John Brock of Coca-Cola: Staying Strong in the Competitive Beverage Industry

John Brock is chairman and CEO of Coca-Cola Enterprises in Atlanta, Georgia. Coca-Cola Enterprises, or CCE, is the world’s largest marketer, producer and distributor of Coca-Cola products. CCE is different from The Coca-Cola Company, which develops products, produces related marketing and advertising programs and sells syrup concentrate to bottlers. CCE is a bottler that buys syrup concentrate from The Coca-Cola Company and combines it with other ingredients to create some of the most popular brands and beverages, like Coca-Cola, Diet Coke, Coca-Cola Zero, Sprite and Dasani. The company then markets and distributes products to retail customers and consumers.

 

Brock has more than 25 years of experience in the beverage sales industry. In March of 2000, he was named chief operating officer of Cadbury Schweppes and chairman of Dr Pepper/ Seven Up Bottling Group’s board of directors. In 2003, Brock was named CEO of Interbrew, headquartered in Brussels, Belgium. In April 2006, Brock joined Coca-Cola Enterprises and was appointed chairman in April 2008.

Knowledge@Wharton High School caught up with Brock when he came to Wharton to attend the 2008 Net Impact North America Conference, where he and other businesses and organizations discussed effective ways of tackling social and environmental challenges. He talked with KWHS about Coke’s fleet of hybrid trucks, recycling goals and more.

 

Knowledge@Wharton High School: What’s it like to run the world’s largest soft drink distributor?

John Brock: It’s fascinating to be given the responsibility and the privilege of leading this awesome company — 73,000 people in six countries. And handling the world’s most iconic brand, Coca-Cola, along with lots of other incredibly exciting brands. It’s a fun job. It’s a passionate job. The thing I like about it the most is the fact that our people are committed, they’re intense, they want to win, they believe in Coca-Cola all the time. It’s just a beautiful thing.

It has been a terrific experience for me for two and a half years, because before that, I ran the largest beer company in the world. And before that, I was at Cadbury Schweppes in London for seven years, and in Connecticut for 13. So it’s great being back in Atlanta, where I actually went to college — I graduated from Georgia Tech many years ago and haven’t lived in Atlanta since college. Having the chance to be back in Atlanta with Coca-Cola Enterprises is a huge responsibility, but at the end of the day, it’s fun.

KWHS: How is the company responding to high schools that are getting rid of soft drink machines to offer healthier beverage options?

Brock: The Coca-Cola Company and our competitive soft drink companies all linked up with the Clinton Foundation and with The American Heart Association, and developed a very clear set of guidelines for pulling a number of our beverages out of schools.

We decided that, given the issues that are at play in our country today, it didn’t make sense to offer sugared soft drinks in any schools, starting all the way with kindergarten up through high school. Those are being voluntarily pulled out, have been over the last several years.

We still offer a selection of products, particularly in high schools, which we think is appropriate. One of the things that we think is very important for American high school students, and ultimately, consumers, is to have freedom of choice, and to make wise choices. One of the things we’ve been trying to do in high schools, for example, is offer water, enhanced water, juices, milk, diet soft drinks and diet sports drinks, because that’s a very reasonable kind of selection from which they can choose.

We feel very comfortable about the moves we’ve made to voluntarily pull beverages out of high schools. We think that’s a far better way to go than for the government to be telling us what to do. Legislation often ends up legislating the wrong thing. We feel like we’ve made the right decisions by taking it upon ourselves, as an industry, to do what’s right.

KWHS: The price of corn, one of the raw materials that is used to make high fructose corn syrup, a key ingredient in Coke, has gone up in recent years. How is Coke responding to this and other economic challenges?

Brock: Yes, we’ve had some real issues with the price of high fructose corn syrup. Similarly, with the price of aluminum for cans, which make up 60% of our products in North America, as well as petroleum, which, of course, has been volatile. Not only does that affect our fuel prices, but it goes into our plastic bottles.

We’ve had major challenges from a commodity price standpoint for the last three years. Very different than the previous 25 years, where the typical increase was 2 to 2.5% a year. The past three years it’s been anywhere from 7 to 10%. You ask about corn specifically. The key driving force behind the accelerated price of corn has been the ill-conceived U.S. government program on ethanol [an alternative fuel made from corn and other crops], which is, unfortunately, not good from an environmental standpoint, and it’s not good from an economic standpoint.

It seemed like a great idea several years ago. Everybody jumped on the bandwagon. Unfortunately now, nobody has what it takes to go undo it. It has absolutely driven the price of corn through the roof. Even though there’s been a bit of a retreat in the price over the last several months, along with other commodities, it’s still at levels way beyond where it should be. That has driven the price of high fructose corn syrup up, which has driven the price of our products and lots of other food products for American consumers, up. The simple answer to the question is we need to get the U.S. government to change the ethanol program. With that, you’ll see some better situations in terms of commodity prices, particularly on corn, in American consumer products across the board.

KWHS: Talk about the company’s fleet of hybrid delivery trucks and other ways that Coca-Cola is environmentally conscious.

Brock: We believe sustainability is critical, absolutely key. It’s center of play. It’s not niche anymore. It’s not just something you kind of do when you’re thinking about it. It’s something we take seriously, and it has to be done all the time.

We have a whole host of strategic priorities. The three that fall in the category broadly of the question you just raised are water stewardship, packaging reclaimability, reusability, recyclables, and then energy conservation and climate change. We have active programs going across all of those. You happened to mention one specifically: hybrid electric trucks. We’re very excited about that. We’ve got the largest fleet of large-scale, hybrid electric trucks, 142 of them, of any company in the world. We’ve had 10 here in Philadelphia, we’ve got 10 in New York, 10 in Atlanta.

