Alison Watkins says Coca-Cola Amatil was “a burning platform” when she arrived in 2014. Now she’s working hard to make the company an innovator again.
When Alison Watkins took the reins of Australia’s Coca-Cola Amatil (CCA) in March last year, the soft drink giant was facing some hard truths. With a stock price at its lowest since 2011, a 1.9 per cent drop in trading revenue to A$4.9 billion in Australia, and a serious decline in its beverage business earnings, much of the company’s fizz had left the bottle. Watkins received a strong mandate from the board to shake up the bottler’s strategic direction.
A year and a half into the job, Watkins has restructured the company’s supply chain, a task which included announcing 260 job cuts last December, and she has split the company’s Australian non-alcoholic and alcoholic beverages divisions. In April she launched a reduced-calorie product, Coke Life, in an attempt to quench Australian consumers’ growing thirst for healthier products.
Watkins has also increased the company’s focus on the youth market through smaller pack sizes and a new social media-led marketing campaign. She has radically changed the shareholder structure of CCA’s Indonesian business, and has overhauled her senior management team. You could say it’s been a busy 18 months.
Watkins has always been one for hard work. After steering listed agribusiness GrainCorp through a takeover bid by US food giant Archer Daniels Midland, she announced her move to CCA just days after Australia’s federal treasurer, Joe Hockey, knocked the A$3.4 billion bid on the head. Before that she led the strategy and regional banking divisions of ANZ (while modestly crediting the bank’s former chief executive, John McFarlane, for taking a risk on her), was CEO of fruit juice company Berri, and held board positions at ANZ and Woolworths.
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In taking the top job at CCA, Watkins became one of very few women to have reached the rank of chief executive of a top 50 Australian company (after Westpac’s former chief Gail Kelly, and Kerrie Mather at Sydney Airport). Hard work indeed.
In the beginning
Growing up on a farm in Tasmania, Watkins says she became acquainted with male-dominated industries from an early age. She describes herself as a tomboy who was encouraged by her father to drive the tractor, work in the shearing shed and tear around the paddocks on a motorbike.
“He gave me a lot of responsibility and encouraged me to roll up my sleeves. There’s no difference in the way he treated me as a daughter and how he would have treated a son.”
Watkins’ father also ignited her early interest in business, introducing her to the commercial side of farming.
“He bought me shares in Elders. I think I was about 10 years old. I hung on to them for way too long, which was probably a good lesson to learn as well.”
Watkins says her greatest strategic lessons were learnt at McKinsey & Co, where she worked for 10 years after beginning her career as an accountant.
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“McKinsey teaches you to understand that there are no problems you can’t solve. You can think that you’re in a difficult position strategically, but there is a logical way to go about breaking down problems and engaging your team, and potentially outside help, to figure out what you’re going to do.”
Watkins had a lot to figure out on taking the helm from Terry Davis at CCA. With the help of independent contractors, key CCA executives and some frank conversations with frontline staff, she embarked on a wide-scale strategic review of the company that resulted in a pledge to cut A$100 million in costs over three years.
“Our performance was declining, so our profits had declined the previous year and it was apparent that we were trending the wrong way into 2014 when I came along,” says Watkins.
Changing consumer taste has been a key challenge for CCA, which offers more than 240 products including regular and low-kilojoule soft drinks, waters, sports and energy drinks, teas and flavoured milk.
In 2007, 59 per cent of Australians drank soft drinks in any average seven-day period. Today, that number sits at 48 per cent. There is a growing consumer trend toward healthier options, yet the iconic brand of Coca-Cola has always been linked with a sugary sweet fix. The US-based Coca-Cola Company, which owns 29 per cent of CCA, had a global revenue decline to US$46 billion in 2014, down four per cent from 2012, suggesting the brand has been slow to keep up with the times.
In April, CCA spent A$10 million to launch Coca-Cola Life, saying it is only the fourth drink to be introduced in the trademark’s 128-year history, following classic Coca-Cola, Diet Coke and Coke Zero. CCA claims that with 35 per cent less sugar and fewer kilojoules than original Coca-Cola, due to its use of a natural sugar substitute, stevia, Coke Life has gained a 13 per cent share of the “sugar cola” category since its April launch. The company’s long-term expectation is for Coke Life to represent one to two per cent of total Coke brand volumes, which is about the level achieved in the UK market.
CCA’s attempts at product expansion have not always gone smoothly, though. Its new Barista Bros Extra Strength Coffee Flavoured Milk was recently recalled when milk protein created rather unpalatable lumps in the beverage. The withdrawal notice stated “the product’s quality and appearance is not as it should be”.
The youth market poses another challenge for the company.
“We do know that teenagers are less likely to have consumed a carbonated soft drink or a Coke in the past four weeks now than they were five years ago,” says Watkins.
