You can learn a lot at lunch with Coke and CCE execs

I was invited to lunch Thursday with Coke CEO Muhtar Kent and Coca-Cola Enterprises chief John Brock so they could sell me on the benefits of one of the most dramatic moves in the beverage giants’ history.

Coke had just announced that it is taking over the North American operations of the largest soft drink bottler in the world, while CCE will become a bigger player in Europe.

It’s funny how life works sometimes. Ten years earlier, when I was covering these two companies for this paper, I was at lunch with top CCE execs. I asked if it made strategic sense for Coke to absorb CCE.

I was told, yes. But the timing was wrong. Possibly in five or 10 years.

Why was that?

Because, an exec said, Coke at the time did not have the leadership in place to pull off such a bold move, given all the problems it was having.

For those who might not remember, Coke was a mess in 2000. Just to name a few issues — an unprecedented 5,200 job cuts, an abrupt CEO change, a class-action discrimination lawsuit, regulatory problems with acquisitions, and to top it off, Pepsi was eating its lunch in the fast-growing segment of non-carbonated drinks in North America.

At the same time, many Wall Street analysts and reporters, including myself, questioned whether it made sense for CCE to be a major player on both sides of the Atlantic. The bottlers, which produce, distribute and merchandise the beverages, are the blockers and tacklers of the beverage industry. Execution is critical, and CCE’s needed some work.

So why not focus on one continent or the other?

Over the years, even after leaving the beverage beat at the end of 2001, I kept asking Coke and CCE execs about whether they would split up CCE. I also asked if Coke might take over the bottler. I repeatedly was told that neither was in the cards.

Fast forward to today. There are new cards on the table. Why now?

North America is a major problem area for carbonated soft drinks, whether Coke’s or Pepsi’s, due partly to growing health concerns.

Nearly a year ago, Pepsi announced that it was taking its two biggest bottlers back into the fold to save money, reduce duplication and be quicker to respond to retailers and consumers in this very tough market.

Publicly, after Pepsi’s announcement, Coke was steadfast in defending its system. And, while it sure looks like it on the surface, both Kent and Brock denied Thursday that they’re following Pepsi’s lead to gain similar benefits.

Kent and Brock said they have been talking about these strategic issues long before Pepsi’s announcement last year. (They must have heard about my lunch 10 years ago.)

“The sun, moon and the stars all lined up,” Brock said at the lunch Thursday.

In business terms, that means the two companies were in a much better position to do what has been logical for some time. The leadership of both companies is strong now and they’re both coming off relatively good years.

“At the end of the day, it’s all about leadership,” Kent said. “There’s a time for everything.”

Better late than never.

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6 comments Add your comment

RC

February 25th, 2010
4:17 pm

Coke Head

February 25th, 2010
5:13 pm

second! Horn train’s coming! choo choo….

Ima Nidiot

February 25th, 2010
5:57 pm

As former CCE person (20+ years), I don’t know what to make of all this. While, on paper, this kinda-sorta makes sense, making this all work is going to be a monumental task. Consider that Coca-Cola has over 94,000 employees and CCE has around 70,000. Both companies have large IT infrastuctures, data centers, as well as separate IT systems, as well as a combined force of something like 10,000 IT people. Only the US postal service has a larger truck fleet than CCE. I guess only time will tell…….

TnGelding

February 25th, 2010
9:54 pm

Growing up I would have never known CCE was separate. Cool, clear water. Right out of the faucet. We’ve finally wisened up. Asia will have to grow Coke and Pepsi.

AIG May Need Another Bailout? (AIG)

February 26th, 2010
12:25 pm

[...] You can learn a lot at lunch with Coke and CCE execs – An interview with Coca-Cola (KO: Charts, News, Offers) execs after the announcement of the takeover of its largest bottler. [...]

Edw3rd

February 27th, 2010
10:11 am

Sorry, not exactly sure what you “learned”…