Ladies and gentlemen, please welcome to the stage Investor Relations Officer for The Coca-Cola Company, Mr. Tim Leveridge.
Good afternoon, everyone. My name is Tim Leveridge, and I have the honor of leading the investor relations function here at The Coca-Cola Company. On behalf of my team, the leadership of Coke, and all of our associates worldwide, welcome to Atlanta, Georgia, and our company headquarters. It's great to have you here. As many of you know, it's been a while since we've done one of these, so it's great to have you back on campus, and we hope that today is both informative and helpful as you continue to make your decisions about our business. Now, as we get going today, I'm sure you all will be happy to know that we're going to have plenty of this available on the website. For those of you that are joining via the website, welcome. Glad you're here as well.
Also, too, in the spirit of digitizing the enterprise, we have created a nifty app for you to be able to download if you've not already done so. All of the materials, presentation materials, as well as a lot of the information we showed in the showcase, will be available on that app. Definitely encourage you to do that. Now, I wanted to share with you around the information that we shared in the press release today. We did reaffirm our 2017 outlook, and we did talk about and reiterated our 2018 outlook considerations. We're not going to be talking about those in detail today, but we did talk about and provided some longer-term expectations that I'm sure many of you have seen by now, and we'll be covering those off in our presentations.
Now, I wanted to take a minute and talk quickly through what the day is going to look like. James Quincey, our CEO, is going to be kicking us off, followed by Francisco Crespo, our Chief Growth Officer. We're going to take about a 15-minute break at that point in time, then we're going to come back with three of our four Group Presidents, Alfredo Rivera, Brian Smith, and John Murphy. Each of those individuals are going to take you through a bit of what they're doing in their groups and how it ties into the overall company strategy. We'll take another break, so again, you have lots of time to try all of the products outside. We're going to come back, and Jim Dinkins, who's our incoming Group President for North America, is going to wrap up with that.
Kathy's going to walk us through our financial overview as we go into the rest of the formal presentations. We'll have plenty of time for Q&A at the end of that. We'll wrap up and go from there. With that, welcome once again. Let's start the day.
No, I can't stop me when I taste the feeling. Nothing could ever bring me down. Yeah. Feels good in my heart and my soul when you're right here beside me. I don't ever want this day to end. We can watch the waves, have your Coke and you sit here beside me. Take a little of my heart again. We can feel forever, you feel together we will. No, I can't stop me when I taste the feeling. No, I can't stop me when I taste the feeling. Feels good as we stand on the shore. Our hearts are still jumping. Grab another Coke and let's dive in.
Ladies and gentlemen, please welcome to the stage the President and Chief Executive Officer of The Coca-Cola Company, Mr. James Quincey.
Good afternoon, everyone. As Tim said, welcome to Atlanta. It's been a while since we've had everyone here for an Investor Day. Hopefully, you had an opportunity to see some of the stands out there, and dig into them, try some of the beverages, see some of the setups. If you didn't, of course, there'll be an opportunity in the breaks. I think there's some interesting products, some interesting ideas out there, and of course, a degree of openness about where we're going and what we're trying to do. Let me jump in and start setting up the day of the presentations. Of course, you're all more than familiar with this statement, which you'll see repeatedly through the day. Let me connect us in a way back to where we were earlier the year. We set out a set of strategies earlier in the year.
We set out a destination. We set out an idea of beverages for life. I want to connect you back to that and start filling in some of the texture, and some of the ideas, and some of the things that we need to do to bring it to life. The destination was clear. Yes, it was beverages for life. I think that in itself, as I talked about at CAGNY, encompasses the shift to a total beverage company that we're trying to push for. It's not a journey that started this year. Actually, it started a while ago, over 10 years ago. I think we're being very decisive and assertive in saying we want to go for total beverages. We want to be participating in each of the 8 beverages people drink during the day, and we want to round out that portfolio.
The first part of the destination that we set very clearly was accelerating the move to a total beverage company. We'll talk about that today. We also said, thankfully, we're very close, as we closed, obviously, the U.S. at the end of the last month, we're returning to being a brand-focused organization. Returning to the core of what we've always been able to do well, which is building, nurturing, and keeping relevant brands for consumers. Lastly, in order to make all of that happen in a 21st century environment, we're driving culture change. We're driving culture change in the way we operate, the way we engage with the bottling system, and the way we go to market collectively. The destination of where we want to go is clear.
It is worth just pausing for a second to remind ourselves of the strong foundation from which we're starting from. We are perhaps the envy of many companies in terms of our starting point. That foundation, yes, we're number one in sparkling beverages, which of course, everyone knows and expects. We're also the number one company across any RTD, non-alcoholic ready to drink. We're the number one juice, dairy, and plant company. We're the number one hydration company. We're the number one tea and coffee company around the world. We already have a great position. Not all those shared positions were born equal, we have a great starting point in terms of the portfolio. We've been able to build those brands over time. Since 2007, just a little before the last analyst meeting, since then, we've doubled the number of billion-dollar brands we have.
We have a fantastic go-to-market system with our 250-plus bottling partners. We reach those 27 million customer outlets, which I think in parenthesis, importantly, cover 20 different channels. We have a balanced global distribution, balanced global portfolio. In almost rough terms, our profits come a quarter each from each of the operating groups. A fantastic strong foundation of brands, distribution, and know-how. We also participate in a great industry. I think firstly, it's worth noting that this is an industry that has a diverse sales base. If you want to simplify those 20 channels down a little to just the modern grocery trade, the traditional mom and pops, and the everything else eating and drinking, you'll see that the industry of beverages is broadly distributed, unlike virtually any other industry across multiple channels. There's diversity in our business. There's also strong growth in our business.
In percentage terms, beverages are growing faster than many other consumer products. Finally, it's not just a game of percentages. As you all know, it's about the dollars. That growth rate of about 4% across the world in percentages is really going to drive about $150 billion of extra growth through 2020. It's got a diverse customer base, it's got leading CPG growth rates, and it's a lot of dollars. Got a clear destination, a great foundation, and we're in a very attractive industry. Of course, nothing in this world is without its challenges or opportunities, depending on how you want to see them. That's just as true of the consumer products industry. Consumer preferences are changing.
