Coca-Cola’s New Health Kick

Apr 17, 2008 Gerald Hampton Issue 12, Lead Interviews 0

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Danny Strickland, Chief Innovation and Technology Officer at The Coca-Cola Company, discusses the strides the world’s largest beverage company is making in the health and wellness arena, as it expands its geographic reach and its global portfolio with a newfound health consciousness.

Coca-Cola is still all about refreshment – but these days it’s just as much about health and wellness. The company, once primarily known for its classic, syrupy-sweet carbonated beverage offerings, is now talking about brain food and cholesterol-lowering agents as it aims to make further inroads into health conscious consumer-driven markets. The renewed focus on health has resulted in a healthy share price for the $28.8 billion company, with new ventures into the lucrative enhanced and functional beverage markets such as with the recent acquisitions of glaceau, Fuze and Jugos del Valle, along with strong geographic growth in key markets piquing investor interest.

Since Chairman and CEO Neville Isdell took the reigns nearly four years ago, the company has been on a fast track for growth with bigger, riskier projects, heavy marketing efforts and an eye on acquisitions. The most recent quarterly results reported fourth quarter earnings per share of $.52 – which translates to an increase of 79 percent compared to the prior year on a reported basis – and earnings per share for the year were $2.57, translating to an increase of 19 percent versus the prior year. Worldwide sparkling beverage volume increased four percent and still beverages increased 12 percent.

The impressive growth and earnings speak to the level of continued innovation that has carried the company above and beyond their standard platforms through new product offerings across a range of beverage categories – energy drinks, juices/juice drinks, soft drinks, sports drinks, tea and coffee and water – while injecting an array of health benefits into their portfolio.

Decisions around such innovation largely fall on the shoulders of Danny Strickland, who wears the innovation hat at Coca-Cola and is responsible for orchestrating innovation initiatives across R&D, technical stewardship (including items such as regulatory, water, environment, etc.) and flavor manufacturing. “Great innovation is the convergence of three things,” Strickland says. “It’s understanding the fundamental consumer need that you’re trying to satisfy, having the capability to satisfy that need through a robust and sustainable solution, and making sure it fits from a business standpoint in terms of the right strategy and economics. So, it’s consumer, technology and business fit.”

While many different streams of innovation come across Strickland’s radar, he narrows his innovation focus down to three main components. At the top are ‘big bets’ – the most significant projects that are carried out on a larger scale across many diverse markets. “The big bets are the convergence between consumer needs, technology and business fit, but on a much larger scale,” he elaborates. “We call them big bets because they have a potentially significant impact, they take more resources and they’re more challenging, but the payoff is bigger when you succeed.”

Typically the ‘big bets’ lead to a platform – and as such the perfect example is Diet Coke, which has branched off into Diet Coke Cherry, Diet Coke with Lemon, Diet Coke Caffeine Free, etc. In addition to big bets, another focus of the innovation process entails locally-driven initiatives that possess more of a degree of granularity related to a particular customer or market, and are driven by a local understanding of needs based on a certain demographic.

The third stream of innovation Strickland cites that is critical for success is reapplication – identifying what works well and then applying those successes elsewhere, whether in another product or a different market, such as with Coca-Cola’s On-the-Go bottle. “The On-the-Go bottle was a package that started in China and is significant because it was a great example of us managing innovation differently around the world, finding potential success stories and then moving them around very quickly,” he adds.

Most importantly, underlying every innovation decision is a deep understanding of consumer needs. Coca-Cola has applied extensive consumer research around the globe through a number of techniques and customer interactions, and then applied their findings to identify the different ‘need states’ of a consumer when in need or want of a beverage. Of the 20-25 different consumer need states, Strickland‘s team identified approximately 17 or 18 related to health and wellness, a realization which prompted their work to capitalize on the vast potential of health-related needs and led to the current focus today.