“That said, something like 50 per cent of them have probably consumed one of our sparkling drinks in the past four weeks. So it’s still a very high proportion … but it’s not quite as high as it was.”
Watkins’ strategy is to expand the product offering for greater appeal to the youth market. A 250ml Coke can size was recently introduced with a A$2 price to target younger consumers.
“It’s also about innovating into the beverages that they are consuming,” says Watkins. “For example, they might be more likely to consume coconut water.”
She adds that the company’s size will allow for greater innovation investment.
“We are challenging our model very much at the moment about how we can turbocharge [innovation],” she explains.
“Venture-style models will become important for us and allow us to participate in some of those smaller, innovative start-ups or allow us to back ideas that people have come up with internally.”
She wants to make sure those internal ideas “don’t get squashed by the machine”. And she wants to experiment: “We need to be able to speed up the rate at which we get things to market, try them, [and] pull them if they’re not working.”
Changing the guard
Watkins describes the leadership of CCA as having been on a “burning platform” when she arrived. With her strategic overhaul well underway, she now has a new leadership team to help douse the flames. The former finance director of Woolworths supermarkets, Martyn Roberts, has succeeded long-serving chief financial officer Nessa O’Sullivan.
Paul Kelly, managing director of the company’s long-suffering fruit canning subsidiary, SPC Ardmona, has made way for former Bulla Foods executive Reg Weine. The managing director of CCA’s Australian beverages business, John Murphy, and the company’s managing director for Australasia, Warwick White, have also left.
Watkins argues that a company’s structure and people “should follow the strategic priorities that you have” in order to improve performance and drive innovation.
“Different leaders have different preferences and styles in the way they prefer to operate. For me, it’s incredibly important that our group leadership team – that’s me and my direct reports – have a shared accountability for the success of CCA. I don’t want to have a group leadership team that’s not functioning as a team,” she adds.
“The pace of change in the environment is fast and the pace of change at CCA needs to be even faster because we have got some catching up to do.”
Bringing women through the lines
If you want to get more women into senior executive roles, you need to bring them in from the side, says Alison Watkins.
“I would love to see more women particularly coming up through line roles. The reason I’m fortunate enough to have this [CEO] role is because I’ve had a decent amount of profit-and-loss experience along the way. We need more balance across the P&L roles and that’s how we’ll get more [women] coming through to the CEO roles. You need to promote people across, so it’s lateral risk-taking.”
Watkins believes diversity is good for business, as problems can be approached and solved in different ways.
“I feel worried if I walk into a room where there are only men, whether it’s internal or external,” she says.
Bumpy road in Indonesia
This year, Coca-Cola Amatil (CCA) announced the sale of a 29.4 per cent stake in its Indonesian business to its US parent. The Coca-Cola Company will invest A$500 million in the enterprise, adding to the A$1.3 billion which CCA has already put into the venture.
“We’ve been in Indonesia for 23 years and we have a really established business there,” says Watkins.
“In volume terms, it will probably overtake our Australian business in a small number of years. Indonesia is a market that can be a bit of a bumpy ride. The economy is up and it’s down. But overall, over the next 10 to 20 years, GDP per capita will grow strongly and with that, consumption of non-alcoholic, ready-to-drink beverages will grow strongly.”
Watkins acknowledges that sparkling beverages are not an everyday choice in Indonesia. Developing its “stills” category with flavoured teas and juices is definitely on CCA’s agenda.
“It’s very important to adapt to the local market. It’s a dangerous thing to think you can change very well-established preferences. The Coca-Cola Company is very good at adapting its approach and product portfolio according to local markets.”
She sees only limited growth potential in Australia. “There is always stuff to do in Australia but at the end of the day we are a fairly small, mature market. You do need to be prepared to step outside … there are many reasons why Indonesia is a logical country for us.”
Who is your favourite business thinker? What do you believe are their most important ideas, and why?
“I have found many business thinkers to be inspiring sources of motivation and ideas over the years,” says Watkins. “There are, however, some I just keep going back to – well-thumbed favourites on my bookshelf.” They include:
- Jim Collins and Jerry Porras
Built to Last: Successful Habits of Visionary Companies (first published in 1994)
“While you can take issue today with some of the companies they profiled, the themes are very sound, like Clock Building not Time Telling, and More than Profits.”
- Jon Katzenbach
Teams at the Top (first published in 1998)
“It’s really helpful in thinking through what a true team at the top means. In particular, what constitutes a team as opposed to a working group and the elements to pay attention to.”
- Robert Cooper and Ayman Sawaf
Executive EQ: Emotional Intelligence in Business (first published in 1998)
“One of the early books that defined and gave credibility to the huge importance of emotional intelligence.”
This article is from the September issue of INTHEBLACK