groundwork to buy the nation’s largest soft-drink bottler for more than $12 billion — Coke’s biggest acquisition ever — and vowed, with much pomp and circumstance, to double revenues by 2020.
But now, that Midas touch is starting to show signs of tarnish.
International case sales are slowing. Coke’s carbonated beverages in North America remain under sustained attack by health advocates and changing consumer tastes. And last quarter for the first time, North American case sales for the company’s non-fizzy sector of water, juice and tea fell 1 percent.
What’s more, Coca-Cola says it expects to announce job cuts — analysts speculate they could amount to about 2,000 workers globally — by early next year. It’s part of a broader effort to cut $3 billion in costs annually.
In a recent conference call with industry analysts, the usually ebullient Kent was more subdued as he acknowledged that the goal of doubling revenue, outlined in the company’s “2020 Vision,” is getting blurry.
“Importantly, the goal of doubling system revenues is one our system can always aspire towards. But it is not a goal to be pursued at any cost over a fixed time frame, and we are realigning our expectations based on where we are today and the outlook for our industry,” he said.
In other words, Coke is in reset. And how Kent, 61, guides the company during this period could be pivotal for his future.
“Change is hard, the coming year will be complicated, but Muhtar gets what has to be done,” said John Sicher, editor and publisher of Beverage Digest.
That means more people could lose their jobs in Atlanta — Coke’s headquarters — which has been hard hit by 975 job cuts at Turner Broadcasting.
Coke recently said it did not know how many positions could be cut or in what cities the trims will be made. The company employs 130,600 people globally and nearly 8,900 in metro Atlanta.
“There will be job impacts, including job losses, and we will be as thoughtful and compassionate as possible with our associates as we make these difficult decisions,” spokeswoman Ann Moore said in an email.
Despite the troubles, Kent’s challenges need to be put in context. Coke’s sales, earnings and profit margins are still strong and the power of its brand consistently ranks among the highest in the world. Even in this tough year so far, revenue for the first nine months was $35 billion, which produced $6.3 billion in profit.
Over the long haul, Coke believes it will be able to raise prices with the right product and packaging mix to grow profits, even in the face of stalled case volume. That’s why it’s focusing more these days on achieving revenue growth in the mid-single digits, instead of on case volume alone.
On the innovation front, Sandy Douglas, leader of Coke North America, cited Coke Life, a new mid-calorie drink made with natural sugar instead of high-fructose corn syrup. The Share-A-Coke program, which allowed consumers to have their name put on bottles, was a big hit over the summer, and the company plans to bring it back early next year.
Under Kent’s leadership, Coke released the popular Freestyle machine that dispenses more than 100 brands at restaurants, theaters and fast-food eateries.