Neville Isdell, chairman of The Coca-Cola Co., Atlanta, speaks often about the qualities necessary for success in 21st Century business, and at first, many of those attributes sound like they have little to do with beverages, or even business itself. But Isdell has based his leadership at Coca-Cola on the idea of sustainability, and in his view, that encompasses everything from product innovation to the environment to consumers’ perceptions of the company as a social entity.

“Consumers have a much higher expectation of us, of business,” he said during a speech at the Executives’ Club of Chicago this spring. “They expect us to be part of the solution on everything from climate change to health and wellness. Increasingly, consumers are basing their purchasing decisions on how they feel about a company, so the reputation of the company is part of the reputation of the brand.”

 

For Coca-Cola, one of the world’s most venerable brands, that reputation had slipped off track by 2004 when Isdell took over as chairman and chief executive officer. The company had suffered two rounds of layoffs in 2000 and 2003, its product portfolio no longer reflected the broad array of beverages the marketplace clamored for, and Wall Street was beginning to doubt its ability to get into that larger game. Isdell was tasked with raising employee morale, improving stock performance and helping the company turn the corner into a new era that was vastly different from the one it had led for nearly 120 years.

 

The job would have been an undertaking for anyone, but Isdell was enjoying semi-retirement in Barbados at the time, working with Coca-Cola on a consulting basis. He could just as easily have chosen sandy beaches over a return to corporate life. In fact, he says his family initially lobbied for that. So what lured him back?

 

“Given that I was partly retired for over two years at that time, and that my wife did not want me to do it, I wrestled with the fact that it would totally change my life and that I would end up working harder than I ever worked before,” he says.

 

“At the end of the day, I realized that the question I was asking myself originally was: ‘Would I want to do this given the pressures and the commitment required?’ But I realized I was asking myself the wrong question. The right question was: ‘How could I not accept the ultimate challenge for someone who has spent a wonderful life in The Coca-Cola Co.?’ After understanding that question, and sharing this perspective with my family, I immediately decided to throw my hat in the ring.”

 

Isdell had spent nearly 40 years in the soft drink industry, working in a number of capacities all over the world. A native of Ireland, he spent most of his youth in Africa. Isdell joined the Coca-Cola system in 1966 at its bottling company in Zambia. He went on to hold positions in South Africa, Australia, the Philippines and Germany. In 1989, he was named president of the Northeast Europe/Africa group and led the company into new markets in India, the Middle East, Eastern Europe and the former Soviet Union. Prior to his retirement, Isdell served as chairman and chief executive officer of Coca-Cola Beverages plc in Great Britain, and then vice chairman of Coca-Cola Hellenic Bottling Co. after its merger with Hellenic Bottling.

 

That international experience, as well as the perspective of both bottler and parent company, has served him well in positioning Coca-Cola for its 21st Century role. Coca-Cola operates in more than 200 countries, and much of its growth these days comes from overseas markets.

 

“Having this exposure to different cultures and traditions has helped me develop the ability to look at every issue on a 360-degree basis,” he says. “I have learned that if you approach issues only from your own cultural perspective — without factoring in the perspectives of others — you are never going to be able to properly operate and have a measure of success in other countries and cultures.”

 

Isdell put those global insights to work immediately upon his return to Coca-Cola. He consulted with customers and employees around the world to develop a strategy, which the company called its Manifesto for Growth, that would guide the rest of his time there.

 

 

“When I returned to The Coca-Cola Co. in 2004, it was a time when the company was not performing to its full potential, but it was not a company in financial difficulty,” Isdell says. “We faced the challenge of building on the strength of the world’s greatest brand, Coca-Cola. The brand was not flourishing, but it was, in my view, still a growth brand. Most importantly, I also believed that people in the company knew and understood what needed to be done to reenergize the total system but they had lost the belief that they could win.

 

“In order to validate my belief, I spent my first 100 days not talking to the investment community, nor to the media — something for which I was criticized,” he says. “I traveled around the world to our top-performing countries and talked to customers, partners and company employees, and this reinforced my view that people in the business had the solutions but that there was no consistency in those views.”

 

The result of the global tour was the Manifesto, a 10-year plan developed by several hundred of the company’s top executives. It stated as its goal to reinvigorate growth and inspire employees.

 

“What we have created is a clear view of the business that we’re in — non-alcoholic ready-to-drink beverages — and a clear view that it is one of the most advantaged segments of fast-moving consumer goods, and we have a massive opportunity of growth across the whole spectrum,” Isdell says.

 

 

Embracing that full spectrum of non-alcohol beverages was one of the first challenges the company took on. Coca-Cola had been criticized for keeping its eyes mainly on carbonated soft drinks for many years longer than it should have, while consumers and the competition were embracing energy drinks, sports drinks, ready-to-drink teas and the like.

 

During the past several years, Coca-Cola acquired and developed a number of new brands to broaden its presence in additional categories. In its largest acquisition to date, it bought Glaceau’s Vitaminwater and Smartwater brands in 2007. Several months before that, it acquired fruit and tea drink-maker Fuze Beverages.

