Give credit to Coca-Cola
For those unfamiliar, these are the guys who created a YouTube classic by combining Mentos and Diet Coke in a simulation of the dancing fountains at Las Vegas' famed Bellagio hotel. (You've seen the fountains if you've watched the ending of Ocean's Eleven.)
Coke is almost it
Of course, Isdell wasn't there over breakfast to crack jokes. He was there to talk about progress. And there's plenty of good news to report. For example, in a recent stock taste test, Foolish colleague Ryan Fuhrmann found that Coke and rival PepsiCo
That's progress as far as Isdell is concerned. And it's progress that he seems to believe Coke can bank. As he told analysts, "In the time that this presentation is going to take, I want to let you know that, around the world, 58 million servings of our products will be consumed. And I think that's quite a sobering number."
I'll say. But where will future growth come from? Isdell points to emerging markets. But he's not necessarily talking about China or India or Thailand when he says that. Japan, believe it or not, is an emerging market for Coke.
Says Isdell, "the definition that we're using is really a per capita hurdle of 900 servings of ready-to-drink beverages in a total market. So that would mean that, for us, Mexico is a developed market and Japan is an undeveloped market."
I suppose that shouldn't surprise me. We Americans are a little obsessive when it comes to our home-grown sugar water. Not so much with the rest of the world. But Isdell, a native of Ireland -- happy early St. Patrick's Day, Mr. Isdell -- aims to change that. "We are committed to win on our home field," Isdell told analysts. "But international is the key to the future, and you see momentum growing in that particular arena. And it's quality growth."
About that EepyBird thing ...
How does he plan to capture it? Innovation. Isdell told those in attendance that Coke has a "culture of innovation," an observation that seems right. For example, as of August, Coke had introduced more than 1,000 new drinks.
And there have been some notable successes. Isdell told analysts that Coke Zero, which purports to be a low-calorie soda, is its most successful brand extension in 20 years, accounting for more than 100 million cases globally. Isdell says that Coke Zero will enter 35 more markets in 2007, up from 14 now.
Coke is also seeking margin expansion via packaging. For example, Isdell says that it sells Coke through an aluminum bottle in 30 markets and, in those markets, receives a 20% premium for the drink.
What's more, Coke's enhanced marketing brainpower may also be aiding its advertising. Brand steward Mary Minnick leads a team that has orchestrated the "Coke Side of Life" campaign that has been an award-winner. For Isdell, it's still a powerful message, "It's going to be in over 200 markets by the end of '07, and it's right at the essence of Coca-Cola -- about optimism, about fun, about uplift."
Don't forget to add marketable. Coke's youth-inspired tagline has it mocking lawyers in a Coke Zero ad and inking a deal with Apple's
Coke, growth, and a smile
All in all, Isdell says Coca-Cola is on the right track thanks to a vibrant bottling system for its drinks. "If you look at what's happened since '99, where the overall return on invested capital was only 3.9%," he said, "it's now in '06 up at 8.1%. It still needs to go higher. But we're driving that."
If he's right, investors could reap big rewards in the long term. How big? Isdell says Coke has just 20% of the consumer beverage market, which he believes could reach $645 billion by 2010. He expects a lot of that growth to flow Coke's way: "If we look at it from just our own base and our top 22 markets and that 6% growth rate, there's $98 billion of growth that we believe we're going to be able to achieve over that period of time."
Sounds refreshing, Mr. Isdell. Get it done, and you'll have plenty of investors enjoying Coke, growth, and a smile.
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Fool contributor Tim Beyers, who is ranked 1,275 out of more than 23,400 in our Motley Fool CAPS investor-intelligence database, has a Coke and a smile occasionally. But he'll drink it with a frown, too. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on Foolishness and investing may be found in his blog. The Motley Fool's disclosure policy offers investors a refreshing taste of fairness.