Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Coca-Cola, Partners Team up to Solve a Major Global Problem

By Sara Murphy - Oct 24, 2013 at 1:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A new corporate partnership emerges to tackle a nasty global problem, but the payoff is murky.

Coca-Cola ( KO -0.02% ) recently announced a cross-industry collaboration to deliver safe drinking water to global communities that struggle to access this most basic resource. A partnership with Qualcomm ( QCOM -1.06% ) subsidiary Qualcomm Technologies, IBM ( IBM 1.65% ), and NRG Energy ( NRG -0.81% ), among others, the new EKOCENTER partnership will provide a fundamental necessity to rural communities around the world. That's great for people, but is it any good for business?

Minimal payoff?
Shareholders may question the value of such a move. At first glance, it appears that the return on this type of initiative would be negligible, perhaps even a waste of corporate resources. If we look at the bigger picture, though, this could prove to be a savvy move.

The most obvious benefit would be to companies' brands. As consumers and investors alike take a greater interest in corporate responsibility, tying a brand to public health measures can have a strong impact.

This is especially true for Coca-Cola, which in the last decade has come to be inconveniently associated with obesity and cavities. As the company tries to remake its image, positioning itself as a healthy lifestyle proponent, throwing the Coca-Cola brand behind a clean drinking water initiative may be just what the doctor ordered.

Downtowns in a box
In order to understand what's in this for the other corporate partners, and where the actual return on investment could possibly lie, we need a few more details about this project. The Slingshot water purification system is the cornerstone component for distribution, but it's not the only one. The partnership will also deliver EKOCENTERs, or "downtowns in a box," to a subset of communities. These will provide not just drinking water, but other local needs such as sustainable energy, wireless services, refrigerated vaccines, and more.

Now it might make more sense why NRG would be involved. The company provides solar panels and battery storage to power the EKOCENTER, making each a self-sustaining unit that operates off the grid. For NRG, this is about more than brand. The company is part of a major upheaval in the utility sector, and CEO David Crane is betting his whole hand on the idea that traditional utilities are in their death throes, undercut by distributed generation services. Crane's response is to get in the new game, destroying NRG's old business model in the process. The EKOCENTER might then be a brilliant proof of concept for the company.

Bottom of the pyramid
But wait! There's more. If you're a big, multinational company like Coca-Cola, you've grown partly by expanding into new markets, until you've saturated every last nook and cranny of the planet with syrupy beverages. But there's one giant market left, and it's often called the Bottom of the Pyramid.

Bottom of the Pyramid, or BOP, refers to the world's very poor, estimated at more than 4 billion souls who are consumers at only the lowest levels. Meeting their demands could be something of a Shangri-la for major consumer brands, but doing so involves more than just reformulating products and offering them in smaller, cheaper sizes. Indeed, it might just mean investing in BOP communities to enable entrepreneurship and sustainable development, so that people's earning potential -- and thus purchasing power -- grows.

Now consider that Coca-Cola's press release on the new partnership addresses the EKOCENTER's aim "to jump-start entrepreneurship opportunities and community development." Bingo. If you want to gain access to that giant base of potential consumers, what better way than to get them healthy and employed?

Other partner companies have as much to gain from the BOP strategy. Qualcomm Technologies will advise the partnership on how best to deliver wireless technologies, such as mobile devices and Internet services, through the EKOCENTERs. Qualcomm is already involved in various BOP partnerships with NGOs, describing its efforts as examples of "how wireless technology can stimulate economic growth and improve the livelihood of underserved communities," and even explicitly discussing its strategy to bring smartphones to BOP markets.

And what about IBM? The company is furnishing the EKOCENTER partnership with technology and business consulting services for starters, and will help to explore potential approaches for treating used water for reuse. IBM's water efforts may come partly in response to Intel's leadership in that space. But IBM has also been exploring BOP strategies for years, directly seeking to expand information technology infrastructure access among the world's poorest.

This might all strike you as a bit cynical. I mean, aren't we talking about corporate leviathans making every possible effort to separate the world's poorest from what little cash they have? Well, sure, there's certainly a profit motive. But look at it this way: If your children are dying from something as simple as diarrhea and somebody gives you safe drinking water, do you care why? And if that means your healthy kids can learn, get jobs, start a business, and drink Coca-Cola while playing video games, don't you still feel like you've won?

These companies are cultivating their future consumers by taking care of them. That might just be the best long-term business strategy I can imagine.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

International Business Machines Corporation Stock Quote
International Business Machines Corporation
$118.83 (1.65%) $1.93
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
$175.15 (-1.06%) $-1.88
The Coca-Cola Company Stock Quote
The Coca-Cola Company
$53.06 (-0.02%) $0.01
NRG Energy, Inc. Stock Quote
NRG Energy, Inc.
$36.26 (-0.81%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.