Coke’s CFO on Unbottling a Global Transformation

John Murphy was named to lead finance at The Coca-Cola Company in 2018, which placed him in a key role to help transform the enterprise into a digital-first, total beverage company with an asset-light business model. Murphy shares an inside account of implementing the transformation, including what was involved in scaling the company’s growth and portfolio strategy worldwide, with Deloitte Financial Advisory Services LLP principal Kevin Moss, who is Deloitte’s lead relationship partner for The Coca-Cola Company. Murphy also discusses his approach to leading an ongoing finance transformation.

Moss: What motivated Coca-Cola’s business transformation?

Murphy: Our guiding ambition was to develop a sustainable growth model for the company based on a consumer-driven portfolio that delivers value for shareholders. The strategy focuses on growing the top line, building and nurturing great brands by understanding key growth levers, and becoming a total beverage company for evolving consumer tastes. To support the focus on growth and brand building, we decided to pursue an asset-light business model, which led us to re-franchise many of the bottling operations around the world that we had bought back or invested in over previous decades.

At the same time, we were very focused on external changes in the business and consumer environments, especially the changing role of technology in people’s lives. A major element of our transformation is incorporating digital business processes and analytics that can keep us relevant to consumers and at the forefront of changes in business.

What changes were made to align the business with the new strategy?

Murphy: To put the company on a sustainable growth path, we started by simplifying our brand portfolio and streamlining how we operate as a company and partner with our bottlers. Our analytics showed that we had brands that were underperforming and that the majority of our future growth was going to come from a set of brands already in our portfolio. Significantly reducing the numbers of brands was not a hard decision to make, but executing the decision with speed and efficiency was challenging. It required a great deal of work with our operating groups, our bottling partners around the world, and, in some cases, our customers. Much of that work was accomplished during the pandemic―in fact, COVID was a catalyst for us, as it has been for many of the changes we are making. Some of those changes require making courageous decisions, which, when you are doing well and operating under more normal conditions, can be harder to make.

To drive the operational streamlining effort, we created a new operating model and reduced the number of operating units. We have transformed a shared services organization historically focused on the back office, expanding its scope to serve both the operating units and our functional teams. We have continued to streamline the resources needed at the center and to manage the overall global enterprise, which is still in early stages. A big part of resource allocation has been making sure that we get the balance right between scaling where it makes sense, while staying close to the local marketplaces in the 200-plus countries and territories in which we operate, because that is where we drive our competitive advantage over time. As you can imagine, moving both resources and responsibilities in a significant way and in a relatively short period time creates noise and bumps along the way. The last year was one of navigating through those bumps as we got this new model up and running.

What changes in decision-making structures under the new operating model were needed to align with the strategy?

Murphy: That structure is still in the early stages, but we spent a lot of time learning from our own experiences as well as listening to and learning from other companies that had undergone similar transformations, which was really valuable. One of the big lessons was avoiding falling into a complex matrix trap, where people are stuck in silos that restrict them from leveraging collective perspectives across the organization.

At its core, our new global model is based on leveraging scale to drive value, including centralizing many processes through shared services support. At the same time, we are promoting and nurturing empowerment at the local level but with an enterprise mindset. We recognize that operating in more than 200 countries and territories is a competitive strength, and for this model to work, people have to feel empowered to make decisions wherever they stand within the organization. They now have the capabilities to make those decisions, taking into account not only what decisions are important locally but also how they help the broader enterprise agenda.

Another strength of the new operating model has been the creation of category leadership roles, in which we provide more responsibility to a group of executives who have global responsibility for different beverage categories, in line with operating units. We have set up guidelines on the areas where the global category leads have decision rights versus areas where they will have inputs and vice versa with the operating leads, so people have a structure to follow that is consistent worldwide. Marketing expense, for example, is the largest area of resource allocation spend in our business, and we laid out very clear guidelines as to who is ultimately responsible for the decision on resources at different levels.

How does the leadership structure work, and where do the CFO and finance fit in?

Murphy: I was on the leadership team that designed the new operating model, working very closely with our CEO, president, CMO and the rest of the executive team. With strategy reporting to me, I led the day-to-day work required to develop and implement the detailed plan. But what is critical is that this work requires a higher level of collaboration than we have had in the past. That collaboration is necessary during implementation as well; you need to have a large group of leaders on board to effectively make changes on a global scale. We spent a lot of time with a leadership community of about 200 people from around the world, framing the direction in which we are headed and getting their involvement and participation so they felt they owned the program when it came time to implement. My role now is overseeing how it works in practice and making sure we learn lessons from the implementation, channel feedback and make adjustments as we move forward.
From a finance perspective, when I became CFO, one of my objectives was to make sure the finance function becomes future-proofed so we can deliver what the organization needs. I created a role in my leadership team called Future of Finance, and we have designed and are implementing our own transformation to make sure our finance organization of the future has the capabilities, resources and operating model to become the best possible partner we can be to the business.

The transformation that finance has undergone has brought some of the biggest changes to any function across the company. We’ve established a more consistent organizational model for managing the activities we perform globally. The key enabler is having good data―and creating more efficient data services globally has been a challenging task. We moved almost half of finance’s resources into a new organization called Platform Services, which centralizes and scales the delivery of services needed by the operating units and functions, whether it’s analytics, governance or resource allocation support.

—by John Labate, Deloitte Services LP, editor, Deloitte Insights for CFOs, and Andrew Marks, Deloitte Services LP, editor, Deloitte Insights for sustainability leaders.

Editor’s Note: This is the first in a two-part series. Next up: Murphy discusses the role of data and analysis in Coca-Cola’s finance transformation.

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