They're changing around ingredients, whether it be less sugar at times, whether it be more natural, whether it be organic, whether it be just really understanding the core provenance of where the product's coming from. Sometimes it's about where they buy them, how they buy them electronically. The shift from the bricks and mortar, maybe not to everything online for grocery, but the digitization of the total experience of shopping is part of what's going on. You can see it in your own lives. You can see it around the world. This is not just a first world phenomenon. It's across the developing and emerging markets, too. Consumer preferences are changing fundamentally, that's making the category shift, and it's making the products within the category shift.
Of course, some of these could be representative challenges, for an industry or for a company better said like ourselves with a great foundation and the capabilities, we can turn those into opportunities to drive not just the growth, but the share gains for ourselves. The digital evolution, I touched on it in the sense of the consumer's preferences and how they're changing their behaviors, how that's affecting their interactions through social media, how that's changing the way they shop. That digital evolution will flow back through the system. We will have to partner in different ways with our customers. We will have to re-engineer our own supply chain to be even more digital. Of course, last, certainly by no means least, regulation and taxation. The food and beverage industry is certainly coming under the microscope for more regulation around the world.
There are instances of taxation, particularly on sugared beverages and sometimes broader, but including sugar beverages. We have to confront these realities. We have clear points of view and beliefs about why and when taxation is a useful vehicle and how it should be implemented, depending on the objective, depending on whether the objective is to generate funds for the government or to try and help solve the obesity problem. We're clear we need to be part of the solution. We have a clear strategy. We obviously have a clear view as well on narrow taxation not being effective. We think we can help to solve the obesity problem. We have to turn each of these challenges into opportunities. With that, we focused in on five clear strategies.
Accelerating the growth of our leading consumer-centric brand portfolio, driving the revenue growth algorithm, strengthening our systems value creation advantage, digitizing the enterprise, or if you used to like the old phrase, our products need to be within an arm's reach of desire, maybe in the future that needs to include they need to be within a click's reach of desire. Last but not least, unlocking the power of our people. In doing that, we need to make the right choices and invest for growth. Hopefully that's connected a little bit back to where we've been talking about the story over the course of this year. The clear destination, the beverages for life, fantastic foundation, real growth industry, yes, with challenges, but with lots of opportunities.
With our clear five strategies, let me take them, let me tell you a little bit about what's happened so far. Also talk about each one sort of as a platform to lay out the pieces of the rest of the afternoon and connect with the rest of the presentations that you're going to see come along. What have we done so far? We've done a lot. One of the principles we've been trying to live up to in this ever faster, exponentially changing world is to move quickly. We've taken the bull by the horns. I'll talk a little bit about culture as I get to the end of this presentation. Speed and not waiting for everything to be perfect is one of the things we've been trying to do.
Let me just perhaps highlight a couple of the things that we've done so far during the year to really try and push ahead with these strategies. Rather than perhaps talk about Coke Zero Sugar, which we'll touch on later, let me underline a bit on test and learn, because I think that's becoming really important for us as part of the culture. In the past, we would see ourselves more like the set piece battles. You prepare for a very long period of time for a product launch, you try and make it perfect, and you go for it. That means it took a long time, and you did relatively few of them, and you bet big on whether it will work or not. The future's not going to be like that. We must be much more Agile, get things to market quicker, maybe smaller, test, learn.
If they don't work, they don't work, move on. If they do, take them to the next stage. I think part of what's embedded in that is the test and learn approach. That's even true in Coke Zero Sugar. It wasn't one monolithic idea launched everywhere. There were waves that went through of different iterations. The next thing I'd perhaps underline in our journey so far this year is the Revenue Growth Management acceleration. Of course, we've been trying to chase price, we've been trying to chase mix, we've talked about packaging strategy. We've done a lot on Revenue Growth Management over the years, we've been refreshing the whole idea.
In some of the later presentations, we'll talk about how we're bringing that to life in new ways and also to places that perhaps hadn't done it as profoundly as perhaps we should have done in the past. We'll talk about the new re-energized bottling system. Mercifully, we're not going to be talking about progress on refranchising. The map is finished. A couple of countries to go, but let's say in big terms, the map is finished. What we'll talk about is how this new system is energized to chase the beverages for life. Digital's coming, don't worry. I'll talk about unlocking the power of the people. You all know that we've done a number of things so far this year already. A new operating model, the Lean Center. Earlier this week, we launched an update to our compensation approach.
I'll touch on those a bit more later on. We got out of the door fast. Trying to bring new energy and new life to the year against the five strategies. Let me now connect each of those strategies and try and just tease out a little more information, give you the overall story, but also provide some connection points to the presentations that are coming up. Let me do that firstly by taking the first two strategies, the consumer-centric portfolio, and in a way, the revenue growth management, because they tie together. On the top bit, to some extent, we've talked about that before. How do we drive our global portfolio? Clearly, a lot of it comes from our own internal innovation. We've talked at times over the years how actually the majority of those billion-dollar brands that we've got, the majority of them are actually created internally.
We have, working through our ecosystem of innovation partners, we have, between ourselves and those partners, an ability to generate new ideas and turn them into big brands. Continuing to invest in world-class innovation. Doing it in a different way, yes. We're becoming much more open source, if you like, than proprietary. Trying to leverage the scale of all the supply base rather than just do everything ourselves. Trying to do it more in a test-and-learn approach than big, few set-piece battles. We've got a track record of innovation, and we believe we can leverage that to drive more progress in the marketplace. Clearly, we operate in 200 countries plus. Having a success in one country, unless it's a couple of countries, frankly, almost doesn't move the needle. The needle only really moves when it's a big success in more than one of the big countries.
