Keynote Speech by Muhtar Kent at the CIES World Food Business Summit

Muhtar Kent, President and Chief Operating Officer, The Coca-Cola Company
Munich, Germany
June 19, 2008

As prepared for delivery

Thank you, Neville, and good afternoon, everyone.

On behalf of everyone here, I also want to thank you, Neville, for your inspired leadership over the years at CIES.

The food and beverage industries -- and The Coca-Cola Company -- have benefited greatly from your contributions -- and will continue to for years to come.

You know, I've done a lot of interesting things in my life, but I must say this is the first time I've ever given a speech in the middle of a wheat field!

I love it... and it makes perfect sense as we are in Bavaria talking about food and sustainability.

I'm truly honored and delighted to be at CIES this year... especially during such a critically important and challenging time for the world's food industry.

The television spot you just saw was introduced during the holiday season this past year.

It shows the world coming together to share a meal... and the role Coca-Cola plays in this timeless tradition.

In the food and beverage industries, we all play a vital role in creating these kinds of social connections by making our products available, acceptable and affordable.

The stress we're now seeing in the global food supply chain is cause for concern and for new innovative thinking. We certainly heard some good thinking during the roundtable that preceded this session.

Over the past several weeks, I have traveled to China, Russia, Japan, the U.S. and Europe. Everywhere I go, few issues command more attention... or carry more weight... than concerns over food shortages and the rising cost of life's basic necessities.

Last month, we met with UN Secretary General Ban-ki Moon who said it will take $15 billion to $20 billion dollars a year in new investments and innovations in agriculture and food technologies to offset the current crisis.

The growth and sustainability of the global food industry are essential to feeding the world, providing jobs and livelihoods, and protecting our natural resources and environments.

I don't think our conference organizers could have picked a timelier theme or a more appropriate backdrop for this year's discussions than "Growth and Sustainability."

No part of the world is more emblematic of the sustainability movement than Germany. Earlier today, you heard about Germany's green consumers... and yesterday Chancellor Merkel reinforced her nation's commitment to a green and sustainable future.

A sustainable future is not possible without sustainable leaders and leadership.

Today, I was asked to share some insights about "the next generation of sustainable leadership... and how it can make a real difference."

Specifically, I'm going to frame my remarks around the responsibilities and demands facing the next generation of global food and beverage industry leaders.

What do we expect from them? What do they expect from us?

I'm also going to talk about the need to adapt our business models to serve not only the most affluent markets through the most progressive outlets... but also the most under-served consumers in the most underprivileged regions of the world.

Many of these consumers will be rising to the middle class in the coming decades and they will take their brand loyalties with them.

Engaging this important -- and overlooked -- consumer bloc will be essential to sustaining global market leadership in the future.

Sustainable leadership will also require us to build cultures of sustainability within our companies. This will be the final area I will touch on today.

So, let's start with the responsibilities and demands facing the next generation of leaders.

Tomorrow's leaders will need to be prepared to manage in an environment where the balance of global economic power is shifting dramatically.

Several new realities are emerging... and I refer to them collectively as the "New Equilibrium." They include:

• Rising oil prices
• Rising food prices
• Growing middle class consumption
• And rapid, rapid urbanization.

For the present and future leadership of the food and beverage industry, the implications of the New Equilibrium are profound.

Most experts believe the price of oil is no longer spiking. It's simply rising as global demand increases and oil deposits become harder to access.

The world is now paying about $5 billion more a day for crude oil than just five years ago.

This is fueling one of the largest transfers of wealth in history.

It's now estimated that oil-rich nations have a $4 trillion-dollar cache of petrodollar investments around the world. That figure could increase rapidly in the months ahead.

Perhaps the most telling and recent example of this shifting influence and wealth is the fact that the Abu Dhabi Investment Authority is now one of the largest shareholders in Citigroup. Singapore's GIC now owns a $15 billion dollar stake in UBS.

Another example of this shifting influence is how more and more motorists in the U.S. and Europe are now refueling their cars at Lukoil gas stations. Unthinkable a few years back.

