Top Editors ... The World Top 100 Food & Beverage Companies: Innovation and rejuvenation

Title: The World Top 100 Food & Beverage Companies: Innovation and rejuvenation
Date: 08/01/2007
Autor: By Maureen Byrne

Top players have had to ‘re-invent’ themselves and to look afresh at the crucial role of innovation in an increasingly competitive market, which is expanding to include emerging economies such as Brazil and China
By Maureen Byrne

Although nothing very drastic has happened at the very top of the Top 100 list, with the same companies
appearing in the Top 10 (albeit in a slightly different order) a lot has changed within many of the top companies themselves. Most food and drink businesses in Europe have continued to grow, despite squeezed
margins and intense competition; and this seems to be largely because of the increasing re-focusing on core activities in key areas. For many, the past year has also been a period of self-examination, in some cases long overdue, and leaders have had to re-evaluate their role both within their own companies and the wider world.
It was with humility and honesty that E. Neville Isdell took the podium at this year’s CIES –The Food Business Forum’s World Food Business Summit. At the last Summit, Mr Isdell recalled, he had only just returned from retirement to take up his role as chairman and CEO of The Coca-Cola Company. At that meeting, he was breaking his own 120 day ‘listening before speaking’ promise, which was in effect a ‘round-theworld’ assessment of the company. “The people who run the business day-to-day know better than anyone else what needs to be done,” he said.
“No organisation as large as The Coca- Cola Company changes overnight, and our transformation is by no means complete,” said Mr Isdell, who described the transition as having two stages. “The first stage, what I
now think of as the ‘stabilisation phase’, had to do with resolving a number of longstanding issues that were negatively affecting the day-to-day operation of our business, from legal investigations by the US Department of Justice and the EU, to changes in marketing and operating leadership, to morale problems throughout the company, particularly in our head office and in North America. These were the dark clouds hanging over us.”
The second step, which has been the focus of the past 12 months, was to strengthen the structure of the business, and to increase investment in the marketing and innovation infrastructure. Mr Isdell emphasised that this process – the ‘Manifesto for Growth’ – is designed for long-term quality growth, with no short-term fixes. It incorporates the ‘Five Ps’ – people, portfolio, partners, planet and profit, and sets out 10-year goals for the
company. Part of the transition process involved radical changes at the top management level: of the 15 members of the Executive Committee, five have joined from outside the company in the past year, and three have been promoted from within.
The core carbonated soft drinks sector will remain central in the company’s portfolio, and Mr Isdell insisted
that there was still growth to be had here. However, a huge amount of development, in conjunction with suppliers, has taken The Coca-Cola Company into other areas such as sports drinks, coffee drinks, tea and juice drinks; and the launch of the internet platform iCoke. At the CIES Summit, the company presented an ‘innovation zone’ where new concepts such as Blak (Coke with coffee essence); Coke Zero (low calorie
Coke aimed at men, with a taste close to original Coke); and an interesting range of indulgent chilled chocolate/coffee drinks under the Godiva brand could be sampled.
A lot of fusion and blending in the soft drinks area has led to 10 new brands being launched in the USA this year, as well as a number of products across in the world in countries such as Japan and China. In Australia, for example, Fantalactic (a blend of juice and milk) has recently been rolled out. This is part of the overall plan to be a ‘total beverage company’ offering a concept of Wellness that the company sees in terms of ‘feeling good about yourself and your life’. There are likely to be many more launches, and to reinforce
this message of diversity, The Coca-Cola Company has, for the first time, formulated a corporate identity campaign in addition to brand campaigns. ‘Flying High in the Face of Competition’ was the theme of the CIES Summit, and Mr Isdell said that the company aims to double the Coke brand and portfolio over the next 10 years. “To be sure, The Coca-Cola Company is in no way flying high yet,” he said.
“However , we are beginning to gain altitude.”

