Company plans to double its system revenue, servings by 2020

Thirty-five years after joining the world's leading beverage company through a newspaper advertisement and touring the United States to sell its product, Coca-Cola Co CEO Muhtar Kent remembers what it was about the company that appealed to him in the first place.

"Coca-Cola is a dynamic company that was truly global in scale and local in its approach to business," the Turkish-American executive said.

"It is a brand known throughout the world, but at its core was a very local, community-based business," he said. "That appealed to me. And it still appeals to me."

The ability to build brands, provide value for retail customers, and manage strategic relationships with bottling partners are what give the company the confidence to know that it is on the right path toward responsible, sustainable growth that benefits the communities and people it serves, he said.

Since taking over as CEO in 2008, Kent has redefined the corporate culture, replacing nearly 70 percent of the company's senior management team. Kent said Coca-Cola looks for leaders who can cross cultures, forge strong relationships inside and outside the company's four walls, and who are insatiably curious.

"Great leaders, to me, have the ability to create a shared vision, inspire trust, are biased toward action, and hold themselves accountable," he said.

The chairman said consumers here and in every corner of the world are increasingly are more discerning, informed and empowered than ever.

They want to be associated with companies and brands that share their values and aspirations.

The strong sense of community and heritage and pride is palpable in China and for good reason, he said.

Given the importance of China and other emerging markets around the world, Kent said, the company's secret formula for its flagship brand gives consumers the refreshing, affordable, high-quality beverage that they expect from Coca-Cola.

Growing importance

Coca-Cola plans to double its system revenue and servings by 2020, Kent said. China is one of Coca-Cola's fastest-growing markets, accounting for 8 percent of its revenue and making it Coca-Cola's No 3 market after the US and Mexico.

This has given China more prominence in the company's development plans.

Since re-entering the Chinese mainland in 1979, Coca-Cola has invested more than US$5 billion in the local market, $3 billion of which was invested between 2009 and 2011.

Coca-Cola has announced that in the three years beginning in 2012, it plans to invest $4 billion in the Chinese market, including establishing new plants, and tapping into and innovating in the country's central and western regions and second- and third-tier cities.

With an investment of 1 billion yuan ($163 million), the new Yingkou plant in Liaoning province opened in 2012, and will be the largest bottling plant once it's fully operational. Coca-Cola now operates 42 plants in China.

David G Brooks, president of Coca-Cola Greater China & Korea, said this year will see the opening of another new plant in Shijiazhuang, Hebei province, part of the infrastructure investment serving as the company's solid and distinctive competitive edge in China.

On their expansion strategy in China, Brooks said, "We want to be everywhere."

Three major bottling partners - COFCO Coca-Cola Beverages, Swire Beverages and Coca-Cola Bottling Investment Group China - provide Coca-Cola with a unique resource advantage and development in the vast country, the president said.

Growing with the pace of the country's reform and opening-up policies, the company's plants have expanded from coastal cities in the east in the early days; extended to interior areas, including Wuhan and Zhengzhou, in Central China in the 1990s; and then taken opportunities to explore the central, western and rural markets, he said.

To further penetrate its distribution channels into more grassroots areas, the company has focused on enhancing "consumer experience" with about 8 million retail outlets in China by making its products affordable and accessible for their consumers.

"We plan to increase our investment in marketing, in distribution channels and in our operations centers," he said. "This is the best way to get our products to our consumers."

Diversified portfolio

A report from the China Industrial Information Issuing Center said that the beverage industry has experienced soaring growth since 2000, with an annual growth rate of more than 20.7 percent. The increasing awareness among Chinese consumers of a healthy lifestyle has contributed to the rising proportion of healthy drinks, including water and juice, among all beverage categories in 2012.

While some beverage giants have fought for healthy-drink markets, Coca-Cola's global strategy has focused on having an all-around beverage strategy that includes both sparkling and nonsparkling drinks, with innovation in new products.

In China, the company has a portfolio of 20 varieties of beverages, with more than 50 flavors in sparkling drinks, juices, tea, drinking water and others. Coca-Cola has a leading position in the sparkling-drink business, with Fanta as its fastest growing brand, and in still beverages, such as Minute Maid orange juice.

In 2012, the total transactions of Coca-Cola products recorded a 7 percent growth in China, with the sparkling-drink business up 6 percent, an indicator of an increase in repeat purchases.

This year, Brooks said, Coca-Cola will continue to focus on providing value through differentiated packaging and innovation, and on driving transaction growth ahead of unit-case growth to build closer contact with its consumers.