The Global Ambition of Coke’s Muhtar Kent

His aim: To serve '800 million new urbanized consumers'

   

Dow Leaderboard e1328568431279 The Global Ambition of Coke's Muhtar KentCoca-Cola (NYSE:KO) Chairman and CEO Muhtar Kent is in the enviable position of running the world’s most valuable brand. At nearly $72 billion, Coke’s global brand landed at No. 1 last year in Interbrand’s ranking — that’s nearly $2 billion more than second-place IBM (NYSE:IBM) and nearly $13 billion more than third-place Microsoft (NASDAQ:MSFT).

But Kent knows well that getting to the top isn’t enough. Once you’ve arrived, you’ve got to keep working tirelessly — and creatively — to stay there.

That’s the perennial challenge for the most iconic of American brands, a company whose legacy of innovation stretches back 126 years. And if the beverage empire launched by pharmacist Dr. John Stith Pemberton is to remain the top brand in the 21st century, it will have to do so on a global stage.

That suits Kent just fine. He’s spent the lion’s share of his 34 years in the beverage business managing and mastering markets outside the U.S. In Kent’s strategic roadmap — “Vision 2020” — he hopes to double the company’s global revenue in the next eight years. “It’s not for the fainthearted,” he told the Atlanta Journal Constitution last year, “but it’s achievable.”

Coke in His Blood

Kent, a Muslim, is the son of Necdet Kent, a Turkish diplomat who risked his life to save the lives of scores of Turkish Jews living in France during World War II. The son earned his undergraduate degree in economics at London’s Hull University and his MBA at Cass Business School in London.

But his career track and trajectory changed one day in 1978 when he answered a newspaper ad for Coca-Cola. He advanced through the ranks quickly, rising to senior vice president of Coca-Cola International and managing director of Coca-Cola Amatil-Europe, before leaving Coke to take the helm of Turkey-based Efes Beverage Group in 1999.

But KO was in Kent’s blood. He came back to Coca-Cola in 2005 to become president and chief operating officer of  Coca-Cola’s North Asia, Eurasia and Middle East Group. He was promoted to president and COO of Coca-Cola in 2006, a title he held until succeeding E. Neville Isdell as chairman and CEO two years later.

Industry insiders at the time cheered the move, with Beverage Digest Publisher John Sicher noting that Kent “understands the company and the system literally as well as anybody in the world — and better than most.”

Beating Pepsi

So far, so good: Coke’s stock is up 58% since Kent took over in July 2008. Even in the mature U.S. market, Kent managed to acquire the company’s largest bottler and launch smaller but higher-margin beverage options. The result? Coke is beating rival PepsiCo (NYSE:PEP) at its own game, while improving its margins.

If you caught KO’s earnings announcement on Tuesday, it’s clear that Coca-Cola has a great start this year. Its first-quarter earnings of 89 cents a share on sales of over $11 billion beat analysts’ estimates by 2 cents a share. Global volume also rose 5% in the quarter — and Coke sold more cases even in Europe over the same quarter last year.

Although high commodity costs are having an impact, emerging market growth is strong. In the first quarter, volume grew 9% in Russia, the Middle East, Africa and India — compared with 2% growth in North America. Coke is also winning big with noncarbonated beverages like its Powerade energy drinks and Dasani bottled water.

Kent sees the most compelling growth opportunity in the emergence of vast numbers of middle-class consumers in these emerging economies. “We’ll have about 800 million new urbanized consumers in the decade,” he said in Tuesday’s conference call with analysts and journalists. “Now the quarter we just left behind, about 22 million new urbanized consumers and about 22 million to 25 million new middle class have been created in the world, and we were there to serve their needs and refresh them.”

Finally, a Solid Succession Plan

Kent may have glided into the CEO spot, but Coke’s leadership transitions haven’t always gone well. Roberto Goizueta’s death from lung cancer in the fall of 1997 left a void in the company’s leadership team that proved difficult to fill.

The Cuba-born Goizueta had been one of the strongest CEOs in company history. While consumers might remember the “New Coke” which launched — and flopped — on his watch, shareholders likely remember the 1,700% increase in KO’s stock price during Goizueta’s tenure.

Successor Doug Ivester lasted a little more than two years before Coke’s two most powerful shareholders, Warren Buffett and Herbert Allen, gave him a private, but firm, push into his next career. Doug Daft, a native of Australia who had headed Coke’s Asia business, was next up.

But Daft’s reign was marred by fraud charges, a rigged market test of Frozen Coke at Burger King (NYSE:BKC) restaurants and other woes. When Daft retired in May 2004 — seven months earlier than expected — it was assumed the job would go to President and COO Steve Heyer. But Coke chose to call Isdell out of retirement instead, and Heyer departed the company.

KO’s fourth CEO in seven years, Isdell turned out to be just what Dr. Pemberton ordered. The new boss mopped up the many big spills left by Ivester and Daft, repaired relationships with bottlers and began to turn around sales. And share prices — KO stock rose 19% during his tenure. He launched the “Red, Black and Silver” strategy — refocusing the company on Coke, Coke Zero and Diet Coke.

But Isdell’s greatest legacy might well turn out to be the “proper succession” plan that brought Kent to the top job. The men had known each other for two decades and had similar views about what Coke needed to do to recapture its success.

When he was asked earlier this year how he can boost KO’s performance during the next decade, Kent’s words were reminiscent of Isdell’s sentiments. “More innovation. More system investment. More coolers,” he said. “And by remaining constructively discontent, knowing that we can always do better. Ensuring — starting with me — that there is never any room to be arrogant or to rest on your recent successes.”

Given Coke’s global ambitions and a marketplace that can quickly turn strategies upside-down, those are words Kent will need to remember.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.


Article printed from InvestorPlace Media, http://investorplace.com/2012/04/coke-muhtar-kent-global-brand-ko/.

©2014 InvestorPlace Media, LLC

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