Of course, oil booms and busts are not exactly uncommon. What is different now, however, is that we're seeing solid, gradual gains as opposed to sudden peaks and valleys.

This is also producing some unintended and far-reaching consequences, which is the second component of this shifting landscape.

The surge in production of bio-fuels like ethanol is partly responsible for rising food prices around the world. You just heard a great debate about this and you're fully aware of the causes.

So here we are with higher energy costs... and higher food costs.

Now... factor in the sustained increase in demand for food and energy that's being prompted by rising living standards in emerging nations.

So, the third major shift we're seeing is the growing global middle class. In fact, by 2015, some 700 million new consumers will be ascending to the middle class. Most of them will be found in emerging nations.

That's two markets the size of the United States added to the world economy in less than a decade!

These new middle class consumers strive for the same things we want out of life -- including better quality food and beverages.

And like their counterparts in the developed world, most of these middle class consumers will reside in urban areas.

Urbanization is the fourth component of the New Equilibrium.

For the first-time in history, the majority of the world's population is now living in urban areas.

The urbanization trend is just beginning.

For the next decade, 65 million people annually will migrate to urban centers. That's roughly the equivalent of adding a city the size of London to our planet every 80 days.

Clearly, what you see here with these four global shifts are significant challenges and opportunities that impact the sustainability of our industries... and our planet.

Cost pressures... infrastructure pressures... distribution challenges... cultural challenges... training and development challenges -- the list goes on.

For all of us, it's going to require shifts in thinking... shifts in behavior... indeed, shifts in our world view.

How well our future leaders understand these new realities... accept them... and prepare for them... will determine our success in the coming years.

That's also one of the reasons we at The Coca-Cola Company are proud to support and participate in the Future Leaders Program here at CIES. The more we can do -- together -- as an industry to develop leadership will only strengthen the sustainability of the food and beverage businesses.

Over the past few months, I've given several speeches on college campuses and to executive education groups.

Every single group asks the same question: "What leadership qualities are we looking for in today's rising managers?"

More than ever, we're looking for future leaders who possess a world view. We need people who can move seamlessly across borders and cultures and who feel as comfortable working in Mumbai as they do in Munich.

With 20 million customer outlets around the world, we need people who can speak the language of sophisticated modern trade.

At the same time we need people who are flexible enough to understand the pressures and local cultural nuances associated with being a sole proprietor of a small street-corner bodega or kiosk.

We're looking 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 recently met with a group of high-potential young managers from our company who are part of a global leadership development program we launched last year 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 and deep into interesting new roles.

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.

True innovation, we have found, comes from this beautiful fusion of cultures, ideas, beliefs and experiences.

That's why in Atlanta we have over 50 different nationalities represented at our corporate center alone.

It's why we have Latin Americans assigned to top level jobs in Asia... Europeans in high level positions in North America... Africans in prominent roles in Australia...and Eurasians working in Africa.

The next generation of leadership will need to be able to recognize and harness the power of diversity.

At Coca-Cola, it's an absolute business imperative as we conduct business in over 200 countries around the world.

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. As more and more women around the world gain economic power, we need to be there with the right shopper insights, the right mix of products, and the right marketing and merchandising strategies.

I've talked a bit about the pressures coming down on the next generation of leadership and what we expect from them.

At the same time, this next generation has their own expectations about what kinds of companies and brands they want to work for.

In the U.S., for example, a survey commissioned last year by Sun Microsystems shows that almost three quarters of workers want their employers to be environmentally responsible.

The percentage is even higher here in Europe.

Another survey of young global professionals in their 20s, conducted by Robert Half International, shows that the ideal employer reflects "a down-to-earth blend of idealism and pragmatism, of concern for self and others. "

As a group, these 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."

Those sentiments were echoed by thousands of young professionals who participated in this survey.

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 30 years ago.

I also hear the same sentiments when we interview young job candidates and 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.

Many of these sustainability innovations are on display here in the Innovation Zone. I hope you get a chance to take a look at them.

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.

Borrowing from my days of studying statistics in university -- there is a clear one-to-one regression in terms of healthy sustainable businesses and healthy sustainable communities.

