A Closer Look At Coca Cola’s Message Through Senior Leadership Changes

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KO: The Coca-Cola Company logo
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The Coca-Cola Company

Recently, The Coca-Cola Company (NYSE:KO) announced several senior leadership changes which will be effective from May 1 – when its President and COO James Quincey becomes the Chief Executive Officer.  These senior appointments include a “Chief Growth Officer” and a “Chief Innovation Officer” indicating that the company is looking at growth driven by innovation in its products. These changes also ensure that the information technology function reports directly to the CEO indicating that digitization will be a key pillar of growth in the future. To improve its operations, the company has combined its key global transactional and expertise services into a reconstituted group named “Integrated Services” to better manage procurement and shared services. These changes indicate that going forward the company will aggressively work on diversification of its portfolio to reduce the dependence on carbonated beverages. Currently nearly 60% of Coca Cola’s revenues come from carbonated beverages (including Diet coke) and with consumer preferences shifting towards “healthier” beverages, a heavy dependence on carbonated soft drinks for revenues can impact future growth negatively.

Diversified Portfolio, Less Dependence On Carbonated Beverages

As the beverage industry undergoes a transformation with carbonated soft drinks losing their position and consumer’s preferring “healthier” beverages, it appears that Coca Cola is now looking to focus on innovation to introduce new/modified beverages which will attract consumers. It is focusing on flavored water, bottled water, and dairy beverages to diversify its portfolio. The new management structure is aimed at the company’s strategy to drive growth via newer products in line with changing consumer preferences.

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Coca Cola’s competitor PepsiCo is already working on several initiatives to take advantage of this trend and developing a portfolio of healthy beverages and snacks. PepsiCo’s dependence on carbonated soft drinks is much lower compared to Coca Cola, given its profitable snack division and a portfolio of diversified beverages.

Coca Cola is now looking to work aggressively on its transformation and its new organizational structure is aimed towards meeting this goal.  The company believes that these senior leadership changes will lead to a leaner and agile structure which is aimed at strategic initiatives including innovation and diversification of its portfolio.

We believe that in the current beverage landscape a diversified portfolio with a balance of carbonated and non-carbonated drinks is critical for Coca Cola’s long term growth. Its current organizational change indicates that the company is committed towards this transformation which should help it build a competitive edge in the long term.

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