Speeches

Remarks at the CEO Club of Istanbul

Muhtar Kent, Chairman and Chief Executive Officer, The Coca-Cola Company
Istanbul, Turkey
November 2, 2009

As prepared for delivery

Thank you for that kind introduction and good morning, everyone. It's great to be back home in Istanbul and to have the opportunity to once again address the CEO Club.

The last time I spoke to your esteemed group was just over a year ago. I remember it quite distinctly because the week prior I had been involved in another very important gathering at Coca-Cola. We convened the top leaders from The Coca-Cola Company and our bottling partners from around the world down in Boca Raton, Florida.

It was the first time our Company and our great bottling partners who make up the wonderful Coca-Cola system with $80 billion US dollars in revenue -- had come together as a system in over a decade. The point of the meeting was to begin crafting a shared vision for the future of the Coca-Cola system.

We saw a world coming together that was going to require everything we could muster as a system. The world's financial markets were beginning to unravel on word that some of Wall Street's largest investment companies and banks were in dire straits. A federal bailout plan was being hotly debated and even the tone of the historic U.S. presidential campaign had shifted on its axis.

It was in this backdrop that we looked to the future -- a future that transcended the financial crisis and one that had been set in motion long before the meltdown on Wall Street. What emerged from that meeting last September -- and several discussions with our people since then --was a solidified system-wide vision that we call Our 2020 Vision and Roadmap for Winning Together.

We outlined our vision across six critical categories -- areas we call

• profit
• people
• portfolio
• partners
• planet and
• productivity.

The vision we crafted is designed for growth and action. It's not lofty... it's not complicated... it's real... it's actionable and it's guided by goals that will stretch us and grow us for the better.

I mention this story because it raises a bigger point that I would like to address today about leadership. Specifically, I'd like to begin a discussion about leading through turbulent times... and preparing the next generation of leaders to lead in a world of constant turbulence. No issue is more critical to Turkey's long-term success than our ability to develop the next generation of leaders.

I am sure many of you are familiar with the World Economic Forum's Global Competitiveness Report. It was put together by Klaus Schwab of the World Economic Forum and Michael Porter from Harvard University. The report ranks nations according to a number of factors that determine their economic competitiveness in the world. Factors like education attainment... workforce sophistication... attracting and retaining talent, and so forth.

In terms of leadership development, the report paints a mixed picture of Turkey. While we rank high in business sophistication and higher education in relation to our neighbors in Central Asia and the Middle East, we are still lagging behind the larger economies of Europe and North America. We're also still seeing far too many of our best and brightest leaving Turkey for opportunities elsewhere. In addition, our female participation in the work force ranks among the bottom half in the world.

As business leaders, we need to work together to help better groom our next generation of leaders. This will require more investment in our management schools This will require a stronger national effort to keep our best and brightest here in Turkey. And this will require greater efforts to bring more women into business leadership positions.

Collectively, I believe we will need to create a clear, compelling and inspiring vision for developing the kinds of leaders Turkish businesses will need to win and grow in the years ahead.

Throughout my 32-year career, I've been fortunate to interact with some truly wonderful leaders -- leaders from business, government and civil society. Regardless of their background, I've noticed one overarching and essential trait found in all leaders -- and especially leaders who manage through challenging times. They have the ability to create a clear and compelling vision for their organization, and to inspire their people to achieve that vision.

No one was better at this than my mentor and great friend, Don Keough, the former President of The Coca-Cola Company. During his fabled 30-plus year career with our Company, Don helped oversee one of the greatest periods of geographic expansion and shareholder value growth in the history of Coca-Cola.

His new book, The Ten Commandments for Business Failure has been translated to Turkish and is set for release here. I highly recommend it.

One of the great lessons I learned from Don was that "vision without execution nothing more than daydreaming." At the same time, execution without vision is like running in the dark -- you're moving but probably not in the right direction.

As I described at the outset, one of my first priorities as CEO of The Coca-Cola Company was to guide our entire system toward our system-wide vision and to develop the capabilities to execute that vision.