This leads directly to the second area I wanted to touch on today -- how we adapt our business models to serve consumers in the most remote and underserved areas as well as the most sophisticated and progressive outlets in the world.

I think most of you are aware of how we at Coca-Cola do this through large format stores and other progressive channels.

In fact, we work with many of you on knowledge-sharing and cooperative training and leadership programs.

What's less understood is how to adapt our business models to serve the under-served and the under-privileged -- those hundreds of millions of people today who will ascend to the middle class in the coming decades. These under-served consumers will play a significant role in determining our market leadership in the future.

I'm sure some of you are familiar C.K. Prahalad's work on the "fortune at the bottom of the pyramid" -- the business case for making your products available, affordable and acceptable to the lowest-income consumers.

This is an area we're very familiar with at Coca-Cola.

Our strategy has always been to be the first to gain access to a market and to grow along with that market by providing jobs and economic opportunities.

In Africa, where we are today one of the largest private employers and the No. 1 beverage brand, we are using a number of innovative business models to drive our business and create more sustainable communities at the same time.

One of the most exciting is our manual distribution center network that's been established across the continent. This program allows independent entrepreneurs -- including many women -- to set up distribution centers on behalf of the company.

Instead of trying to serve thousands of small retail outlets with small drop sizes, our bottling partners distribute to carefully selected manual distribution centers that sell Coca-Cola products exclusively to retailers.

So far, 2,300 distribution centers have been set up by independent entrepreneurs across Africa. Our goal is to help create 1,300 to 2,000 additional distribution businesses across the continent -- enterprises that could generate as many as 8,400 jobs and $520 million dollars in revenue over the next three years.

The key to success here are the local entrepreneurs who are in tune with the local needs of their communities. We also work closely with them and provide training programs to help maintain optimal sales and service levels.

This program was recently recognized as an important contributor in the drive to achieve the Millennium Development Goals.

I'd like to show you a short video that features Neville Isdell talking about the importance of this program. Please take a look.

Worldwide, we now have about 10,000 of these types of entrepreneurial ventures established within our distribution chain.

Another example of doing well by doing good comes from a rural village in Kenya that has struggled with access to clean water.

I brought along another short video that sets up the challenge. Please take a look.

This, I think, is a great example of the virtuous cycle of sustainable community building. A new well brings fresh water... which frees up time... which allows for new entrepreneurial ventures... which brings new wealth to one of the most remote areas of the world.

All of which benefits our business.

So far this afternoon, I've laid out some thoughts on attracting and developing the next generation of leaders... and adapting our business models to ensure sustainable leadership as the demographics and economics of the world continue to shift.

I'd like to close with a few final words about creating a culture of sustainability within our organizations.

In other words, how do we "sustain" this drive toward sustainability?

Sustainability is not a one-off project or initiative. It has to be a movement. A way of life. A way of thinking about the world.

We believe so much in this idea at The Coca-Cola Company that we introduced a concept called Living Positively just a few weeks ago.

It's a way for us to think holistically and globally about all of the sustainability efforts we're working on system-wide. It includes goals and metrics and several agreed upon principles.

We've set goals for our community work... for our active, healthy living programs... for our environmental work... and for our workforce and employee engagement efforts.

Ultimately, Living Positively is about making the right decisions -- the smart decisions -- to run our business better and to satisfy the needs of our customers and consumers -- most of you here in this room.

It's about creating a culture of sustainability -- one we think will spread well beyond the Coca-Cola system.

I can't think of more appropriate industries to lead the charge in the global sustainability movement than the food and beverage businesses.

We provide the world with sustenance, comfort and happiness.

The world needs our leadership -- and indeed expects our leadership.

Truly, there's no better business to be in than ours... and no greater responsibility to bear than leading the world down the path of sustainable growth and progress.

I wish you all the best of luck on your own journey to sustainability.

Rest assured we at The Coca-Cola Company and throughout the Coca-Cola system are here to help you support those efforts.

Thank you again for your time and attention this afternoon.