Coke Is It – in Japan, in Asia and Around the World

September 23, 2003

Speaker
Mary E. Minnick, Executive Vice President, The Coca-Cola Company, President & Chief Operating Officer, Coca-Cola Asia

Presider
John Wheeler, Acting President, Japan Society

Mary Minnick, Executive Vice President, The Coca Cola Company, President & Chief Operating Officer, Coca-Cola Asia, described how the global soft drink company successfully competes in Japan's beverage industry as a local brand.

Coca Cola followed the U.S. military into Japan in 1945, and in 1956 it began marketing to the civilian population. Japan business has been a significant catalyst for change and innovation within the organization, as Japan has some of the most discerning consumers in the world, according to Ms. Minnick. "If you can delight the Japanese consumer, you can delight consumers anywhere," she observed.

Today, Coca-Cola offers the Japan market 800 different brand and package combinations, selling 25 different brands and 60 different flavor combinations, as well as significant volume in coffees, teas, and functional and wellness drinks. It produces 27 new products each year. And, says Ms. Minnick, the innovativeness of Coke in Japan is not limited to products but extends to packaging, manufacturing, financing and distribution.

"Listen to your consumers. Make the hard choices. Throw out what is unproductive. Don't be afraid to try new management styles," she counseled. In September, Japan's system of bottlers, consisting of 14 partners of different geographic regions and its manufacturers, formed Coca Cola National Beverage Company. Jointly and cooperatively they now provide procurement, production and logistics for the entire market.

"There is no such thing as a global consumer," declared Ms. Minnick. She explained that the marketing and distribution of Coke are Japan-specific. In this unique market, vending machines are a key channel. They are designed to dispense hot and cold beverages and accept purchases through cell phones. Coca-Cola is also partnering with supermarkets to grow share of value, according to Ms. Minnick: "Supermarkets, under the impact of inflation, need attention."

Ms. Minnick is proud of Coca-Cola's corporate image in Japan. In the most recent Nikkei corporate image survey, her firm was named fifth after Sony, Toyota and Honda. "Our idea is to be part of the language, history and people, by serving one bottle at a time, a moment of refreshment," she said.

Did your growth rise, decline or stay flat in the downturn? Who's your big competition?

Ms. Minnick said that in the past 10 years, Coca-Cola's compound average growth rate ranged between 4 to 6 percent, with some significant fluctuations because weather is a factor for vending machines. The competition is varied, broad and fairly significant, she declared.

How would you describe your corporate governance policy in Asia?

"We operate by one standard, established by our Atlanta headquarters; one code of conduct, one supplier guideline; and we don't operate any differently in Asia than anywhere else in the world," Ms. Minnick asserted.

How is your approach on environmental initiative coordinated in Japan with your global approach?

On the theme of giving back to the communities, decisions are made locally and vary widely according to the need, said Ms. Minnick. Environmental initiatives focus on rainwater in India, while in Japan the emphasis is on recycling, eliminating hydro-fluorocarbons in vending machines and raising environmental consciousness among local schoolchildren.

What information exchange do you do with retailers to help you optimize inventory challenges?

Ms. Minnick said the best model is Coca-Cola's relationship with Japan's 7-11 stores, where the two firms share and analyze real-time information, creating a feedback loop to inventory. A stimulus for further optimization will be the arrival of global companies like Wal-Mart (which has the best information exchange, she said).

With so many vending machines already, where will you put the new ones?

Gas stations and indoor complexes are candidates, said Ms. Minnick. Vending machines can also be made more efficient: they can be moved around; information technology can be installed to promote different offerings by time of day or to customize offerings by demographic specification.

What type of category and shelf-management assistance do you provide?

Coca-Cola is doing significant category and shelf-management work in Australia, Europe and parts of the U.S., and it is being brought into the Coca Cola learning center, she noted.

Why hasn't Coke entered the soft alcohol market catering to the taste for rum-and-coke?

"We have not fully exploited the non-alcoholic market."

How far are you going with the supply-chain transformation in Japan?

"The plan is to consolidate, but it will not happen overnight," Ms. Minnick noted. Management will start with centralized production schedule. "The economies of scale from swinging from one production site to another, eliminating overhead and aligning the wage scales are exponential." The main idea behind consolidation rather than merger and acquisition is to preserve local expertise and relationships, she said.

Are there lessons in your wellness products for the U.S.?

"There are lessons that can be learned, but I am compelled to point out the characteristics that are unique to Japan," commented Ms. Minnick. She described Japanese as "experimenters who embrace innovation, more so than in other markets."

Why don't you have smaller drink sizes in Japan?

Good point, said Ms. Minnick. "We have gone for standardization, but matching consumer packaging is important. You will see much more packaging innovation--in size and materials--in the future."

Given the costs, is so much product innovation really worth doing? Why not just focus on the core products?

"You have to be very judicious," replied Ms. Minnick. She also said, "It isn't necessarily easier to build profitability and brand equity with a few products that work." In any event, innovation is part of her firm's culture and mindset.

--Ann Rutledge