Coke CEO Vows to Rebuild Management
Thu Sep 23, 2004
By Paul Simao
ATLANTA (Reuters) - Coca-Cola Co's new Chairman
and Chief Executive, Neville Isdell, says bolstering the soft
drink group's depleted management ranks will be a key priority
as he embarks on a make-over of the slumping company.
"We've got a pretty thin bench,"
the 61-year-old Irishman said in an interview at Coca-Cola headquarters
in Atlanta this week. "I'm actually very comfortable that
we've got a very strong management team, but we don't have a
"That's the major piece I'm addressing."
Isdell, who took over the reins the world's
largest soft drink maker on June 1, offered his candid assessment
less than a week after issuing a profit warning and acknowledging
the company had fallen short in its marketing and execution.
Although he has managed to hire and promote
a number of experienced executives since filling the shoes of
Doug Daft, the Coke chief continues to grapple with the fallout
from a dizzying four-year exodus of talent.
The list of departures includes two No.2 executives,
two chief marketing officers, the heads of North American and
European operations, as well as thousands of lower-ranking workers
let go in a string of restructurings.
Isdell, who has jetted around the world recently
to take stock of Coke's fortunes, admits management and staff
shake-ups sapped morale, particularly in North America, the
company's largest and most important market.
He said employees had spent too much time
"reading tea leaves" and not enough time focused on
the company's core objective: growing its vast portfolio of
carbonated soft drinks, bottled waters, juices and other drinks.
Improving the development of internal talent
and continuing to hire skilled outsiders are likely to be the
cornerstones of Isdell's effort to restore the luster to Coke's
"He can do it quickly but not overnight,"
said John Sicher, editor of Beverage Digest. Many investors,
however, are not waiting to see if Isdell can nudge the company
into a new era of growth and prosperity.
Shares of Coca-Cola have slumped about 20
percent since Isdell's arrival. They fell to a 16-month low
of $39.95 last Thursday after the company warned that profits
would lag Wall Street expectations in the second half of 2004.
Coca-Cola dipped 9 cents to $40.33 on Thursday
on the New York Stock Exchange.
Goldman Sachs analyst Marc Cohen, who has an outperform rating
on Coca-Cola in the context of a neutral rating on the beverage
sector, said investors appeared to be taking too conservative
a view of the company's long-term prospects.
"We believe that those who are looking
for a quick turnaround have misplaced expectations," Cohen
said in a research report on Wednesday that suggested the soft
drink maker's fair stock value was about $50.
But investors are not likely to warm up to
Coca-Cola until Isdell finds a way to boost soft drink sales,
which account for the bulk of the company's business in its
more than 200 markets around the world.
While the Dasani bottled water, Minute Maid
juices and other non-carbonated products have delivered solid,
sometimes spectacular growth, the company's flagship Coca-Cola
brand and other carbonated drinks have been a disappointment.
The company currently expects its unit case
volumes, a key measure of financial health in the beverage industry,
to grow an anemic 1 percent to 2 percent in 2004.
Coca-Cola has been hurt by global economic
weakness and other factors beyond its control, but industry
observers say mediocre marketing and strategic gaffes are also
to blame for the poor showing.
They note that PepsiCo Inc. and other rivals
have gained ground on Coca-Cola in some markets.
"Coke has great products, but it is a
company that has lacked coherence and direction," said
Manny Goldman, a San Francisco-based beverage consultant who
has followed the firm for more than three decades.
Isdell, who oversaw Coke's heady expansion
into India, Eastern Europe and other foreign markets in the
1980s and 1990s, said he saw opportunities for the company to
develop and grow its brands at a healthy rate, especially overseas.
He also rejected suggestions its marketing
strategy was in need of a massive overhaul, pointing to the
recent introduction of the C2 mid-calorie cola drink as an example
of how marketing had helped spur sales of a new brand.
But Isdell would not rule out the possibility
of lowering the company's long-term annual targets of 10 percent
operating income growth and 11 percent to 12 percent earnings
per share growth.
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