Lifting and shifting, whether it ends up being the same brand or that idea reinterpreted under an existing brand elsewhere, our ability to lift and shift the best ideas and the most successful ideas around the world is absolutely critical to our ability to create these more billion-dollar brands and a diverse portfolio. Yes, there will still be a role for both on M&A. When Kathy talks, she'll talk about how that's reflected in the numbers, but we absolutely continue to believe there are opportunities to pick up some of the smaller companies, great brands, great companies, make them bigger where they are, and certainly make them bigger by taking them globally. Bolt- on M&A will continue to play a role for us. Now, to some extent, we've said that before. I certainly said it in CAGNY and some of the other investor presentations.
It's about doubling down. What I want to connect to, which Francisco is going to talk a lot about, is how are we going to be disciplined with that growth? Because the more innovation you have in the more countries, in more categories, the opportunity to get anarchy and total distraction starts going up. We need to bring more discipline to our approach of how do we make sure that the big amount of innovation we create ends up in fewer successes, not in a jam sandwich approach without it resulting in good results. Francisco will come and talk about the discipline of growth, how we're very clear on the importance of everything ending up having quality leadership. If it's just an also ran small few points of market share, it's not worth the hassle. Quality leadership is key.
He'll talk about how we view what needs to be done to build a brand under the idea of quality leadership and how that's different by the different stages of growth. We have a clear idea of how we need to grow our portfolio, the sorts of ways we need to grow it, and we're super clear that that only can be done if we're very disciplined. As I said, Francisco will delve into that a little more deeply. The third strategy was strengthening the system's value creation advantage. The reality is, as I said, mercifully, refranchising has ended. The system is clear. It's re-energized. In fact, we were at the global system meeting earlier this year in May. We were talking about what needs to be done to bring Beverages for Life to life. Now, it's not exactly the same everywhere because the starting points are different.
As the group presidents come up and talk, they'll talk about how their parts of the world are pursuing the journey towards Beverages for Life. Yes, the journey's in different stages in different places. There'll be different mixes of how important is it to get into new categories at what speed. The starting points are different. The role of our GM in that will be different. Each of the groups will give a little more of a nuanced story about where they are on the journey and how they go forward. Each of them will talk about how they're engaged and how energized the bottling partners are to go with us on that journey, having got the map finalized and having largely reset and clarified how economics work going forward.
Progress on the portfolio, progress on the revenue algorithm, and engage with the system going forward. Fourth strategy around digital. Clearly, digital is core component. I think it's almost in danger of becoming everything, and at times nothing. Therefore, we think it's really important we break it down and get specific about some different parts. Digital marketing, everyone knows the consumer needs to be engaged with in a different way. Enough has been said about that, in terms of how the millennials, how the world is changing in terms of consumption of media. Francisco will talk a little bit about how we're adapting, the progress we've made, and what's left to be done in terms of engaging with the consumer in terms of digital marketing. That's one bucket the way we see it. The second one is e-commerce.
We see ourselves predominantly working with our customers across all those varieties of channels I talked about to help those customers succeed and win against their strategies. Many of them have an e-commerce component or a digital component, not just the pure online players, but also the ones, whether they be supermarkets who are going online, whether they be takeaway food delivery going straight to the consumer. Our approach has been to work with them through their platforms to create value in their strategies. We've tried a few experiments in going direct to consumer, whether that be in developed countries or in places like China. In the end, I think the large majority are going to go through the customer platforms, and we're going to create value with them that way. Obviously, we had to find somewhere in the presentation a room for a cute expression.
The next one is that. The ecosystem. The digital world needs a new ecosystem. I don't know who got the creative prize for that, but that's the idea. We need an ecosystem. Doing what needs to be done with the consumers in a new way, doing what needs to be done with the customers in a new way, requires the system, the models, and us to have a different setup. We've got to be different, a new ecosystem. Kathy will talk a little bit about some of the stuff we're doing internally. We've made some good progress in the last couple of years reformulating the way all our systems work, the way our processes work. We've implemented a whole series of things between software like Workday, between some of the robotics, the automated intelligence. We've got more to do.
We've got more to do because there's no way we can aspire to help engage with our consumers, and help our customers if we ourselves can't be at least on the front edge in terms of how things work digitally. We made a lot of investment, and we're doing a lot of work to bring that up to speed internally, and we are working with our bottling system to do that, too. Digitizing the enterprise, three big buckets, the consumer, the customer, and the internal piece. Last of the five strategies, but by no means least. We made a number of changes earlier this year to become even clearer on the operating model. Yes, part of that was in anticipation of the end of refranchising.
Simply put, a few years ago, we were a company trying to administer a 150,000-employee organization, and by next year we'll be sub 40,000. We just needed a smaller center. Second, we took advantage of the digitization internally I just talked about and embedded some of those new ways of working. Third, we made some choices about what needed to be done at the center. We clearly have some leadership and governance roles, but we wanted to push more empowerment to the field, more empowerment to the countries. If you're in a process of divergence, if you're in a world that's becoming a little more local, you need the field to have more power to act and to move quickly. The sum of all that was we got clearer on what the Lean Corporate Center needs to be. We made some painful adjustments to the headcount.
We did it in a Coke way with dignity and humanity. We got through that. We got a smaller, leaner center because it's more fit for purpose going into the future. Got clear on what are the services that are needed to support the field and the field to be more empowered to act in this new broader portfolio and more local world. Supporting the structure, we made some updates to compensation. It's not 180-degrees change, it's an update. We made some updates earlier this week to our compensation approaches. We've made it simpler and I think clearer on how it supports growth. We took out volume as one of the metrics, revenues there. Now, in lots of parts of the world, volume is going to be the principal driver of the revenue if you're in the emerging markets in Southeast Asia or India.
It's not like volume disappeared from the equation. It's just, let's get clear. We want revenue, and whether that's places like the U.S., which is more price mix and not much volume, or places like India, which is much more volume and less price mix, in the end, we're after revenue, and we're asking the countries to build the franchise. We've made that adjustment. In some of the long-term incentives, we took out, for example, economic profit. While it might have been the best mathematical or the best theoretical answer, it's not so easy for people to follow. We've swapped that into EPS and cash flow, making it simple because they can see those numbers in our quarterly reports. Trying to simplify things, trying to keep people focused on the very simple idea. It's about the top line.
