The past year has delivered solid results for Coca-Cola Amatil (CCA) and this success has been based upon both strategic changes and the successful introduction of new products, with some notable impacts on the convenience channel.
In a post financial results release chat, C&I Week spoke to Martyn Roberts, group chief financial officer at CCA, to find out how the changes at CCA have impacted the convenience channel.
Significantly the Australian Beverages division of the business is ahead of schedule in delivering a three year, $100 million cost savings plan and the business is progressing steadily in the implementation of the strategies, first announced in an October 2014 review.
The stated objectives of the 2014 review included the need to stabilise earnings and return to growth; strengthen the company’s brand portfolio and increase appeal to a wider range of consumers; optimise revenue management by optimising price, pack architecture and strengthening promotional management; restructure the company’s cost base to deliver ongoing productivity gains and redesign the route to market model to improve cost to serve and better leverage CCA’s scale.
By resdesigning the route to market, CCA has achieved significant gains and these changes have impacted directly upon retailers. As Mr Roberts told C&I Week, while CCA hasn’t changed the way it delivers product, it certainly has changed the way it sells and that’s been a main focus of the last 12 months.
“What was happening before was customers (whether they be good, bad or indifferent) were getting a very similar level of service attention from our sales people. But what we have done now is we’ve categorised those customers into what we call gold, silver and bronze. The gold customers – who are our biggest customers – are now getting a lot more focus from our sales people and then the smaller customers, we are really encouraging them to move online or use our national sales centre and be more self-sufficient,” Mr Roberts said.
According to Mr Roberts this change has enabled the company to grow sales by having more focus on the bigger customers.
“That’s enabled us to free up sales people [and] form a new team of new business hunters who can actually go out and look for new customers rather than having our sales people working in the same pool that they have been working in for years.”
Refocusing the sales team in this manner so that sales people are able to go out and try and find new outlets and expand the company’s reach is a huge operation.
Mr Roberts says “it has been a big reorganisation with most of the effort on that in the first half and that’s really settled down in the second half and will hopefully set us in good stead for this year and beyond.”
Another stated October 2014 goal delivered in the 2015 financial year was to strengthen the company’s brand portfolio to increase appeal to a wider range of consumers. This has been particularly important in the convenience channel and has been demonstrated most effectively by the introduction of the Barista Bros line of flavoured milks. Over the 12 months, Barista Bros captured a 6 per cent share of the category.
“Its success in convenience channel is basically around the time of day… it is an occasion-based drink. Whereas Coke is more an afternoon drink. Barista Bros captures the morning consumers.”
While Barista Bros has quickly gained traction in the convenience channel other releases – Coke Life in particular and to a lesser extent Zico coconut water – have not seen the same level of success in convenience.
Mr Roberts points out that while Coke Life only accounts for a small percentage of sales (1 or 2 per cent of trade mark Coke, in line with the company’s pre-release expectations), “it not really about the current performance for us. It’s more a ‘stake in the ground’ to get a reduced calorie but naturally sweetened product into the market place,” he said.
“It is really the start of what will be a journey over a number of years in terms of reducing the sugar content as we get the formulation better to move towards the direction of having a fully naturally sweetened product, which is really what consumers are after,” Mr Roberts said noting that continuing investment into stevia and natural sweeteners and moving towards more reduced sugar products is “the number one R&D project for The Coca-Cola Company in Atlanta at the moment.”
The company’s introduction of Zico coconut water to the company’s enhanced water range has been a great success, with the company’s enhanced waters now holding about 35 per cent of the category value in grocery; in large part due to the launch of Zico.
According to Mr Roberts, Zico started stronger in grocery than in the convenience channel, in main due to issues around product supplies as it is an imported, US Coca-Cola Company trademarked products.
“We made a decision to import an existing product … availability has probably been challenging and it’s probably been stronger in grocery than in petrol and convenience mainly due to availability rather than customer or consumer demand,” Mr Roberts said.
Asked for his predictions for the convenience segment in the next 12 months, Mr Roberts said, “I think for us there’s a lot of upside. We see a lot of upside in dairy in continuing the strength of Barista Bros. We see in more the medium term, getting our juice offer in a good space so we can get a share of that, increasing availability of niche products like Zico and continuing the roll out of our smaller pack sizes. I think there’s only upside in the channel as we start to focus on it a bit more.”