Bartiromo In Davos: Coke CEO "Drinks In" Global Growth
Coca-Cola may be the best known and widely sold commercial brand in the world. So when the company CEO speaks--a lot of people listen. CNBC’s Maria Bartiromo conducted a rare interview with Coke CEO E. Neville Isdell at the World Economic Forum in Davos, Switzerland. Bartiromo asked Isdell a range of questions ranging from how he plans to combat rising soda prices to how he plans to further grow the company on a global level.
The non-alcoholic “ready-to-drink” industry is in a sweet spot, Isdell says, and Coca-Cola is right in the middle of it. The industry is growing worldwide at a pace of 3.5% and Coke is growing even faster. Coke’s international business has even outperformed its North American business. Isdell says this is due in part to raw material costs in the U.S. that don’t exist overseas but it’s also because the company has developed new products that have taken off internationally and just haven’t reached our shores yet.
Another factor accounting for Coke’s international success (the stock is up over 17% in the last year) is its operations in China. Isdell says the Chinese are “very open” to Coca-Cola products and it’s now Coke’s fourth largest market in the world.
But back to those raw material costs – while every company has to find ways to offset rising fuel prices, Coke is dependant on an array of commodities, especially aluminum and high fructose corn syrup. Isdell says he expects high fructose corn syrup prices to continue to rise in line with ethanol, although he is more bearish on aluminum. He sees a “copper-like” burst in the aluminum bubble sometime in the next 12 months as aluminum stocks come off their peaks due to an overabundance of speculative buying.
And Isdell says that some of the increased costs of buying commodities will have to be passed on to the consumer.
But even with price increases, Isdell makes it clear that Coca-Cola has no plans to slow down. He says there is a "mélange" (mixture) in the marketplace as consumers look for more choice. He notes growth potential in the diet sector as well as value-added waters and juices that carry vitamins and other components for the health-conscious. “Beverages are now carriers for addition benefits,” Isdell says. He points to Enviga – a new calorie-burning beverage that was just unveiled in the U.S. as an example of where the company sees growth in the coming years.
But with all the growth and change in the market, it doesn’t seem like Coca-Cola has forgotten its roots. “There’s still a place for: boy, I’m thirsty, I want the real thing. I want a Coca-Cola,” says Isdell.
By the way--Coke is going head to head with Pepsi in next month's Super Bowl for the first time in nearly a decade. Coke bought two commercial slots during the first half of the game. Previously--Coke only bought ads in the pre-game spots while Pepsi has had ads during the game itself.
FYI: The company actually produces concentrate for Coca-Cola, which is then sold to various Coca-Cola bottlers throughout the world. The bottlers, who hold territorially-exclusive contracts with the company, produce finished product in cans and bottles from the concentrate in combination with filtered water and sweeteners. The bottlers then sell, distribute and merchandise Coca-Cola in cans and bottles to retail stores and vending machines. Such bottlers include Coca-Cola Enterprises, which is the single largest Coca-Cola bottler in North America and Europe. The Coca-Cola Company also sells concentrate for fountain sales to major restaurants and food service distributors. (source: Wikipedia)