They consume 35% less fuel and generate 35% less emissions. Although they cost about 40% more, they pay for themselves. We are buying as many as we can get, as fast as we can get them. We’re also going to be looking to upgrade to the next size. Our current fleet of hybrid trucks is a medium size. We and the developers of the trucks are close to commercializing the next size up. We envision a significant increase to our fleet of an even larger group of hybrid electric trucks.

That’s just one example of what we’re doing. There are a whole variety of other things, from energy-efficient coolers, to LED lighting [a more efficient type of lighting] that we’re putting in our warehouses, to the installation of wind turbines in Wakefield, England, to solar panels at our distribution center in California. All of those are aimed at one thing, and that’s reducing our carbon footprint [A measure of the total amount of carbon dioxide and other greenhouse-gas emissions that a product, service or lifestyle produces, all of which contribute to global warming].

KWHS: And what about recycling?

Brock: Our view is pretty simple. We want, and are very close to having, all of our packaging materials recyclable. That’s step one. It’s got to be recyclable. The next thing we have to do is figure out a way to reclaim it. We are working hand in hand through The American Beverage Association, with cities around the country, trying to come up with a variety of model programs to figure out what’s the best way to get it back.

What’s clear is that there’s not a one size fits all. What works in Hartford, Connecticut, isn’t necessarily going to work in Los Angeles or in New Orleans. So we have to work with the cities to come up with what is an economically viable, reasonable program for that particular piece of geography. As we collect the materials, the next thing is we need a place to send them for reprocessing. We’ve just built the world’s largest reprocessing facility in Spartanburg, South Carolina — $60 million. We’re buying in plastic, we’re buying in aluminum and we are recycling it through this operation.

We’re committed to getting the numbers up. I think it’s fair to say we’ve got a long way to go. We’ve got a public that wants to recycle, but doesn’t want to be inconvenienced, nor do they want to pay for it. We figure it’s our job as the industry to help figure out a way to get over those hurdles. We have a company called Coke Recycling that is an adjunct of CCE. Its specific purpose is to figure out new ways of collecting bottles and cans, as well as to work ways of buying the materials from people who have collected them, to get them to our Spartanburg facility, and then to get them recycled, and then to put them back economically into various products, whether it’s into more PET for production of bottles, or  into other uses like carpets, rugs or clothes.

KWHS: How has the company changed its marketing campaigns to appeal to the next generation of soda drinkers? For example, can you explain your Sprite branded Mobile Social Network for teenagers and other efforts like that?

Brock: Yes. I think the Coca-Cola Company understands that the world of carbonated soft drinks, which we now call the world of sparkling soft drinks, is challenging. It’s challenging because consumers have such a wide array of choices today that they didn’t have 20 years ago. Brand Coke was everything. It was an energy drink. It was a refreshing drink. It was a hydration drink. It was a fun drink. It was a sports drink. And now there’s a lot more segmentation in the market. We all recognize we’ve got to reestablish relevance and saliency in the world of sparkling soft drinks, and most notably, with the world of Coke.

One of the things we’ve done is come out with Coke Zero, which is the only truly successful innovation in the world of carbonated soft drinks in the last 15 years. Probably the only significant introduction since Diet Coke 25 years ago. It offers real Coke taste, but with zero calories. Diet Coke was never intended to taste like Coke. Coke Zero was and does. It has a new flavor system and a new sweetener system. In fact, it’s a huge success.

Beyond that, we have a program that you’re going to be seeing a lot more of called Live Positively. It’s all about, again, the brand Coke, and what is so good about it — the fact that Coke has been around forever, that it’s part and parcel of our history, our culture, our nostalgia, everything from football relationships to scholarships to what you drink when you eat. It’s a really fun thing, and it’s nothing that we need to, in any way, shape, or form, apologize for. It’s something we should be proud of.

When combined with movement, physical exercise, getting up, getting around, the Coke brand fits beautifully with this whole Live Positively campaign. We think it’s going to reenergize the thinking behind sparkling soft drinks. The final thing I’d say around sparkling drinks is just, in general, and you mentioned Sprite, one of the things that we in the Coca-Cola Company know is that the world of marketing today is totally different than what it was 20 years ago when it was 30-second television advertisements. Today it’s the Internet, it’s blogging, it’s all kinds of things that are different. And it’s using your mobile telephone. My Coke Rewards, as well as the new program that Sprite has, which is very much a mobile telephone program, are all ways of wheeling and dealing with today’s teens, principally, and recruiting them to become lovers and drinkers of our products.

KWHS:  What was your very first job in high school?

Brock: My very first job in high school was working in my uncle’s dime store — I grew up in a small town in Mississippi on the Gulf Coast, and worked some summers and Christmases and vacations. So stocking counters, talking to customers, helping them find things, that was my first job.

My first real job was right after I graduated from high school. For each of the next three summers, while I was attending Georgia Tech, I worked in the International Paper mill in Moss Point, Mississippi. One of the things that was so good about that is, after working three months in the summer in a paper mill, you’re ready to go back to college. The first summer I spent basically hauling wood and steel around in 95 degree weather in Mississippi. The next summer, I spent cleaning out high-pressure steam tanks in which coating had been mixed up — 10,000 tanks with all this white stuff. At the end of both of those summers, I was ready to go back to Georgia Tech.

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