A big focus on health
Understanding the array of health needs has pushed Coca-Cola heavily into the health and wellness arena to produce products that deliver a tangible added benefit. “One of the directions that we have been going for the past several years that’s bearing more and more fruit as we go is a focus on health,” Strickland elaborates. “We know that consumers are looking for more. They still want it to taste great but they’re looking for additional value-added benefits, and health and wellness is something that many people are looking for.”

In turn Coca-Cola has taken a broad approach to health and wellness – looking at elements such as disease prevention and the various consumer states of need such as energy, recovery, alertness or refreshment. The more significant aspects of wellness have required the application of clinicals to demonstrate the added benefit.

Minute Maid Heart Wise is an early example of one such product that incorporated more weighty health benefits – namely in the form of plant sterols. “Minute Maid Heart Wise is a Minute Maid Juice that contains something called plant sterols, which actually reduce your cholesterol,” Strickland says. “We added to that a vitamin version, a joint health version, which has glucosamine and chondroitin in it.”

Even more recently, the latest version of the Minute Maid Juice has included DHA – the proprietary source of preferred Omega-3 acid, an ingredient that can be found in fish oils and often is associated with claims of enhancing brain function. Also commonly found in baby formulas to aid in early development, Coca-Cola is now applying its heralded benefits to adults.

While the idea of Coca-Cola experimenting with plant sterols and conducting clinical trials to understand true health benefits may sound like a significant departure from its early days, Strickland is sure to emphasize that Coca-Cola products have always been based on great science – and will continue to be.

One of the foundational items created to ensure this continued focus on health benefits is
The Beverage Institute For Health and Wellness, an entity composed of individuals specifically with health and wellness backgrounds to further pronounce Coca-Cola’s commitment in this arena and to bring together an external advisory panel. Together with a team of nutrition scientists and registered dieticians, the Institute is responsible for the company’s clinical research programs and serves as a resource for anyone interested in the science of beverages and their role in health and well-being.

“The main purpose of doing all that (creating the Institute) was two things,” Strickland says. “One was to make sure we had a real understanding of the health issues that our consumers faced and second, to provide guidance to our fundamental development work around that and how we should approach understanding those and developing products.”

Whether it’s health related or not, one thing’s for sure: under Strickland, innovation is a rigorous, championed process deeply integrated into the company’s backbone and involves welcoming ideas of every sort from individuals across the board. He points out how innovation merely begins with a simple idea or project concept and then working to refine it. For example, heart health and weight management were easy targets to identify as obvious health concerns, and so the company turned to sterols to aid with promoting heart health.

Though the innovation process itself at Coca-Cola is not exactly linear or simple, it’s obviously something the company is an ace at. One prime example of recent innovation success is Diet Coke Plus – something Strickland calls out as a ‘real signal to people’ that Coca-Cola had broken the mold.

“When we began to put nutrients in Diet Coke, we crossed an important line,” Strickland elaborates. “You are now beginning to have a positive impact on health, and that’s changed how people have felt about Coke, the same way that the Minute Maid Health Line has changed the way that people think about Minute Maid because now people understand that they have choices.” Choices is a light way of putting it – today the entire Minute Maid portfolio consists of more than 100 different flavors and varieties of beverages.

While Coca-Cola has definitely proven its underpinnings of great science through its expanded portfolio, it’s also evident that it continues to do what it knows best: great taste. No more has this been evident than in the success of Coke Zero – one of the most successful launches in company history, which accounted for nearly one third of Trademark Coca-Cola growth in 2006, and today the brand is available in 50+ countries.

“Underpinning Coke Zero is a level of formulation skill around flavor and sweeteners, and those are two fundamental strengths of the company,” Strickland notes. “If you think about what Coca-Cola is able to do better than anybody in the world and always has been is offering beverages that taste great. With Coke Zero, we’ve refined those skills yet further, in this case to taste more like coke and to get the sweetness profile just right for a very broad number of people.”

Because a good chunk of focus in placed on sustaining the pipeline, Strickland is already talking about how the innovation know-how acquired from the experience with Coke Zero will be applied to other beverages in the portfolio.