Without the top-line growth, we can't generate the profit growth, and it's the profit growth that's going to help us drive our US dollar EPS. We made some updates to compensation. It's got some flexibility in it to help support those in the organization who contribute the most. The last element, culture. Culture, as you all know, is super important. Doesn't matter what you say on the structure should be, doesn't matter what you say the strategy should be. If the culture drives it in a different direction, that's always going to be a problem. We need to continue to push on the culture. You, investment community, other people have given us feedback on our culture over the years. It wasn't where we wanted it to be. Too big, too slow, too bureaucratic.
Not all of it was bad, those were some of the elements that were on the negative side. We're clear we need to push it harder. We're clear that in order to drive a total beverage company, we need to be much simpler with people in saying, "Look, it's about growth." We need to have a growth orientation. We can say there are lots of different pieces in the culture, and culture can become very complex, it can become very nuanced. Let's start with a simple idea. It needs to be growth orientated. If we have to call out a few things, then I think it's about four. We have to be curious. If we're not curious about how the consumer's changing, if we're not curious about the customer's strategy and how they create value, we're not going to come up with the right ideas.
Every large organization, every large institution, the natural tendency of getting bigger and getting successful, it tends to be less curious about the outside world. Let's underline curious about the outside world. Let's underline inclusive. There's no point just being curious on your own if you're not bringing in divergent ideas, if you're not looking out across the broad world of Coke, where something has probably already been done that you need, then you're missing a chance. We also need to underline empowered. In a large institution, a successful large institution, sometimes people in the field think there are more rules than there actually are. They have just assumed that they can't do things. We need to turn it round.
We need them to think that they're allowed to do things unless it's very clear that they can't, rather than them only thinking they can do the things that are authorized. We need to re-underline empowerment, which is part of the structural approach. Then lastly, back to the version one, version two, version three. If we can't become faster, more experimental, cycle faster through ideas, experiments, insights, learnings onto the next iteration, we won't be able to expand not just across the categories, but across the number of countries we need to succeed in. I would underline those four things, all in the service of a greater growth orientation. With that, I hope that I've started to paint a picture of what the day is going to be about, what we're trying to underline in these presentations we're sharing.
I've kind of tried just to summarize here against each of the presenters, where that connects to the things I've seen, or things you've just seen, whether it's Francisco, who's going to talk about the discipline of quality leadership, the group presidents, whether they've got a more advanced portfolio, or they're trying to catch up in terms of expanding out of sparkling. Then of course, Kathy's going to come back at the end, and talk about how we're delivering on shareholder value. Let me perhaps leave with one last page, which is our reaffirmation of our long-term aspirations in terms of the numbers. We believe we can get the revenue into the 4%-6% growth rate range organically. It's an industry that's growing, and we have a track record of gaining share.
With a clearer focus on what we need to do, being this leader in the growth industry with our footprint, the destination and the strategies, we can drive the top line. In this new model, the brand orientated model, it's the top line that drives the rest of the equation. Got to get the top line. Yes, there'll be some leverage. We've talked about the margin expectations. We've talked about the growth of operating income, and we believe we can turn that into not just EPS, but into cash. I think it's going to be an exciting journey, an exciting new phase of growth, with a culture that underlines that expectation that we can turn this into a successful and growing future. With that, I'm going to get off the stage and hand over the microphone.
Ladies and gentlemen, please welcome to the stage Chief Growth Officer, Francisco Crespo.
Good afternoon. Is this on? Yeah, I think it's on. I'm Francisco Crespo. I am the Coca-Cola Company Chief Growth Officer. Basically that means that if this company doesn't grow, it is my fault. If it grows, it's because the operations are doing it right. Let's get that clear and right. I've been six months in job, and basically I have been traveling a lot. I had a lot to catch up. I have been in Asia, Africa, Europe, just trying to understand better all the world that I really don't know and don't understand as much as I need to. I have been doing a lot of traveling. I also have been using the vast amount of information that we have available, trying to shape a growth agenda. I think that's what I'm going to try to share with you.
I have been connecting with the team, figuring out how are we going to shape
The things that we will be doing in the future as we work to make that growth agenda move forward. Here is the statement. I'm sure you already read it when James presented it, and it's there in smaller print, so you can practice with your eyes reading smaller letters. I would like to start with a thought that is very important, and it's that growth is not an objective. Growth is not an objective. Growth is a discipline. A discipline is training people, lots of people, to act consistently and follow certain behaviors and rules. Discipline is also a branch of knowledge and a field of study. When you practice that discipline, then the outcome is growth, and that's what we are looking for here.
Growth is necessarily embedded in these 5 principles that I think explain with all clarity what is different, what is new, and why we will get the discipline of growth right. Well, you see, rather than telling consumers what they should be drinking because we are the marketing experts, we will humbly align our portfolio to follow their tastes, their needs, their wills. Instead of defining volume as the sole metric of growth, well, we will find how do we empower our brands with the ability to capture transactions and revenue. That is growth. Beyond defining the picture of success in internal terms, so how many coolers there has to be in this customer, we will ensure that in every outlet, we are expanding our competitive advantage.
Of course, we will jump out of the bench being a digital aficionado to be in the field, start playing the game, and master the game. It boils down to the culture. The culture we want is one in which the values of curiosity, experimentation, learning, and excuseless delivery are the values that are rewarded. We are members of a club that has growth in it. Just by being a member of this club, we grow. You can argue that we are with our weight heavier into the lower growth. Maybe rather than a 4%, we are more in the 3%, simply because that's where our weight is heavier. There's $150 billion to be created through 2020, and the argument that you have been hearing, and it's simply logic, is to accelerate growth beyond what the club will already provide.
We need to expand our share in all those categories where we don't have a decent share, right? Well, not exactly. The notion that I would like to share is the notion that we don't want any share anywhere at any cost. As James was saying, there is a key concept in quality leadership. Quality leadership for me is when you beat your next competitor two, three times. You have two, three times better brand preference, two, three times better brand love, two, three times better share of visible inventory, two, three times more items per store, two, three times more coolers in the market. When you do that, well, simply put, and I have gone through the correlations and study all of it, you double system margins. What we need to do is we need to deliberately build quality leadership in all these other categories.