It became apparent to me and to my leadership team that the world we inherited at the beginning of 2008 was significantly different than it was even a year ago. We saw some things happening that were going to fundamentally and dramatically reshape the nature of our business over the next decade and beyond. These changes were going to make the last 10 years seem tranquil by comparison.

Specifically we saw -- and continue to see -- four massive global trends unfolding:

1. A powerful shift in the epicenter of global economic growth.
2. Rapid urbanization as people move to cities for opportunities.
3. A reset of consumer attitudes, values and expectations... and
4. A new era of innovation brought on by these first three trends and fueled by sustainability imperatives.

Collectively, we call these four macro trends the New Equilibrium. This is our world for at least the next 10 to 20 years if not longer. Leaders must understand this world... and prepare their organizations for this world.

Let me just quickly describe each trend in a little more detail beginning with the shift in the epicenter of global growth. By the year 2020, the world's economic power will radiate from many nations and not just a few. Despite the current economic woes, we're going to see the creation of a trillion dollars of additional wealth around the world -- 60 percent of this will be in the emerging world. Of course, we're already seeing this shift as China and Asia seem to be on the verge of leading the world out of the current economic crisis.

In the next 10 years, we're going to see a billion new consumers rise to the middle class. Our estimates on this number, by the way, are lower than projections from the World Bank and the IMF, among others.

With this surge in global economic power and middle class growth, we're also seeing a huge influx of urban migration -- the second defining force of the New Normal. Today, the world's cities are growing by 65 million people each year, and that will continue for at least the next decade. That's the equivalent of adding a metropolitan area the size of Istanbul to the planet every 90 days for the next 10 years.

The third force we're seeing in this New Normal is a fundamental consumer reset. A reset of priorities, values, and expectations. Consumers worldwide are focused on value. They expect to engage with brands in a dialogue as opposed to a one-way monologue. They do not want to be told what to do. Today's consumers are dictating what they want... how they want it... when they want it... where they want it... and what price they are willing to pay.

This is an important trend -- and one that threatens to break the traditional distinction between buyer and seller that has been at the cornerstone of modern commerce.

Increasingly, and just as important, consumers are judging us as much on the content of our character as the content and quality of our beverages. The work we are doing to embed sustainability initiatives across our supply chain and operations is important to the new consumer psyche.

In fact, it's foundational to the fourth major trend we see in the New Equilibrium– the rise of transformative innovations. Most new breakthrough innovations over the next decade will spring from a world radiating economic power from multiple sources... from a world with more empowered consumers... and from a world where natural resource scarcity is the norm.

The new definition of innovation lies at the intersection of all of these forces. New ideas and innovations now originate well beyond the four walls of a company. Innovation is just as likely to come from customers, suppliers, and consumers. Innovations are global. They no longer just trickle down from developed to developing nations. They are just as likely to trickle up from developing to developed economies.

For our industry, these four massive trends mean more people... with more wealth... leading highly mobile, on-the-go, urban lifestyles that are conducive to greater demand for ready-to-drink beverages. These trends also mean increasing cost pressures, environmental pressures, commodity scarcity, NGO pressures, global talent competition, innovation pressures, and a host of other challenges.

In short, our vision is to harness new wealth, new beverage requirements and new innovations to accelerate growth and create the world's most respected consumer goods system.

I've been spending a lot of time over the past 18 months getting my leadership team assembled and aligned behind our vision and strategies. Like football, leadership is a team sport. Getting the right team in place to execute our vision and strategies is essential to our success.

Indeed, there are two things a CEO can never delegate and must always own -- especially in challenging times like these.

• The first is communicating vision... and I've already talked a bit about that.
• The second is owning the development of leadership talent and succession planning.

Central to our 2020 Vision is developing leaders who will be able to manage in a very complex and dynamic global environment over the next 10 to 20 years. As we look at the type of people we need to lead our Company in the years ahead, a very clear picture starts to emerge.

We need leaders with a different set of skills -- leaders who can be both business executives and diplomats. Leaders who are both master tacticians and master influencers. Our future leaders will need to drive profits by creating the world's most coveted brands... and by influencing a global bottling system of 1 million associates around the world to execute flawlessly in every market in the world.

