James Quincey Chair and CEO of Coca-Cola

Hi everyone and welcome to our podcast In Good company. I'm Nicola Tangen, the CEO of the Norwegian Sovereign Wealth Fund, and your host today. In this podcast, I talk to the leaders of some of the largest companies we're invested in so that you can learn what we own and also meet these impressive leaders. Today, I'm speaking to James Quincy, the chair and CEO of a company that has satisfied our thirst for over a century, namely the Coca-cola company. Coca-cola was initially introduced as a medicine in the late 1800s.

He's a believer.

He's a believer now. We, of course, we all know about coke. If you were to distill down the secret sauce, what do you reckon has been the secret sauce to coke?

I think one of the pieces, one of the elements of the secret sauce, particularly a brand coca-cola, has been this. In two dimensions, one has been an enduring ability to be both a touchstone to something, you know, that has been there for a long time. I mean, the formula of the same, the Spencerian script of the font, like, there's all these touchstone elements of comfort of the past. Yet each generation of managers have made its marketing and the way it's brought to the marketplace relevant for that moment in time. So it is both representative of continuity into the path of comfort, yet also relevant and exciting about the future. Which is a very hard balancing act to do.

I believe that 94 of the people in the world actually recognize the Coke logo, which is probably one of the highest brand recognitions in the world. Right? How do you develop that type of iconic brand?

Firstly, a massive, massive, massive amount of consistency. We have never, ever, ever changed the logo, not that the number of design agencies haven't tried to entice us to do so. Not that it was standardized in 1886, it took us until about 1923 before we standardized the logo.

One of the brands which has really done the worst on Blind Test is Red Bull. I mean, people just absolutely hated it. Yet they made the boxes smaller, they increased the price, and hey, it's selling incredibly well. So is it all about brand and association?

It's about everything you experience a beverage product with five senses, it's not just about the taste, the package it comes in. Will. You can get people to debate heatedly whether a beverage, a coke, is best drank from a can or a glass bottle?

Now you often have athletes in your ads, why is that?

People want to connect with people they know sometimes. We generally spend most of our connectivity on the overall sport or music in general, rather than personalities. Personalities can come and go. But the World Cup is always the World Cup. We've been doing the Olympics for almost 100 years, very long-term sponsors of FIFA, World Cup, etc. etc.

You also use Santa Claus as a spokesperson.

Yes.

Changing tack a bit and talking about your distribution. You know, I've been to places where there isn't even clean water, but guess what you find in the fridge a coke. So tell us about your distribution network.

Absolutely, the product reaches almost every corner of the world, and I think there are two aspects which are very interesting one by chance, not necessarily by design. It is a product that survives a decent amount of time in tip-top condition. You don't get degradation of the product over time, so it stays in, you know, good drinking order for a very long time.

Now you have one competitor called Pepsi, and you may have heard of them. They have a very big market share in Norway, so I think it's one of the countries where it has the biggest market share. How come Pepsi in some countries have a high share and in other countries they haven't?

A lot of historic reasons, is the short answer. There were some countries where they got to before us, and they have had, you know, some historic share positions.

Now, looking at the consumption trends, what are the trends?

So, two ways of looking at consumption trends, one is to say they're incredibly stable. One of the arguments I make with the investment community is to look at the beverage industry and think about, firstly, how stable it is. If you do a histogram of the growth rate of the beverage industry, the median growth rate is, let's say, four percent, maybe not in the last couple of years, but let's say historically last 30 years, 4 percent.

Is that why Warren Buffett, Who is your biggest shareholder? I think he said that a ham sandwich could run coca-cola.

I, I, I. I'm not sure I would count myself as the bread or the ham, or maybe cheese in the ham sandwich.

Moving on to AI, which is really, of course, the hot talk now, and we discussed it when we met in in America. And you mentioned yourself, it's been driving some of your advertising. now. tell us how do you use it?

So the first way, I mean, apart from some of the kind of already existing models, that kind of optimize for certain things within the supply chain and other ways it's used. I think this next generation of AI examples, the first thing we did, we got, we married. The text AI with the visual AI, and allow people to make essentially outdoor ads about Coca-cola through the AI machine. So they were able to go in, pick coke images and then tell through the chat AI. You know, what did you want him to do? Like? I think the winner was There's a coke with a cat in space like.

How much do you think you could drive productivity?

I don't know how high is up. What I do know, though, is I would rather be on the front end of this than on the.

