Coca-Cola Needs Andy Grove

For some time now, Coke has been floundering. I'm sure there are many problems other than boardroom pay issues, but it seems to me the biggest one is that Coke behaves like a lethargic monopoly.

In b-school a professor told us, during a discussion on branding, that if Coke lost everything – physical assets, bank accounts, people, etc. – the company could still take a billion dollar loan. The brand by itself is that valuable. After a century of dominating the beverage industry, the dynamics of the industry changed. Consumers had more choices, and began looking for different things to drink. Coke's strategy appears to have been "get people to drink more Coke," when it should have been "how do we milk the Coke cow while we find new drinks to make Coke obsolete." Okay, maybe obsolete is a little too much.

The tech industry is tough because things are constantly changing and improving. It's about development, it's about new products, and it's about making your old products obsolete. Andy Grove was good at that last one. The beverage industry was about good advertising and powerful distribution channels. It isn't anymore. It is about new products and how they fit into the various drink niches that now exist. For Coke (the company) to be successful, they need to spend less time on Coke (the drink), and more time on brand proliferation. Take a chapter from the cereal industry playbook and niche the hell out of drinks until each niche is so small and has so little market share, no new competitors can come in (like Red Bull did), because it won't make financial sense.

I hope Coca-Cola can hire a CEO with the guts to push Coke to the back seat and focus on the beverage industry as it is today, not as it was 50 years ago. But given what I have seen over the last few years, they would rather use the Ostrich strategy and keep their heads in the sand. Business is much easier that way.

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  1. laurence haughton's Gravatar Comment by laurence haughton on January 10th, 2006 at 11:32 am

    Remember the # 1 announced purpose at Coke has for years been to make money for shareholders.

    That has led groups to do all sorts of things that delivered very good shareholder returns but at the expense of other groups like customers and bottling partners.

    This will be a real-time experiment in what happens when shareholders (instead of customers) are put at the top of the “purpose” pyramid.

    It also confirms the difficulty of being big versus being fast.

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