I've personally found that the best influencers and relationship builders are people who have open minds. That's why we look for people with diverse backgrounds and points of view. We make a point to find young managers who want to be stretched -- who relish the challenge of working outside their comfort zones.

I meet several times a year with high-potential young managers from our Company who are part of a global leadership development program we launched two years ago called Catalyst. We pick managers from all over the world for special stretch assignments that benefit our business. We place them far outside their comfort zones. They are put into cross-functional and cross-cultural teams and given challenging assignments.

One team, for instance, was sent to a Southeast Asian nation to develop a 5-year market-entry plan. Another team was sent to Eurasia to work on a water profitability model. Another team was dispatched to Africa to work on a juice supply chain business model. These kinds of global and cross-cultural experiences are invaluable.

Leaders at Coca-Cola -- or from any other multinational or aspiring multinational company -- need to possess a world view. We need people who can move seamlessly across borders and cultures. We need people who reflect the diversity of our 20 million retail customers and 4 billion consumers around the world.

Strong business skills... a global mindset... and an ability to harness diversity -- those are the leadership attributes for success at Coca-Cola. If you look at my senior management team, you'll see that we've got leaders from Mexico, Lebanon, the UK, Australia, Liberia, Turkey, France, Colombia, Ireland and the U.S., among other nations. At times, Coca-Cola resembles the United Nations... and in fact we are in more markets than are represented by the UN today.

This incredible diversity of ideas and cultures and beliefs at Coca-Cola is one of the most important competitive advantages we have as a business system. I sense more and more businesses will begin to resemble us in this regard in the coming years. In fact, CEOs in the US and Europe recently told an Economist magazine survey that their senior management teams will become more international over the next three years.

One of the most fulfilling diversity programs I am personally involved in is serving as the chair of our company's Women's Leadership Council. In this role, I work with senior women executives throughout our company to identify strategies to attract and develop more women into leadership positions. The keen insights women bring to our business are profound, to say the least.

Today, women account for the majority of purchase decision makers for our beverages. Globally, women make up 70 percent of all grocery shoppers. Women's leadership has never been more important.

I've spent a bit of time talking about what we want from future leaders. But let me turn the table for moment. What does the next generation of leaders expect from us?

There's no question that the next generation has their own expectations about what kinds of companies and brands they want to work for. What we're seeing from our own recruitment efforts is a pretty consistent picture across the world.

As a group, young professionals share the belief that business should benefit both the individual and the broader society. They want opportunities to stretch and grow quickly... They want progressive benefit packages... They place a huge premium on work-life balance... And they want their work to be meaningful and productive to society.

Listen to what one 26-year-old finance professional had to say: " The companies that stand out the most are those that provide for their employees and communities just as much as they provide for their customers. Nothing is more rewarding than knowing that what you do for a living positively affects the lives of those within your community, the country, or even the world."

I know from talking to my own children, that they have much higher expectations of what they want out of an employer than I certainly did when I entered the workforce over 30 years ago. I also hear the same sentiments when I go speak on college campuses. People want to work for companies that share their values.

Today, when we recruit new talent to The Coca-Cola Company, one of the first things we hand them is a packet of information about the numerous projects we are involved in around the world to help build sustainable communities. They learn about a number of important initiatives, from the work we're doing to reduce our water and carbon footprints to recycling efforts to green coolers and lightweight packaging innovations.

We have seen through our own experiences -- time and again -- that our business in any market is only as healthy and sustainable as the community in which we operate. Consequently, we need future leaders who understand this balance... and the good news for all of us is that there will be plenty to choose from in the Millennial generation.

Given the new realities of the world... Given our expectations of what we want from the next generation of leaders... Given what the next generation wants from us... I believe the winners of the global leadership race will be businesses and organizations that have strong brands and clear visions. These will be organizations that encourage innovation and continuous education...that accept risk and promote entrepreneurship... and that give back to the world as much as they take.

Mostly, I think the winners will be businesses and organizations that understand the world is changing and recognize the need for new talent and leadership who can help them make sense of the change.

I wish you all the best of luck on this leadership journey, and I thank you again for your time and attention this morning.

Thank you.