With solid fundamentals in place around taste and science, a deep understanding of consumer needs and one of the most robust innovation approaches, it’s safe to say Coca-Cola is set for long-term sustainability. “When you think about a pipeline, you really have to think about this as a dynamic process and the bar continuously gets higher,” Strickland points out. “There’s a lot of talk about sustainability from an environmental standpoint, but we have to think about sustainability from an innovation standpoint as well because consumer’s expectations continue to evolve. We have to be able to sustain an expanding pipeline, and you can really only do that by doing the fundamentals right.”

The Beverage Institute For Health & Wellness
The Beverage Institute For Health & Wellness supports nutrition research, education and outreach, with a primary focus on beverages. The Beverage Institute is responsible for evaluating emerging wellness trends and ingredients on behalf of The Coca-Cola Company, conducting clinical research in support of Company brands and establishing research programs that lay the foundation for the development of new beverages to meet the nutritional and wellness needs of consumers.

• R&D: Research programs lay the foundation for the development of new beverages to meet the nutritional and wellness needs of consumers. Research interests cover a wide variety of beverage-related nutrition topics, including hydration, weight management, fortification, functional ingredients, and the potential for delivering the natural goodness of whole fruits and vegetables through beverages.
• Experts: Research direction is determined through a coordinated effort of our team of nutrition, medical and technical scientists and our external Scientific Advisory Council, which includes scientists and physicians affiliated with some of the world’s most prestigious research organizations.
• Contributions: The Beverage Institute is dedicated to helping consumers and health professionals understand the role that hydration, beverage ingredients and personal choice play in a healthy lifestyle.

The latest Coca-Cola products
Coca-Cola, the world’s largest beverage company noted for possessing the most recognized brand, markets four of the world’s top five soft drink brands including Diet Coke, Fanta and Sprite, and a wide range of other beverages, including diet and light beverages, waters, juices and juice drinks, teas, coffees, energy and sports drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy the company’s beverages at a rate exceeding 1.4 billion servings each day. Below are the most recent additions to Coca-Cola’s refreshment portfolio:

March 2008 Ilko Coffee International Premium ready-to-drink expresso-based coffee beverages: The Coca-Cola Company and illycaffè SpA have finalized their global joint venture and will be introducing three premium ready-to-drink coffee products in several European countries in April 2008.

August 2007 Simply Orange Juice Company expands offerings to include Simply Apple and Simply Grapefruit: Simply Apple and Simply Grapefruit offer consumers a “closest to fresh-squeezed taste experience.”

August 2007 Coca-Cola North America and Caribou Coffee launch new premium ready-to-drink iced coffee in US: Caribou Iced Coffee will be available in three delicious flavors: Regular, Espresso, and Vanilla, and will be packaged in a unique 12 oz. reclosable Alumi-Tek aluminum bottle from Ball Corporation…

May 2007 DASANI launches new DASANI Plus enhanced water beverages: The line, with zero calories per serving, comes in three varieties: Refresh + Revive, Cleanse + Restore, and Defend + Protect.

May 2007 The Coca-Cola Company acquires glacéau, maker of vitaminwater, for $4.1 billion: glacéau, the creator and leader of the enhanced water category, is the maker of vitaminwater, fruitwater, smartwater and vitaminenergy.

May 2007 Simply Orange Juice Company keeps it simple for on-the-go consumers with new single-serve carafes: Simply Orange Juice Company is expanding its flourishing portfolio of refreshing, not-from-concentrate chilled juices and juice drinks with the introduction of new 13.5 fl. oz. single serve carafes.

April 2007 Minute Maid introduces enhanced orange juices for health-conscious consumers: New varieties include Minute Maid Multi-Vitamin and Minute Maid Active.

About Danny L. Strickland
Danny L. Strickland is SVP and Chief Innovation and Technology Officer for The Coca-Cola Company. Danny leads the company’s worldwide innovation and research and development efforts and helps develop new products, packages and technologies to meet the demanding needs of consumers.

happy wheels

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