The Coca-Cola Company KO appointed Hendrik Steckhan as president of its U.S. operations, per a Wall Street Journal report released on Tuesday. 53-year-old Steckhan was, until recently, serving as the president of Coca-Cola's North American non-carbonated beverages unit. He also led Coca-Cola’s German business from 2010 to 2014. Steckhan will report to North American chief, Sandy Douglas.
Additionally, Stuart Kronauge and Ivan Pollard were named as co-heads of U.S. marketing. They will be taking over from former North American marketing chief, Wendy Clark, who resigned last month.
Coca-Cola’s North America business has seen improved sales performance in 2015 supported by higher prices and better volumes largely on the back of its disciplined quality advertising investments.
The North America segment recorded revenue growth of 1% year over year in third-quarter 2015, reported in October, despite currency headwinds and negative impact of structural changes. Volumes grew 1% as improvement in still beverages was offset by decline in sparkling sodas.
To boost long-term sales and profits in the North American segment, Coca-Cola is pursuing investments in newer revenue platforms. In June, the cola giant acquired a stake in and signed a deal with Monster Beverage Corporation MNST to expand distribution of Monster products into additional territories. This will allow Coca-Cola to compete more effectively in the global energy category.
Similar to the Monster deal, Coca-Cola acquired a 17% stake in Keurig Green Mountain, Inc. GMCR in 2014/2015. Also, the company signed an innovative partnership with Keurig Green Mountain under which the latter will make and sell Coca-Cola branded single-serve pods for use on its Keurig Kold at-home beverage system. The deal opens up an exciting new packaging format for Coca-Cola’s brands.
It also signed a distribution agreement with Suja, a high growth organic cold-pressed juice company, to gain a foothold in this growing market. In China, the company has invested in the plant-based protein drinks platform through the acquisition of the beverage business of China Green Culiangwang Beverages Holdings.
Moreover, Coca-Cola is refranchising the majority of its company-owned North American bottling territories to create a more efficient system.
It has been divesting and merging many bottling operations since 2014 to revamp its bottling system and thereby improve margins and drive growth. Three of its European bottlers — Coca-Cola Enterprises, Inc. CCE, Coca-Cola Iberian Partners and Coca-Cola Erfrischungsgetränke AG — will merge to form a new Western European bottler named Coca-Cola European Partners. Also, the company has entered into an agreement with beer and beverage company, SABMiller, and partner Gutsche Family Investments, to combine their bottling operations in Southern and East Africa and form the largest Coca-Cola bottling entity in Africa.
The company has also created the National Product Supply System (NPSS) to strengthen and streamline the U.S. production volume that will lower costs, enhance investments and improve innovation.
The refranchising efforts, though hurting sales/profits in the near term, will result in higher operating margins, lower capital spending, and improved return on invested capital over the long term.
Coca-Cola carries a Zacks Rank #3 (Hold).
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