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COCA-COLA’S STRATEGIC DEXTERITY

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Right before Labor Day, Coca-Cola purchased Costa Coffee. If you have been to the UK, other parts of Europe, or Asia, you will understand that Costa Coffee is the second-largest coffee shop chain in the world, just behind Starbucks. In the UK, Costa has 2,500 stores. The brand has 3,800 stores in 32 countries.

This purchase is yet another segue away from a cola-uber-alles approach to a beverage strategy that better reflects people’s changing tastes. According to Barron’s, Coca-Cola’s sales declined every year since 2012, while coffee in all of its forms, is still strong. Coca-Cola is recognizing that continuing to focus on what worked in the past is not necessarily a winning strategy for today.

Coca-Cola ceded coffee primacy to others such as 1) Nestlé (owner of Nescafé) that cemented a deal with Starbucks to sell the brand’s teas and coffee drinks globally, and bought the boutique brand Blue Bottle and 2) JAB, a European holding company, owns Peet’s Coffee, Stumptown, and Keurig Green Mountain. From a brand-business standpoint, Coca-Cola is working to reverse behaviors that are strategically insensitive. Strategic insensitivity is a result of failing to pay attention to changing customer needs, problems, beliefs, and values.

There are legitimate concerns that Coca-Cola is not capable of managing actual brick-and-mortar stores. The firm’s strengths are elsewhere. Additionally, there are concerns that buying Costa gives Coca-Cola a lot of global real estate, an area in which Coca-Cola has not played.

These arguments overlook all the experience Coca-Cola will receive through its purchase of Costa. Costa knows a great deal about how to run coffee shops. Unless Coca-Cola decides to dismiss a raft of Costa executives, these concerns are slightly misplaced. It is true, that actually owning and running coffee shops is not something Coca-Cola is known for, however, there are few brands that work with restaurants better than Coca-Cola. When Coca-Cola works with big customers such as McDonald’s, a team is embedded in the McDonald’s offices. The team knows what is going on with customers, with customers’ needs, and most specifically, the team is on top of the logistical and service requirements needed at all the McDonald’s restaurants.

Coca-Cola, whatever its problems, is showing that even big, embattled behemoth brands can exhibit strategic agility. Coca-Cola is revealing that it is open to and able to evolve when disruptions happen or business, environmental, political, geographic circumstances alter the landscape. Coca-Cola is fighting against the arrogance of success by expanding its horizons into more popular beverage areas. By changing its perspective on the beverage landscape, Coca-Cola is leading with strategic dexterity, being resolute and responsive, disciplined and dexterous, at the same time.

Even though investors are on the fence, unconvinced that Coca-Cola is making the right move with this expensive acquisition, one investor group executive told Barron’s the following, “I continue to remain Neutral on Coke, but I like when companies continue to diversify their core businesses, and this is another turn in the company’s long history. The Costa acquisition is a bold move by Coke as it continues to expand outside of its core beverage business and increase its retail presence.”

NEW RULE FOR BRAND ORGANIZATIONS

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The phrase “Be a runway, not a control tower” popped up a few of years ago in a Singapore newspaper. The phrase is a great way to put a frequent brand organization occurrence: the resistance to change.

For brands to be successful in the ongoing challenge to remain contemporary, the idea is not to oppose change but to drive it.  Change happens all the time. Today it is almost impossible to keep aware of everything that changes around your brand. The digital advertising business has to deal with technologies, devices, and apps that change so much faster than people adopt and adapt.

Yet, opposition to change happens. Employees may fear how change will alter their jobs. They may think that what has been the current methods of operation should continue to be the standard operating procedure. Or, they are very happy and complacent and see no need to change.

Change initiatives usually come with a detailed program, an HR course, a set of slides, a video, a script, an app, a dictionary, a metric (or series of metrics), out of-office seminars, and in many cases a slew of young, junior consultants who take up a lot of office space. For many brands with change in leadership there is also a change initiative: new person, new ideas.

A brand’s culture sometimes can be the control tower keeping everyone on course, and focusing on avoiding any and all risk. Brands flourish in supportive organizational cultures. If the organization is risk averse or closed to change, it creates an inflexible and relevancy-resistant environment.

Brands must stay relevant. This requires change. Continuing to do the same old things when the world is dynamic is a formula for failure. The biggest challenge that brands face is ensuring that brand teams are open to change, and that the organizational environment is conducive to change. In organizations undergoing change, for that change to be genuine and not superficial, cultural change initiatives must be consistently reinforced, widely communicated, supported from the top of the organization, and realistic for the organization’s current situation.

Brands are dynamic, active promises about what they will do for the customer. Brands do not do well where the control tower effect is in place. Brands need continuous renewal. Brand teams must be aware and alert to marketplace changes and anticipatory ideas for satisfying customer needs. With too much control tower, without the continuous renewal of innovation or renovation, a brand will stagnate. The business will stagnate. Enduring profitable growth requires building a continuous renewal cycle.

When there is a misalignment and conflict between the brand strategy and the brand culture, the culture prevails over the strategy. Culture always wins. Brands need supportive, flexible cultures. If the culture is inactive and risk averse, in other words, a control tower closed to change, the misalignment is serious.

Brands need the runway. But, this does not mean there are no brand boundaries. Every runway is a well-defined pathway. Skidding off the runway is no good. Taxiing outside the boundaries of the runway is dangerous. Staying within the lane but being able to have change take flight is in a brand’s best interests.