That's what we need to do. That is the first discipline, the discipline of building quality leadership. What is quality leadership? Well, it starts with edge. Edge is our competitive advantage. If we can't explain why our brand is better, why consumers should adopt our brand rather than any other brand for that occasion, then we probably don't have edge. The easy thing for me to do would have been to show you Coca-Cola, right? Iconic brand, unique taste, incredible assets. Then I could have shown you seven times more brand equity than our next competitor, four times better activation, and that's how we earn the right to collect that value in prices. I would rather do it with Simply.
You see, having this distinctive carafe, distinctive packaging, having a product that has the fresh taste that brings you closer to nature, having an advertising with the voice of God that tells you that this is really the real thing is a good start on edge. Then when you put your connection plan in such a way that you start closing in the brand equity, the brand preference, then you execute and activate in the market, and you start closing your gap in share of visible inventory. After that, eventually, you earn the right to collect better margins, then you start challenging the incumbent. This is a dynamic thing. This is something that needs to be nurtured, that needs to be checked, that needs to be studied, that needs learning.
The discipline of building quality leadership takes me to the next discipline, which is the discipline of building a portfolio. In the Y-axis, you have basically the profit pools. The higher, the better the profit pools, and brand edge or quality leadership in the X-axis. We have a legacy, a big legacy here in this space where we have quality leadership brands. In these brands, it is probably okay to have a lot of research before we do anything. It's probably okay to call an agency and do advertising because we have the scale, and it's probably okay to be sure that we have thought through the value chain because anything that we execute is huge. That discipline does not work when we are trying to disrupt spaces where we are either inexistent or irrelevant.
In those places, the best research is trying it and checking it in the market. The more agile we can do things with toll packers and distributors, the better because we're just figuring it out. If we are calling an agency to do advertising, we don't understand how brands are built here. Brands are built here on the experience. Consumers simply get it when they see the design, the packaging, and the occasion, and they start getting it. It's a very different game. We are not that bad in that part, and I'll talk to you about that in a while. Eventually, because here the metric is exponential growth. Eventually, with exponential growth, you build a position where you have double-digit market share. You're out of the ditch, you already have a position, but you're number two or three. Again, the game changes.
The game changes because what we need is, first of all, to ensure that we have edge. Unfortunately, a lot of times we all confuse innovation with imitation. We see something moving, let's say spinach soup with bubbles is selling a lot, and we go and ask our technician, "Can we produce that?" "Yeah, of course. Let's do it." That is imitation. That is not edge. It requires the discipline of checking the previous chart. Where is our edge? Then you need to consistently overinvest and overexecute that edge. After quite some time, some years, you eventually bring the market to your side. Totally different discipline. These are three disciplines we need to work.
It is the discipline of the entrepreneurial audacity, the discipline of the fighter that has the stamina to fight and never give up, it is the discipline of the wisdom of the leader. Three different disciplines. Let me talk about these disciplines, starting with our leaders, because sometimes when we are here, it sounds like, "Not much to do here." Let's focus over there. If that is in your head, you're missing a lot of value. This area has a lot of value for us to capture. I said we humbly have to follow consumers. Consumers are seeking for better tools to manage their sugar intake. That is a reality. Coca-Cola is one brand, only one brand. Coca-Cola has a unique taste. Coca-Cola is incredibly refreshing. Coca-Cola uplifts you. Coca-Cola brings people together, your friends and family.
Coca-Cola provides happiness for sense, you can have it with or without sugar. That is the one brand strategy. It's putting all the brains, all the marketing wisdom, all the execution power of Coca-Cola on shaping choice, not offering choice, but really shaping choice. This brings me to the next discipline, the discipline of recipes, experimentation, and customization. You see, there is absolutely no way that out of the center we can devise a recipe that applied in every market in the world is going to give us maximum value. There's no way. That doesn't exist. Each market has its own culture, characteristics, our own strengths. Our competitors have different virtues. The recipe, here is a summarized version of the recipe of Coke No Sugar, are just things that we know are required. Let me give you I always give very silly examples.
Let's say that this recipe, we have realized it is about a pancake. Okay. Don't bring a pizza, don't bring a burger, bring a pancake. Now, if in a market we need to put two eggs rather than one, fine. That's experimenting. If in another market, we should use a different kind of flour, fine. That's experimentation. There has to be a lot of experimentation happening in the BU levels around these recipes in order for us to customize this. Here you have how this is reinvigorating Coca-Cola trademark. Coke No Sugar growing 13%. In places in Europe, Germany is growing almost 20%, Great Britain is growing almost 50%, Mexico is growing almost 90%. We are always adjusting how these recipes are applied and ensuring that we get the learnings right. These are the Fanta example.
New bottle, new formula, new campaign, boom, acceleration on the growth. We are growing 8%. That's not bad, right? High single digits in revenues. That's quite nice. There is a lot of value to be captured on our leading brands. When you see margins improving here, there is a lot of discipline behind making that happen. Second example, I already talked about the average. I might be totally wrong, this is my crude reading of the world. A lot of the fast-moving consumer goods were built on the average because they were worshiping economies of scale. Economies of scale gave you mass media, mass distribution, relevance in front of your customers, and low cost. That was the game. Average was the game. The problem is that allowed for a lot of local small players to capture premium niche spaces.
Our portfolio has a lot to say in that space. Local ingredients, whether it is a Georgia peach or a California raspberry or Mexican sugarcane. We are already seeing that people are happy to pay more for having that type of product. Upliftment is at the epicenter of brand Coca-Cola. Coca-Cola Plus Coffee, some of you probably tried it out there. It's an excuse to engage again with the brand. Beautiful small cans, premium news on the brand, innovation in Coca-Cola. We also provide premium experiences. Royal Bliss in Spain, Schweppes in Great Britain and a lot of other countries. Blue Sky with organic ingredients in the U.S. ViO with local bio ingredients in Germany. Appletiser with 100% apple juice out of South Africa. We have a lot in our portfolio to ensure that we are capturing that appetite for those ingredients and those benefit-driven products.