Wellness and nutrition
With the twin challenges of obesity in the developed world on one hand; and the plight of starving people on the other, food and drink companies are striving to alleviate both of these serious problems, both of
which are life-threatening. Peter Brabeck-Letmathe, chairman and CEO of Nestlé, the world’s largest food
company, explained: “We have long had a vision of Nestlé as not just the world’s largest food and beverage company, but also as the leader in health, nutrition and wellness.”
Steps have been taken during the past year to bring this vision to life. On 1 January this year, Nestlé Nutrition became a standalone business entity, and the Corporate Wellness Unit is now operational and driving group-wide intitiates in the area of health and wellness. In common with a number of food companies and retailers, Nestlé has its own way of communicating nutritional values on packs, with its ‘nutritional compass’. More ‘Branded Active Benefits’ (BABs) products have been rolled out, and sales of these products rose by a healthy 20% during the year. Transformation has figured high on the agenda for Nestlé, too. “The move to a
Health, Nutrition and Wellness company is an important aspect of that transformation, the strategic aspect, if you like,” said Mr Brabeck-Letmathe. “The other aspect is more operational.”
Shared service centres, and outsourcing have figured among the operational initiatives, as well as improvements in the supply chain, and a focus on driving efficiency through the Operation Excellence 2007 initiative.
Nestlé is also well aware of its responsibilities towards developing countries. “It is my firm belief that, in order for a business to create value for its shareholders over the long term, it must also bring value to society,” said Mr Brabeck- Letmathe. “Our investments must be good for the countries where we operate, as well
as good for the company.”
The company’s strong ties with the emerging Latin American market were forged many years ago, when it built its first factory in the developing world in Brazil in 1921. The company’s presence has grown and flourished, despite the political and economic instability, and today there are 72 factories in the region. As part of its ongoing commitment to the region, the company has created the Dairy Partners Americas (DPA: a joint venture with Fonterra), which aims to improve agricultural practices and milk collection facilities in the
region, as well as wastewater treatment. Nationwide nutrition programmes have also been developed in a number of countries, including Chile. “We are now seeing the fruits of our long-term investment in this
growing region,” said Mr Brabeck-Letmathe.
Latin America’s economic growth of 6.2% in 2004 was the best of the last quarter century, according to Prof Filipe Larrain, of the Pontificia Universidad Catolica de Chile.
“Prospective growth rates for 2005 to 2006 are not as spectacular, but still respectable at around 4%.”
Continued economic growth will be essential to the region, which faces considerable challenges, not least of which is the fact that about 45% of Latin American people live below the poverty line, although there are wide variations among the countries, with only 19% at this level of income in Chile, the most open of
the economies.
(Food and Beverage International will be reaching out to this region to provide valuable information for the food and drink industry with its launch of Alimentos y Bebidas, Latinoamérica, in September this
year. It will be published in Portuguese for the Brazilian market, and Spanish for the rest of Latin America.)

Global responsibility
Danone is a company that has vigorously refocused from nine to just three categories: fresh dairy (55% of the business), beverages (27%) and biscuits (18%), and is now the world leader in the first two, and No.2 in
biscuits. A strong health positioning has seen developments such as Activia, and products aimed at improving healthy ageing and good nutrition, founded on research and development based at the Daniel Carasso Research Centre in Paris. ‘New frontier’ countries for Danone (China, Indonesia, Mexico, Russia and the USA) have doubled their share of group sales to 25% since 1999. And this seems set to continue as economies in emerging countries such as China open up and improve.
Speaking at the CIES – The Food Business Forum Summit in Paris, Franck Riboud, chairman and CEO of Danone, stressed that innovation was the key to further and sustainable growth. Adapting global concepts locally is one of the company’s key strengths, as well as ‘stretching’ categories such as bottled water to include flavoured and functional drinks.
Anther passion of Mr Riboud’s is ‘to bring health through food and beverages to as large a number of people as possible’. “Worldwide, three billion people live on less than €2 a day,” pointed out Mr Riboud. “We need
to break the price barrier, and we have rolled out a new model in South Africa, where Danimel yoghurt is priced at 1 Rand (€0.10) each. The distribution is through ‘Danimel Ladies’ who buy the product and
take it to introduce to others. It has even been taken to churches!”
The latest project launched by Danone is through a partnership with micro-credit bank Grameen in Bangladesh, where a new yoghurt factory will be opened in November this year. This project will involve cows being bought with money borrowed from banks via Grameen, and the products themselves will be sold for around 3 or 4 euro cents each. Interestingly, the yoghurts will be packed in corn-based biodegradable cups.
This would seem to be rather a leap of faith, but when questioned about the wisdom of this project, Mr Riboud admitted that he did not know whether it was strategically wise or not. Rather disarmingly, his reply was: “If you try to understand everything, you’ll never do anything. Bangladesh is a small project. Let’s see what happens!”

