Coca-Cola’s Venturing and Emerging Brands (VEB) unit will be an important part of this strategy, as it seeks to identify and nurture small, trendy brands with big, billion-dollar potential.
Building capabilities to maintain and repeat results is a third pillar for the company’s North American strategy.
‘Something that might be new to you is how much growth opportunity there is in North America’
Coca-Cola’s flagship North American market features some 360+ million consumers, with an industry retail value of $210bn. In its FY2016 it grew 4%, outperforming total retail value growth for both the non-alcoholic RTD beverages industry and US consumer packaged goods companies.
Sparkling drinks still make up the majority of the portfolio – taking a share of 57% - but other drinks are important too. Hydration accounts for 13%; juice, dairy and plant beverages account for 14%; tea and coffee at 9%, and energy at 8%. Coca-Cola enjoys a number one position in many of those categories, said Dinkins.
Speaking at Coca-Cola’s investor day this month, Dinkins – who will take the reigns as Coca-Cola North American president in January – said that, although considered a developed market, there is still plenty of opportunity in North America.
“Something that might be new to you is how much growth opportunity there is in North America,” he said.
“There’s over $30bn of growth over the next three years. And in that, $20bn of that growth is going to come from categories where we have a 25% or less share, and there will be over $7bn of growth in categories where we have a leading share.
“So, I feel like coming into this role - although I've worked in North America for 25 years - that North America is a big market with big opportunity.”
North America’s beverage industry retail value growth for 2017-2020 predicts a 3% CAGR resulting in $30bn worth of growth: something that promises “a compelling growth opportunity across all category clusters, including sparkling,” says Dinkins.
The most promising category to watch is tea and coffee, with a projected 5-6% CAGR resulting in a growth of $8bn.
Hydration follows with a 4-5% CAGR resulting in $7bn growth, while the juice, dairy and plant category can expect to enjoy a 2-3% CAGR.
Sparkling soft drinks will still see growth but at a slower rate to other categories – around 1-2% CAGR.
Dinkins sets out three pillars for Coca-Cola in North America: building strong brands; creating customer value; and building capabilities to sustain and repeat results.
Dinkins says that Coca-Cola will continue to use its growth model for North America: such as focusing on three advantage routes to market: a strong food service business, a DSD business with bottlers, and one of the largest warehouse chilled businesses in the US.
The next billion dollar brand
Coca-Cola’s Venturing and Emerging Brands (VEB) unit has been key in identifying small brands with big potential: Honest Tea, Zico, fairlife and Suja are all brands that the unit works with.
The unit looks at how the beverage will evolve in 5-10 years’ time – and the brands that will thrive in this new environment.
Dinkins takes fairlife, the ultra-filtered milk brand that has around 50% more natural protein than ordinary milk, as a good example of a brand ‘with real edge’.
“We were able to find fairlife and see that edge that it had,” explains Dinkins.
“The edge really fell in three areas. One is that one of the founders was a veterinarian, and that veterinarian believed there was a better way to run a dairy farm.
“The second was a patented filtration system where we could actually take the best parts of milk and provide them to the consumer.
“The third was state-of-the-art manufacturing to make sure we could get to market quickly with these brands, and the fourth was leveraging the model in the marketplace that [we have with our] Coca-Cola brands.”