Leaders have a lot of space. We may have been leaving money in the table because we were chasing volume and not revenue. We do know how to reinvigorate following the right trends and understanding consumers. We do have an opportunity to have recipes that customize, capture better value, but because they connect better with local consumers, and we have a lot of premium spaces that we can and should occupy. Let me switch gears and try to talk a little bit about a different discipline. How do we disrupt spaces where we are not the leader? Well, I can give you a lot of examples. I can talk to you about Innocent in Europe and Great Britain. Ayataka, fastest growing tea in Japan. I could bring Maaza, a juice brand in India that has brand love.
That is the brand love of a huge brand, probably one of the highest I've seen across beverages. I would like to focus in Honest Tea and Powerade because this is, as we said, a different discipline. It forces you to be sure. The first question here is, how can I be sure I am not simply imitating? That's the first question that we need to ask ourselves, and we have to better have a good answer. We have to incubate it, because when we follow volume, we confuse consumers, and I'm going to prove it in the next example. Consumers need to understand, these are brands that are not built with the me. These brands are built with the experience.
If you put it in more than one experience, consumers start thinking, "Oh, I don't understand what this brand is anymore." Incubation, it requires obsessive segmentation to make it happen. Let's jump into it. Venturing & Emerging Brands is a tool that has been brilliant in the U.S. and now is being deployed in other geographies. Venturing & Emerging Brands found Seth Goldman, who simply thought, "I think these teas and these drinks have too much sugar. I do care about organic, I do care about fair trade, and I would like for a brand to be more transparent." That's edge. That is a perfect definition of edge, a different space. He had the patience to only put it in the organic trade. If he would have gone for volume and put it in every channel, probably consumers would have lost.
I don't understand anymore what this is. He built it slowly. Just used digital and mouth to mouth, and then had the courage to kill the zombies. Because unfortunately, a lot of times, when we discover something that does not work, rather than killing it and avoiding it to drag our energy and distract everybody, we say, "No, we're going to recycle it. We're going to try it again." No, tea bag, bad idea. Kill it. Kombucha, interesting, but it was just an imitation. Kill it. And eventually, they scale it up. Oops, we can take this brand to other spaces. Lemonade, sports drinks. This is going to be a billion-dollar brand in a few years. It's not that we don't know how to do it, but it requires the right discipline. Now, let me talk about Powerade.
Powerade in Mexico, when you sweat, you lose four ions. It is not a long argument to say that it is better if the drink that you're taking has four ions than only two of those. Power, when you're doing exercise, you would have to agree that it's better than having a reptile name on it. We have in Mexico, the Mexico team, we have the Olympics, we have the World Cup. We activated all these spaces where we had an advantage, we executed with passion. We incubated it. For a while, we over-invested in DME. We lost money. We accepted that we were over-executing and over-investing while we were segmenting, getting those customers where we were not present, putting the right packaging and pricing in those where competition was harder. Now we are the leaders. 54% of the sports drinks market in Mexico.
It's not that we don't know how to challenge and become leaders. It's that it requires discipline. It requires persistence. It requires for us to take it a different way. As we do this, we need to disciplinedly build certain capabilities. The first one is segmentation. You see, we can't continue to segment people simply age group, gender, socioeconomic level. What matters is their behavior, their values, their lifestyle. What we are checking is who's drinking my category, who's lapsing from it? What else are they drinking? What are the dual drinkers? Those are the questions that matter. That is the information and the segmentation that we need. If you have seen FEMSA's digital platform, Spin by OXXO, you will understand what I'm going to say. We know customer by customer. What is the competitive environment? What is the key occasion that happens there? We know how to tailor execution.
Segmentation is a big capability of making all this happen. The second one is integrated experiential brand building. Brands are built on the experiences that consumer has. It needs to start with the brand purpose and the brand essence. It needs to follow what is the brand strategy? What is the key occasion to activate to build a habit? It needs to explain what is the brand edge. That has to go weaved across design, packaging, activation, communication. I laughingly said that we talk a lot of times about precision marketing, and the truth is it's just sending the same message better tailored to different customers. This is precision diagnostics. This is a step behind. We need to develop 21st century storytelling. What does that mean? That means that the media diet has changed.
Those meals of 60 seconds and 30 seconds, nobody is eating those as the only meal they get. That still exists, but now they are eating a lot of bites. 6 seconds. That's all the span of attention they have. A little bit of those snacks, those 50 seconds non-skippable. Checking in your mobile phone and making sure that we have enough of our diet offered in the right place, and that we are not watching in a screen like this our advertising, but in the little screen, that is important. That is 21st century storytelling. As we speak, we have people from our team in Asia, expanding our roster of agencies. Our roster of agencies have been very good, fantastic, but mainly Hispano-American.
We are getting three agencies from Asia in the roster because we really need to understand how to connect the values of our brands to the values of that culture. We already hired an agency out of Amsterdam to get some different perspective there. Partner value creation. The extraordinary job that our friends in North America have done with customers, we are trying to bring it to another level with some of our partners. There are platforms like Google and Facebook. I was there 10 days ago telling them, "Listen, I don't want to ask you, tell me what is the best price for this word in Google Ads or for these in your platform. I want for you to sign a non-disclosure agreement. I want to tell you all my strategy.
I want you to poke all the holes in it, and I want you to bring insights." We're doing that in December because we are going to co-create our strategy with our partners. For that, we need to build strategic value for them as they build strategic value for us. Agile supply chain, I already mentioned. To explore, we need to be agile with co- packers, flexible distribution. As we scale, we need to be sure that the value chain of those ingredients is coming along with us. Finally, in digital, we could boil the ocean. We have focused. We have said it's three things: digital marketing, e-commerce, and analytics. If there's something else, we will figure out later, but let's start with this.