 

This year, the company acquired 40 percent of Honest Tea, giving it an organic ready-to-drink tea, as well as a presence in the natural foods retail channel. It partnered with Minneapolis-based coffee chain Caribou Coffee on ready-to-drink coffee products in the United States and Italy’s Illy Caffe internationally. Also internationally, the company acquired Jugos del Valle in Mexico, and it made an offer last month for the Huiyuan juice company in China, which will be its second-largest acquisition, at $2.4 billion, if approved.

 

But Isdell says he didn’t want to see the company or the industry forget about the core carbonated soft drink business in the rush to enter so many other categories. He wanted to kick-start that segment as well.

 

The health and wellness movement had made an enemy of carbonated beverages, but the primary concern was calories, Isdell has said. The company began using the terminology “sparkling” beverages to distance itself from the negative connotations that had taken over “carbonated soft drinks,” and it focused much of its research and development work on zero-calorie beverages.

 

Coca-Cola Zero, a zero-calorie cola that incorporated a blend of aspartame and acesulfame potassium to taste more like full-calorie sweeteners, hit the market in March 2005. The product steered clear of references to diet, and even low-carbohydrate, which was the diet catch-phrase of the moment. Instead, it went with an edgy black label and tie-ins to NASCAR, Fantasy Football and other more male-oriented promotions.

 

The strategy paid off in reaching male consumers who previously refused to drink diet products, and last year the brand hit the billion-dollar mark with sales in 55 countries. That made Coke Zero the company’s most successful new product launch in 25 years, which coincidentally, was the introduction of Diet Coke. With both its diet bases covered, the company devised what it calls the “three-cola strategy” for its trademark brands, with Coca-Cola Classic, Diet Coke and Coke Zero each hitting a specific target audience.

 

“Robert Woodruff once said the world belongs to the discontented,” Isdell says. “That would provide an accurate characterization of where I view our stance on innovation: constructively discontented. If you look at the successful periods for The Coca-Cola Co., they are directly linked to times when we were innovative, when we were leading the industry.

 

“In recent years, we have had some successes with regard to product innovation with launches like Coke Zero. It was my very firm belief that the stagnation of the sparkling beverage category was an attitude of mind, and that innovation and modernization relevant to the consumer needs would excite the consumer around sparkling beverages again. Coke Zero is for brand Coca-Cola that engine. It has helped reenergize brand Coca-Cola on a global basis.”

 

The diet innovation didn’t stop there. In 2006, the company debuted Enviga, a green tea-based calorie-burning beverage developed in conjunction with Nestle SA. The companies, which already partnered on ready-to-drink Nestea products, developed Enviga to make use of green tea’s antioxidant epigallocatechin gallate, better known as EGCG, and its reputation for speeding the metabolism.

 

And this year, Coca-Cola and ingredient company Cargill announced the market availability of Truvia, a sweetener derived from the stevia leaf. The race for a zero-calorie sweetener that could be classified as natural has been likened to the search for the holy grail by some in the industry, and both Coca-Cola and Pepsi-Cola zeroed in on stevia as its source. Coca-Cola beat Pepsi to the punch by about two months in announcing Truvia. Cargill and Coca-Cola will share ownership of the brand, with Cargill marketing the tabletop version and Coca-Cola using the sweetener in ready-to-drink products.

 

Isdell is quick to point out that more innovation is on the way. “A great deal of what we are doing is still in the development phase, and you’ll see that rolling out over the next few years,” he says.

 

“Innovation is not linear. It needs outside-the-box thinking. It needs open minds and people who challenge. To do that we have broadened our reach well beyond any in-house work that we do to embrace universities, a bunch of other entrepreneurial companies. And, of course, where we think that we are not able to move quickly enough, we make acquisitions like Glaceau, and recently, the offer to purchase Huiyuan in China.”

 

‘Green crusader’

 

Tackling the environment is another hallmark of Isdell’s efforts as chairman, leading Fortune magazine to call him “Coca-Cola’s Green Crusader” in an April 2008 issue. The company has taken on water conservation, recycling and more climate-friendly cooler technology.

 

“More and more, consumers, customers, civil society, governments, and just as importantly, our own employees, are demanding that we play a key part,” Isdell says. “We need to play an essential role in ensuring that we have a planet which is fit for our children and grandchildren. That involved basically looking at our own footprint and speaking out on key issues which had relevance to our own business.”

 

Chief among those issues is water conservation. Last summer, the company announced a multi-year partnership with the World Wildlife Federation to conserve and protect freshwater resources. Isdell said the goal was to “replace every drop of water we use in our beverages and their production.” The company vowed to reduce the amount of water used to produce its beverages, recycle the water used in manufacturing so it can be returned to the environment in a form clean enough to support aquatic life and agricultural use, and work with local communities to assist in water collection and replenishment programs that are relevant to those areas such as watershed protection, rainwater harvesting, reforestation and agricultural water use efficiency.

 

“Water is our key area of focus and it is obvious why that is important to us,” Isdell says. “It’s obvious why we can play a role. And in fact, my view is that for companies to be deeply involved in issues, these issues need to be what I call ‘in the line of sight’ to their business. It cannot be just a particular passion of the CEO. It must have a linkage to the business that ensures they are real and sustainable."

