- Coca-Cola's new operating plan — accelerated and inspired by the company's experiences during the coronavirus pandemic — will cut the number of brands the company produces in half while still developing new products, CEO James Quincey said on a Thursday earnings call.
- The company announced a new operating model in late August that will consolidate 17 operating units into nine to eliminate duplicated efforts. The company announced new operational leaders for these units a few days later. Since then, Coca-Cola announced wind-downs of Tab soda and Zico coconut water.
- "We're letting go of ... slightly more than half of the brand, so we can focus on those with the greatest potential," Quincey said on the call. Decisions about what will stay and what will go are largely made, he said. Changes at the bottling plant level will roll out over the next year.
Coca-Cola has long touted its localized production model as a strength. For the first few months of the pandemic, local bottling operations kept product flowing around the world despite border closures, Quincey said in April.
In the next iteration of the company's operations, the local bottlers are staying, but the management of their performance may be less local and the products they produce may change. A dedicated team has pursued the "ruthless" SKU and brand rationalization process, Quincey described during the summer. It has reduced a vast portfolio of more than 400 brands to roughly 200.
Quincey said the first high-level meeting regarding a more efficient operating strategy took place in February before the team knew the eventual reach and extent of the coronavirus pandemic. The company quickly reduced the number of SKUs it produced to simplify execution amid shifting supply chain disruptions. The logical cuts became fairly obvious from there, the CEO said.
"The ability of the organization to act with speed was very encouraging," Quincey said. "That led us to conclude that we should accelerate even in the course of the pandemic ..."
With the decision-making nearly complete, Coca-Cola's new regional operational leaders will have the task of implementing the new supply chain plan and converting existing manufacturers to different products.
"For the brands who are not selected, we have begun the work with our bottlers to quickly sunset or thoughtfully transition them to one of the growth brands over the next year," Quincey said.
The change in mindset will also apply to how the company creates new SKUs. The company's development strategy aims for a "fail fast" approach to avoid SKUs languishing on the shelf with low sales, executives said on the call.
"We're focusing on bigger, more scalable bets," Quincey said. "And to be clear, this strategy does not mean less innovation overall. Already this mindset is showing results. Year-to-date, revenue contribution from innovation is higher than last year and the amount of revenue per innovation has doubled."