We are building the community, the community that can and should talk and find the governance between our bottlers and us on how are we doing on these three categories. The interesting thing is we're not doing it that bad. We have 89 CokeTV among the best channels in YouTube. Not bad. We are number 1 across fast-moving consumer goods in Twitter, also in Facebook across beverages. Sprite and Coca-Cola, best positive sentiment across five digital platforms in fast-moving consumer goods. Coke Studio, this is an incredible story. 10 years of Coke Studio, this year, 1 billion views. It's in a few countries. We have to expand that to a lot more countries. Probably one of the reasons why Pakistan is doing such an incredible job in recruiting and bringing teens into the franchise.
In Japan, we already have 5 million apps downloaded for a loyalty program that allows you to interact with our vending machines. In China, 5 million transactions with an e-coupon that every time temperature is above 35 degrees Celsius, you can go and get a free Sprite. That is sampling with the refreshing Sprite. Our numbers on e-commerce, not bad. Good, solid growth. Actually, Diet Coke is the number one grocery SKU in digital commerce in the U.S. We are building partnerships with our customers and with any player and platform that is in this space because this is not a channel. We are in a club that grows. That's granted. The discipline of growth will allow us to accelerate growth. The discipline of growth will allow us to build quality leadership in more spaces.
As we do that, we will get better margins, and we will get accelerated growth. For that, we need to build capabilities. We build segmentation, edge-driven marketing, experiential brand marketing. We have to build digital, agile supply chain. The journey is only beginning. We know that there's a lot of value in our leadership positions that we can and we will capture by not chasing volume, but revenues, by connecting better our brands with those consumers, and by going after niche and premium spaces. That money is good growth for us and will help us fund the experiments that we need to have to explore. As those experiments bloom, we're going to have an incredible spring. Unlike "Game of Thrones," I have to tell you, winter is going away. One chart to finish. I have change here because I really think that discipline is here.
It's just not evenly distributed. You go across the world, and you see that we do understand certain things. Now what we have to do is we have to spread it and elevate the knowledge that we have on them and the quality with which we practice it. I've been told that you like mathematics. For me, the definition of discipline is numerically that one. That basically says that when you are 1% better every day, at the end of the year, you're 38 times better. That's 1.01 elevated at the 365 power. Now, when you are 1% worse every day of the year, you end up almost killing yourself. That's 0.99 elevated at the 365 power. The difference between those two things for me is discipline. Thank you
Ladies and gentlemen, we'll be taking a brief 10-minute break, and our program will resume at 1:50 P.M. Once again, ladies and gentlemen, our program will resume at 1:50 P.M. Thank you.
Try Coca-Cola Zero Sugar. Great Coca-Cola taste with zero sugar and zero calories. Enjoy Coca-Cola Zero Sugar today.
Feels good in my heart and my soul when you're right here beside me, I don't ever want this day to end. I am just a king in the dreams that my eyes are let open, taking off of my heart again. I can be real, together be real, together be real. No one can stop. Can't stop the way I'm feeling. No one can ever bring me down. Takes the feeling. I can't wait for this.
Feeling. Nothing could ever bring me down. No one can stop me when I get the feeling.
Introducing Coca-Cola Zero Sugar with new improved taste. Tastes more like Coke, looks more like Coke.
Takes the feeling. I'm not playing with you. I can play a little bit, a little bit. I can play a little bit, a little bit. I can see a little bit, a little bit. I can see a little bit of you. I got a hold on you got a hold on me.
Alex.
My name.
Alex? Mine, too.
I got a new swimsuit with glitter and fringes, and I've got a case of the too many Benjamins. Feels good in my heart and my soul when you're right here beside me. I don't ever want this day to end. We can push the beat to the coconut sand beside me. Take a little love in my heart again. We can feel the groovy feel together be real. No one can stop me when I get the feeling. Nothing could ever bring me down. No one can stop me when I get the feeling.
You okay?
That's the way in.
No, you wait right there.
No one can stop me when I get the feeling. Nothing could ever bring me down. No one feels good in my heart and my soul when you're here right beside me. I don't ever want this day to end. No one can stop me when I get the feeling. Nothing could ever bring me down. No one can stop me when I get the feeling. Nothing could ever bring me down.
Fanta really is amazing. It's so intense and delicious. We could sell it, no problem.
Watch this.
#SoGoodItSellsItself.
Yo what's up? Come alive. Come alive, yo.
The teams are in charge?
We ain't missing.
Are we really going to run Fanta?
You know it. Fanta's so fruity, bubbly, and intense.
It sells itself.
Hey, you must be the new TMO.
I'm Alex.
Teen marketing officer. Yeah, that's right.
What do you do here?
Apparently, whatever you tell me to, boss.
Interesting. We're going to change everything.
Everything?
The bottle, the flavors, the formula, everything. Cheers, Ted. See everyone at noon tomorrow?
Yeah.
Help the team marketing team take over Fanta at takeover.fanta.com.
Gold Peak. It starts with ingredients like delicious mountain-grown tea, filtered water, and just the right balance of sweetness. It's a perfectly crafted home-brewed taste that always makes you feel right at home. Gold Peak, the taste that brings you home. Open a bottle of Honest Tea. Discover an honest world filled with real brewed organic tea leaves, delicious organic honey, organic cane sugar, and filtered water. You can just take a look at the label. Honest Tea, refreshingly honest.
How honest am I on a scale of one to 10? I guess I'd have to say about an eight. I've learned not to tell white lies as much as just defer the question. My wife will ask me, "How does this dress look on me?" Or this shirt, and I'll just say, "I think I got to go downstairs." I really don't know if there's anything I haven't told anyone before, because I really do tell my wife everything. The one thing I might not have told her, so she complains sometimes when I snore, and I haven't told her that sometimes she snores. Honesty is definitely the best policy.
I think Mark Twain once said, "The best part about being honest is you don't have to remember what you said." I honestly think Honest Tea. It's like there's a phrase that I hope to be the kind of person my dog thinks I am. For me what's so neat about Honest Tea is that we hold it above us as like an aspirational brand that it represents I think a lot, so much of what we'd all like to be.
