Coca-Cola's CEO on C-Stores, Obesity, Future Growth
Monster off the table, but open to other "bolt-on acquisitions"
ATLANTA -- In a recent Q&A with The Wall Street Journal, Coca-Cola Co. CEO Muhtar Kent offered his thoughts on several business fronts, including the strength of convenience stores, New York City's effort to ban large fountain drinks in fast-food restaurants and the company's acquisition strategy. CSP Daily News offers these excerpts from the interview:
WSJ: Convenience and gas store sales have been quite strong, despite high gas prices. To what do you attribute that?
Kent: I think time is the best medicine for everything. Consumers are getting more used to it. A $3.50 per gallon gas price three years ago was different than $3.50 per gallon gas price today.
WSJ: There is growing concern and debate about obesity. How much of a threat does that represent for Coke and the beverage industry?
Kent: This is an important, complicated societal issue that we all have to work together to provide a solution. That's why we are working with government, business and civil society to have active lifestyle programs in every country we operate by 2015.
We've gone from being a single-beverage, single-brand company to now 500-plus brands, 3,000 products. Eight hundred of these products we've introduced in the last four or five years are calorie-free or low-calorie. It is, I believe, incorrect and unjust to put the blame on any single ingredient, any single product, any single category of food.
WSJ: Coke has cash reserves of about $13 billion. What do you plan to do with all that money?
Kent: Our capex [capital expenditure] needs for growth. Then we have dividends, secondly. Thirdly, share buybacks. And finally if there's anything left and if there is something we can spend on, bolt-on acquisitions.
WSJ: One area where Coke and PepsiCo have lagged behind others is in energy drinks. We've reported Coke has been in talks in the past with [California-based energy drink maker] Monster Beverage Corp. Is that a route you'd still consider?
Kent: I think it was erroneously reported. We have an agreement with Monster for distribution. We always are in discussions to see how we can realize the full value and potential of our distribution arrangements, but not acquisition.
We believe we have the right plans in place to generate organic growth with our current brands.
WSJ: Are you satisfied with going it alone in tea? That's another area Coke isn't a market leader. In the U.S., there has always been speculation about Arizona Beverage Co. at some point perhaps being available.
Kent: We have a very good roster of brands in the U.S. in tea. Honest Tea, Gold Peak, they're both growing very rapidly and way higher than the total market and total category. ... We also have announced recently that we're launching more mainstream teas in the U.S. under the Fuze label.
Click here to read the complete Journal interview.