Managing a large and well-known company with market leadership in its industry may appear deceptively easy. After all, the company will likely have popular brands that enjoy customer loyalty and a well-structured organization capable of managing operations efficiently. It may seem that the top leadership merely needs to ensure that the operational processes remain effective to meet current business goals and future goals are set that will inspire sustained excellence.
However, top managers at globally renown companies often fall short when it comes to protecting industry leadership and ensuring future growth. Even managers with decades of experience in the same industry flounder under the weight of expectations that follow their every move. And the pressure can be unbearable when the company owns one of the best known brands in the world, with more than a century of rich heritage, and is familiar to billions of customers in all but three countries across the globe. But, as the chairman and CEO of The Coca Cola Company, Muhtar Kent has so far avoided the missteps that have blotted the careers of several of his peers across the industry board.
When Muhtar Kent became CEO in 2008, Coca Cola was going through a phase of difficult relations with the company’s bottlers across the world. Under its traditional business model, Coca Cola manufactured only the beverage concentrates and managed marketing while independent bottlers ran bottling plants and distribution in major markets such as the U.S. This not only helped the company avoid large financial investments in bottling plants and maintain above average returns on invested capital, but also kept its workforce level relatively small. However, the downside was that Coca Cola lost touch with the retail distribution network, the most integral part of the feedback loop that helps gauge consumer behavior. “We had become ingrown. Most of the meetings we were holding were just with ourselves. We weren’t going out to see how the world was changing,” Kent said in a Harvard Business Review interview. In addition, financial problems at some of the biggest Coke bottlers prevented the company from competing effectively in key markets.
Within two years of becoming CEO, Kent made an audacious move to take direct control of the all important U.S. market by acquiring what was then the company’s largest bottler. Valued at $12.3 billion, it was one of the largest acquisition deals Coca Cola had ever made. In one stroke, the company’s employee strength increased by 65,000 and revenues grew by more than $20 billion. Financial analysts were skeptical and warned that by making its operations more complex, the company would be risking subdued growth and lower profitability. But the results have disproved such concerns. Coca Cola has reported strong growth in revenues and earnings, helped by renewed business momentum in the U.S.
When we first talked about achieving growth in the U.S., people thought we were trying to go to the moon in a glider. They thought it was an oxymoron: “growth in the U.S.” But we believe the U.S. is a great growth market, and we’re investing roughly $3 billion a year in it. Here’s why: It’s the only Western nation with a young demographic that is growing. By 2040 only a quarter of the U.S. population will be over the age of 60, compared with 30% in Europe and 40% in Japan. It’s a diverse, enterprising, entrepreneurial population.
— Muhtar Kent, Harvard Business Review, October 2011
Recasting the relationship with the company’s bottlers across the globe has been a key element of Kent’s strategy. To facilitate this process, Muhtar has been careful in ensuring that Coca Cola has managers with the right attitude. Under Kent, the company has replaced more than two-thirds of the senior managers to bring in new talent capable of spotting market opportunities and exploiting them. After managing the successful integration of Glaceau Vitaminwater, acquired by his predecessor, Kent has also pursued aggressive acquisitions to gain access to new market segments with high growth potential.
Muhtar Kent made his name by establishing and growing Coca Cola’s business in new markets across the world. The son of a Turkish diplomat, he spent his early years in Asia and the Middle East, a life experience that most likely fostered his ability to build familiarity with new places. His father, Ismail Necdet Kent, was a hero who saved Turkish Jews in France from German concentration camps. Muhtar joined Coca Cola soon after completing his MBA from Cass Business School, London, and within seven years, at the age of 32, he was asked to head the company’s operations in Turkey. In another four years, Kent was made a vice president responsible for 23 markets across eastern and central Europe. In 1995, he was chosen to lead Coca Cola’s bottling operations in 12 major European countries.
Kent left Coca Cola in 1999 and returned to Turkey to become the CEO of a large beverages group that also happened to be a Coke bottler. Over the next six years, he led new product launches and expansion into new markets, including setting up Iraq’s first Coke bottling plant. By then, Coca Cola had coaxed former CEO Neville Isdell to lead the company again out of slow revenue growth and weak margins. When requested by Isdell to rejoin the company, it was reported that Kent specifically asked to be given the responsibility for China and other fast growing Asian markets. Isdell readily obliged, appointing Kent president of the company’s North Asia, Eurasia, and Middle East group. By the end of 2006, Kent became the president and chief operating officer of Coca Cola’s global business.
Having revived Coca Cola’s revenue and earnings growth, Muhtar Kent now is setting even more ambitious targets for the future. His 2020 Vision plan is aimed at doubling revenues by the year 2020. That won’t be an easy task for a company that sold 26.7 billion cases of beverages worldwide and earned more than $46 billion in revenue during the year 2011. While keeping the company’s operations agile and efficient in the developed markets, Kent is committing $30 billion in additional investments to drive growth in markets such as China and India that hold significant potential. To achieve this revenue goal, Coca Cola is also expanding its social media marketing efforts in a big way. The company already has more than 40 million facebook fans, the most for any brand.
Muhtar Kent, who is 60 now, may not remain in office long enough to see the results of his bold targets for the end of this decade. Yet, if he can build upon the ground work he has laid that will keep Coca Cola one step ahead of competition in the future, he would be among the select few leaders of large corporations who leave office adding shine to their reputation rather than diminishing it.
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© Thomas White International, Ltd. 2015