Back end, Are you worried about it?

Yes, I think there are a lot of general kind of technology related potential disasters, potential problems, whether it be bad actors or, you know, more, dystopian kind of outcomes. So clearly, there are ways this can go wrong in a general sense, and there are ways it can go wrong in a specific sense related to us. You know, some of these models don't necessarily optimize for truth, they optimize for engagement, and they optimize for credibility.

Well, we're coming out with an expectation document this summer on this, so stay tuned. Now moving on to governance. So we recently voted at your AGM and we looked at the filing that you sent us beforehand and.

Does it need to be that complicated? Maybe not, but there's a lot of appetite from investors to understand the compensation, and I think rightly so. To have disclosures arguably got too long for the average investor, probably.

Now, as you know, we as a shareholder advocate that the role of CEO and chair should be should be split, and you have both the roles which we vote against.

I'm overseen, of course, by the board and the leading independent director and the investors. There are no shortage of investors looking over my shoulder as well. And so we feel that for the coca-cola company, combining the two roles is the right answer. Because we have a robust lead, independent director, and we have a robust board environment. In a business that is very large and very complicated, and therefore we find that this moment in time, this is what best suits the company. It is ultimately a very large enterprise.

But you are, you are yourself a board member in Pfizer, correct? How much? how much influence do you feel there that you have over the CEO, and?

The chair. I feel that the board can absolutely execute its role if it so chose to do so.

OK, anything you learned from Pfizer that you are applying to Coke?

Yeah, I, obviously. I joined them at a rather interesting time at the beginning of 2020, and I had thought that we had got better at innovation. But when I saw what they were able to do to bring the vaccine to the market in less than a year. Given that it's normally many, many years before, a vaccine was truly a staggering process. The rate at which innovation can be called forth when you need to, when that, when the focus is. There was firstly, incredibly impressive in their case, and I think a source of inspiration to me as I think about our own business.

Now obesity has grown to pretty epidemic proportions. I think now more than a billion people worldwide are characterized as obese. Do you think we'll be able to reduce obesity rates going forward?

I think we can and should reduce obesity rates going forward. I mean, we certainly have probably happened a few decades ago, gone past the point where there are more calories available in the world than human consumption. Generally speaking, for most of human history, we've had a slight deficit now there's enough food generated. So it absolutely needs to be an overall, and it is an overall governmental policy, policy focus.

We are seeing many governments implementing sugar taxes. What is your view on that?

Yeah, I think, look, there are a couple of pieces. Taxes certainly tend to affect demand. The question, I think would be twofold from my point of view. One is, is the action likely to produce the outcome that they're looking for? If the outcome is less? Obesity, Does that very narrow tax on one product category? Is it likely to drive down obesity?

You're also moving into alcoholic beverages. What are the plans here?

Yeah, we've been experimenting in the boundaries between the non-alcoholic and the alcoholic world. You know, as every industry develops, people look for the white spaces and look for the opportunities that are most adjacent. And there are a set of occasions which tend to mix alcohol and soft drinks mixes, and we see an opportunity, what is called the alcohol ready to drink category, so pre-mixed cocktails, hard seltzers. If you're in the U..S, it's a very interesting space because a lot of the drinks in that space leverage our existing brands.

For us now, the last question in this area, you are taking action to reduce plastic wastes.

Term Yeah, so plastic waste, I think, has two components. And I think with all these kind of systemic issues, it's important to make sure that everyone can restate their objectives and clarify. What is the outcome in one? And I think here it's. We don't want waste in the environment, whether that be land or sea, and actually preferably with a lower carbon footprint. If we state those two objectives, what we see is that a circular economy on packaging material can achieve both those objectives.

James Moving on to leadership. You talk about being an authentic leader, but how authentic can one be when one runs a big public company where you have to be so careful with how you communicate?

I don't think there's a difference between being authentic and, at times, being reserved or being diplomatic. I probably like that in my personal life anyway, so maybe that makes it easier, but I think, look, let me let me put it this way. It was probably possible 20, 30, 40 years ago. For you to say one thing to the employees, another thing to the customer, another thing to the investor, et cetera, another thing to the media. But this is a radically more transparent world.

What's the one thing you would love to say, which you're not supposed to say?

There's nothing, because, you know, I'm not saying no, I mean, look, I.

How do you disagree in a good way?