 

“The most gratifying piece of all of this is the degree to which this has energized our employees and in fact attracted people to The Coca-Cola Co. … people for whom the company had not been on their own radar some five years earlier. I get the most wonderful emails from employees about how proud they are of the company because of what we’re doing,” he adds.

 

In addition to water, Coca-Cola has taken on an environmental issue that is visible to even the most casual observer — recycling programs for its packaging. Last September, it invested more than $60 million to build the world’s largest plastic-bottle-to-bottle recycling plant in Spartanburg, S.C., as part of a goal to recycle or reuse 100 percent of the PET bottles it produces in the United States.

 

The company teamed with United Resource Recovery Corp. and says the plant will produce approximately 100 million pounds of food-grade recycled PET for reuse each year. The plant is expected to open this year and will be fully operational in 2009. The company also has invested in similar facilities in Switzerland, Mexico, Austria and the Philippines.

 

To improve collection rates of the material to be used in the plant, Coca-Cola and Coca- Cola Enterprises formed Coca- Cola Recycling LLC, which has a goal of recovering and recycling most types of soft drink packaging materials, including PET, aluminum, cardboard and plastic film. And it expanded its relationship with RecycleBank, a company that provides incentives for consumers to recycle.

 

Early this summer, Coca-Cola added the deployment of more climate-friendly CO2 coolers to its plans, announcing it would purchase 100,000 units by the end of 2010. All of the Coca-Cola coolers used during the Beijing Olympic games were HFC-free.

 

CO2 technology, which uses compressed carbon dioxide rather than hydrofluorocarbons, is considerably more expensive than current options. In a speech in Beijing sponsored by Greenpeace, Isdell issued a “call to action” for other beverage companies to embrace the technology and help drive prices down.

 

“We cannot wait for consumers or governments or technology or price to move us towards sustainable solutions,” he told the audience. “Instead we must use another lever to make progress — collective choice.”

 

Isdell often makes the point when speaking about social and environmental issues that businesses such as Coca-Cola are not social service agencies and should not be confused as such. But he says, business is in a unique position to affect change, and ultimately environmental sustainability affects a company’s own sustainability.

 

“It has become evident to me that business has a tremendously powerful role to play in driving our world toward sustainable activities,” he explains. “The Coca-Cola Co. is in a rather unique position because we are a local business on a global scale. Thus, we have the opportunity to interact with governments, civic organizations, suppliers and bottlers in many markets, providing us insight into issues that affect many parts of the world. We can leverage our learnings and reuse the best ones in other efforts.”

 

 

When Isdell returned to Coca-Cola in 2004, he says, “I knew from the outset that one of the most important things I had to do was develop a clear succession plan so we could focus on growth.” Although there was no formal agreement on the length of his tenure, Isdell knew it would be about four years.

 

“I view any appraisal of my success with The Coca-Cola Co. to be directly linked the success of my successor,” he says.

 

In 2005, Muhtar Kent returned to Coca-Cola after being away from the company for about seven years. Beginning in 1978, Kent had worked for Coca-Cola in a number of international capacities. He returned to the company as president and chief operating officer of the North Asia, Eurasia and Middle East Group, then as president of Coca-Cola International, and president and chief operating officer of the company in 2006.

 

“As Muhtar led Asia and then became international president, it became increasingly clear from his ability to deliver results that he was the right choice,” Isdell says. “We have known each other and worked together for 20 years. There is a high-level of trust between us and a depth of knowledge that also helped.”

 

This summer, Kent was named president and chief executive officer, and Isdell agreed to stay on as chairman until the 2009 shareholders meeting. Isdell cites Kent’s work on the Glaceau acquisition and the Honest Tea investment as examples of his ability to take the company forward and continue to generate sustainable growth.

 

“The torch has been passed,” he says. “Muhtar is now the CEO, and while I am chairman of the board, this is his business to run and to take to the next level, which I know he will do.

 

“My job is to help him be successful. I will help him manage relationships with external stakeholders. I’m not big on legacies and I’m not going to write a management book, but I do believe that anything that’s written about me in the future will define me as a transitional leader, given that I only led the business for slightly over four years.”

 

Transitional as chief executive perhaps, but after a career in the soft drink industry, Isdell’s affection for the business is indelible, and he says he would do it all over again.

 

“Knowing what I know — knowing everything that I know today — if I were to start my career all over again, I would instantly decide to work at The Coca-Cola Co. It’s a business which brings fun, excitement, refreshment to the world. And whilst to many this may seem a cliché, I’ve seen the fun and excitement on the faces of people around the world, be they remote African villagers, amusement park enthusiasts or sophisticated diners in five-star restaurants.

 

“There’s a magic to the brand and to the company,” he says. “When you mention that you work for The Coca-Cola Co., people want to engage and discuss not just the formula, but the brand, its reach and history. Sometimes you look at yourself and think, ‘I talk about Coca- Cola too much,’ and yet, when you analyze it, you find that that’s only because other people want to know about it. There’s no other business I know of where the level of interest reaches the crescendo that the brand Coca-Cola can create. To live and work in that environment is very, very special.”