Transformation
Patrick Cescau, group chief executive of Unilever (a company that was multinational before the phrase even existed) said at the CIES Summit that companies have been transforming themselves since commerce began, and that if they do not embrace this idea, they simply die.
The recent transformations at Unilever have certainly been radical and wideranging. “The objective is to build a portfolio weighted towards market leadership and higher growth, in personal care, emerging markets and the Vitality programme covering health and nutrition,” said Mr Cescau.
“Where businesses don’t fit this focus, Unilever is exiting, most recently from much of its frozen food business in Europe.” The organisational changes within the company have also been quite dramatic.
“The structure has been simplified,” said Mr Cescau. “Changing the culture and behaviour of managers in our regional offices has not been easy, as often they are fiercely entrepreneurial. However, we want people to be more accountable, and to work in an integrated way and on a globally coordinated model. Our direction is clear, and we are making progress.”
To facilicate new behaviours, the company has changed incentive systems, the language used internally, and some of its personnel – including almost half of its senior leaders in the past year. Many of its noncore activities have been outsourced, such as IT, HR and finance; and a firm focus has been put on knowing its customers.
The most critical change has been to create two ‘pillars’: the ‘global category organisations’ and ‘regional go-to-market organisations’ to meet the needs of shoppers and retail customers, market by market. In particular, country leaders have been asked to go from focusing 80% of their time on consumers, to 80% on retail customers, and viewing them as partners rather than channels.
The impact of the transformation has been good, with organic growth moving from almost zero in 2004 to around 3% in 2005 and in the first quarter of this year; and growth in emerging markets was 9% in 2005. “At the same time, it is vital to be clear about what not to change,” said Mr Cescau. “Our values remain the same:
responsible and sustainable trading, an active role in the communities where it operates, integrity in dealings with all stakeholders, and a commitment to diversity.”
The theme of the CIES Summit this year was ‘Flying High in the Face of Competition’, which was an apt choice, given that the organisation’s annual Top of Mind Survey showed that competition was the No 1 issue
for both retailers and manufacturers this year.
The fact that global mobile phone giant Nokia gave a presentation at the Summit this year is perhaps a sign that competition will continue to bite, and will come from some unexpected places.
As life increasingly goes ‘mobile’, Nokia’s Pekka Somerto, head of lifetime relationship manager, predicts that mobile phones will open up possibilities such as ‘mmarketing’ and ‘m-payment’ in a seamless home system with connection to the TV. Generation C (C for ‘connected’) is one to be watched. Korea, in particular, has embraced the ‘m-payment’ model, and in the banking area, almost half of consumers
now pay using their mobile phones.
“Commerce via the internet will migrate to the mobile phone sooner rather than later,” said Mr Somerto. What this might mean for retail sales of food remains to be seen, but what is certain is that there will be more
challenges ahead for the food and drink industry in the year to come as consolidation continues, and competition grows ever fiercer.

This article was reproduced with permission from Food & Beverage
International (copyright Haydon Jackson Publishing Ltd)