Look, I don't let's. We don't need to whip out the management books. But it's the contrast, the shouting and screaming, so it's like, OK, you know, let's. It's a. It's a rational debate. It's generally speaking. The other person on the other side of people wants to feel that they were hurt, you know? Without going into mumbo jumbo, it's like, Yeah, I like, Do I understand what you're telling me? I hear what you're saying?

Positions What's the most difficult part of being a CEO?

There's one part of the CEO that you never find out until you get there, and the way I describe it is. If you think about an organization, let's just use the classic idea of an organizational pyramid. It's a it's a big, it's a big pyramid, and most people think, OK. You spend your years working your way up the pyramid and eventually you'll get to the apex of the pyramid. And, you know, in a simple way, everyone in the organization will work for you.

What's the trick to that?

Say no, politely.

How do you continue to learn?

I like learning. I am probably slowly becoming more old school in the sense that I prefer to read it than to watch a podcast or a talk. But I'm slowly moving with the times. But I do have to say I still have a yearning for the tactile nature of getting something from a book and being able to ponder it as you read it. Rather than being marched along at the pace of whoever's trying to teach you.

What good have you read lately?

I've read a few books lately on the on the fiction side. I read a book called Clara and the Sun, which is kind of an in the future novel about the relationship between robots and US. It's, it's very different. It's a Japanese, British writer.

What motivates you?

I'm kind of mission motivated in the sense of, you know, I really want to do the thing, I have to feel like, I really want to do the thing. Whatever that thing ends up being, whether it be, you know, I think we've we. For example, we put code back on a growth trajectory over the last number of years. Or I want to learn to be good at X. I normally start off with the perspective, how hard can it be? And then, of course, you find out that most things are much harder than you think and you're not very good at them.

Jensen Huang of Navidia, who we had on recently, also talks about this. How hard can it be? But he also talks about working hard. And he says, Well, you know, you have working hard, and then you have working insanely hard. Where are you on this scale?

Life is a marathon, you can have periods of working insanely hard, but it's hard to live your whole life at that pace. And so, you know, I think it's the pendulum swings between working hard and working insanely hard, because you can't keep it up forever. Life is not a set of sprints, it's a marathon.

How do you pace yourself?

I, you know, I'm somewhat European in that sense. It's like there needs to be some boundaries. I know it's a 24-7 job that there also needs to be some downtime. You need to be able to walk away, not always.

What's your advice to young people? We have a lot of young professionals listening to this.

My first piece of advice, or my main piece of advice that comes with a caveat, is find something you really love doing. Sometimes people take jobs because they think it gives them status or money. But I feel in the long run, you're likely to rise to the top or be happier. Doing the thing that gets you out of bed in the morning if you don't love what you're doing, the chances of getting out of bed early and working insanely hard just go down, in my mind. Certainly do over time.

And what's the most fun piece of your pie chart?

Look, everything can be fun, there can be times when you do really cool stuff. I mean, like, I got a lot out of all the AI marketing recently, but that can be cool stuff. On the family side, like, you know, spending time with family and friends, seeing them grow and achieve stuff. Or even for yourself, going off and learning something new, or trying something new, even if you're terrible at it, just trying something new and learning something new.

And the last thing you learned that you thought was cool?

I think I've become a part of the sad or not so sad trend to trying to swimming in cold water. And I'm. I found out I had to google how fast I was and see whether it was any good. And I was really slow. Unbelievably slow, like right down at novice. And I'm like, OK, but it was fun.

Well, I have to say, if you want to come training in cold water, you are very welcome to Oslo. We we have some really good conditions for that.

I might come in July.

Just one more thing I'd love to ask you about, so the coca-cola recipe, I think it's called the Merchandise 7X.

If I had a better memory, I would. The formula for Coca-cola lives in a safe, which only a very few people have access. I went in there once just because I became CEO, I have to go in with someone else. Looked at the piece of paper and more or less instantly forgot everything about it when I walked out the room.

How many people have access to the safe? That's a secret and tell me about the safe. How did? What does it look like?

It's very, very big. Well, actually, most of the safe is the concrete wall.

And and is the recipe the only thing in the safe?

No, there was a filing cabinet, it's like the matrix, there's a filing cabinet with other stuff in it. I didn't look at the other stuff.

I don't. And if we, if I, if I came to visit, were I allowed inside?

No.

Sounds good, well, you, you are clearly very good at saying no in a very polite manner. So I have to give you that. James, it's been tremendous to have you on the show. absolutely love it.

Thank you great, nice to see you again.

Fantastic, thank you, bye bye.