The Coca-Cola Company Moves to Drive Stronger Growth
The Coca-Cola Company is to implement a series of actions to reinvigorate growth. These actions support the previously announced five strategic priorities to restore momentum and the Company’s long-term growth target of high single-digit comparable currency neutral EPS.
“We are taking decisive action to position The Coca-Cola Company to continue delivering long-term value for our shareowners,” says Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company. “We have taken a hard look at our progress to date and realize that while the strategies we laid out at the beginning of the year are on the right track, the scope and pace of our actions must increase. In addition to announcing an expanded productivity program, we are streamlining our operations and further aligning our incentive plans to deliver against our growth objectives. We are also evolving our 2020 Vision to reflect these changes. Within this context, we are maintaining our long-term high single-digit EPS growth target, while changing our operating income metric to profit before tax and adjusting our net revenue target to mid single-digit growth.”
The company is introducing a number of initiatives to reinvigorate growth. It is streamlining and simplifying its operating model to speed decision making and enhance local market focus. It is also expanding its current successful productivity program by targeting annualized savings of $3 billion per year by 2019. This productivity program will focus on four key areas:
* Restructuring the Company’s global supply chain, including manufacturing in North America;
* Implementing zero-based budgeting across the organization;
* Streamlining and simplifying its operating model; and
* Driving increased discipline and efficiency in direct marketing investments.
As a result of these productivity initiatives, the company expects to fund the marketing initiatives and innovation required to deliver sustainable net revenue growth. These savings will also support margin expansion and increased returns on invested capital over time.
Muhtar Kent, Chairman and Chief Executive Officer of The Coca-Cola Company.
The Coca-Cola Company is also refocusing on its core business model of building its beverage brands and leading an unmatched global system of strong local bottling partners. This will include refranchising the majority of company-owned North American bottling territories by the end of 2017 and a substantial portion of the remaining territories no later than 2020.
The company plans to improve the quantity and quality of its marketing, as well as making future investments that will target markets and categories where brands remain underfunded relative to the opportunity.
In addition to maintaining its long-term high single-digit EPS growth target, The Coca-Cola Company is adjusting its net revenue target to mid single-digit growth, and targeting profit before tax in place of operating income to account for increased equity income growth from its new partnership model. Going forward, the company will have a profit before tax target of 6% to 8%.
The company expects to be below its long-term EPS growth target in 2014 and, based on the current outlook, does not expect comparable currency neutral EPS growth in 2015 to be significantly different from 2014. Furthermore, the beverages giant expects fluctuations in foreign currency exchange rates to have an unfavorable impact on its results in 2015. Indeed, the company expects a mid single-digit headwind on profit before tax in 2015. Longer term, it intends to return to delivering against its stated growth targets.
“While we expect the macroeconomic environment to remain challenging through 2015, we are confident in our ability to return to sustainable growth over the long term,” points out Muhtar Kent. “This confidence is supported by the attractive long-term dynamics of our industry and the unparalleled reach of our brands and our global system. We are fully dedicated to strengthening our position as the world’s leading beverage company.”