Talk to me baby, don't be shy, don't be shy, don't be shy. Come to me baby, don't be shy. It was the summertime, that summer high. Oh, what a masterpiece. The way your eyes met mine, taste like apple pie. Talk to me baby, don't be shy, don't be shy, don't be shy. Come to me baby, don't be shy. It was the summertime, that summer high. Oh, what a masterpiece. The way your eyes met mine, taste like apple pie. Birds flying high, you know how I feel. Sun in the sky, you know how I feel. Drifting on by, you know how I feel. It's a new dawn, it's a new day, it's a new life for me. I'm feeling good. Fish in the sea, you know how I feel. River running free, you know how I feel.
Blossoming day- This heart, that mind, it hurts sometimes. It was broken, now it's better. Since you left, running together.
Here's your order.
I think this is not exactly what we ordered. I ordered a Coca-Cola Zero.
No problem. I can give you the new improved Coca-Cola Zero Sugar that tastes more like Coke. Here is the Coca-Cola Zero Sugar you ordered.
Okay.
You still look like you need a Coca-Cola.
Sure.
Why don't you stick inside your bag?
Wherever you feel. Together we feel. Together we're real.
Enjoy.
Try the new Coca-Cola Zero Sugar.
Taste the feeling. It's all gone.
I'm sure Mr. Bentley will share his Minute Maid.
Nope. I will.
Minute Maid is born from the goodness of fruit and given with love.
I'm into something good. We can feel. Wherever you feel. Together be real. Together. No one can stop me. Taste the Feeling. Nothing could ever bring me down. No one can stop me. Taste the Feeling. Nothing could ever bring me down. Here we go. Taste the Feeling.
On a hot day, there's simply nothing more refreshing than a good pour. No artificial flavors, no added preservatives, no added colors. Just the taste of every last drop of nature. The best things in life are made simply. Simply Lemonade and fruit punch. Honestly simple. There is nothing complicated about Simply Orange. It is not sweetened, not concentrated, not frozen. Sometimes not doing something is just the thing to do. The best things in life are made simply. Simply Orange. Honestly simple.
Quiet, and action.
Let's get one thing straight. I'd never tell you to drink Sprite. Even if I was in a commercial for Sprite, which I am, I wouldn't tell you to drink it no matter what that cue card says.
Bruh, man, say it.
No. Even if you just eaten tacos with extra hot sauce, and you were holding an extra cold Sprite, and for some reason were waiting for me to tell you to drink it, I still wouldn't tell you to drink that thirst-quenching Sprite. I'd ask you, "You want a Sprite?
I got a little bit of something for you. Lyrical too. Get up in the middle of you. Like miracles do. Help you grow in your mental and your spiritual too. Help your hearing and your visual too. Tell them Gemini set it. I come to set it. Break it down and phonetic. Yeah. Dip it in egg whites and bread it. Serve it up hot when I'm up in your spot. Like a tasty treat. I'm in the place to be. Gemini and his friend G-A-N-G-E-R-M-O-U-S-E.
Try Coca-Cola Zero Sugar. Great Coca-Cola taste with zero sugar and zero calories. Enjoy Coca-Cola Zero Sugar today.
Feels good in my heart and my soul. You're right here beside me. I don't ever want this day to end. Yeah. I am just a dream in a dream. My eyes are wide open. Take a little love in my heart again. Making me real. Together be real. Together be real. No one can stop the way I feel. No one could ever bring me down. Taste the Feeling. No one can stop me when I get the feeling.
Introducing Coca-Cola Zero Sugar with new improved taste. Tastes more like Coke, looks more like Coke.
Taste the Feeling. I'm not playing with you. I can tell you a little bit. I can show you a little bit of what I feel. I can see a little bit. I can see a little bit of you. I got a hold on you. You got a hold on me.
Alex.
I got a hold on you.
Alex? Mine too.
I got a new swimsuit with glitter and fringes. I got a case of the too-many-gingers. Taste the feeling. In my heart, in my soul, in the right inside me. I never wanna be faded again. We can watch the waves of the coconut sand beside me. Take a little of my heart again. We can feel the energy. We're together and no one can stop me when I get the feeling. Nothing could ever bring me down. No one can stop me when I get the feeling. Nothing could ever bring me down. You okay? Out of the way. How are you? I'm okay. No one can stop me when I get the feeling. Nothing could ever bring me down. No one
Ladies and gentlemen, our program will resume in just a few moments. Please find your seat. Once again, ladies and gentlemen, our program will resume in just a few moments. Thank you.
No one can stop me. Nothing could ever bring me down. No one can stop me when I get the feeling. Nothing could ever bring me down. Nothing could ever bring me down.
Ladies and gentlemen, please welcome to the stage, President of the Latin America Group, Alfredo Rivera.
Hello, everyone. We're getting part of the group back in. My name is Alfredo Rivera. I'm President of the Latin America Group. I've been here in this role for over a year now. I'm very excited to be here today to tell you about quality leadership, the power of quality leadership, what it looks like, and what it allows us to do in Latin America. Before I jump into that, I want to give you a brief overview of the region, of the context we're operating in, and of the opportunity we have in our industry in Latin America. Forward-looking statement. The region, 39 countries, over 500 million consumers, in a very vibrant industry with a retail value of $90 billion, in which we have a 48% value share. We operate in Latin America through four business units, Mexico, Latin Center, Brazil, and South Latin.
We partner with 49 bottlers. Our four largest ones are on the screen. Through them, we serve over four million customers in the region. We've been facing challenging times in Latin America, as many of you know. At the end of the commodity super cycle that we had, growth has been a problem in general in the economies. We've had bouts of very high inflation in several countries and currency depreciation, a lot of that. We see this changing. We see stability returning to this part of the world. What it means for us is that we can now price to restore growth, which is about having more balance between transaction growth and price growth in order to drive revenue growth.
Under high inflation and a devaluation scenario, we were having to raise prices constantly to keep up, and that was affecting our growth in transactions. Now we see the opportunity to balance growth, and we've been seeing some good results. The second item is what we see as budgetary constraints. James mentioned governments under duress, financially, because again, the source of revenue that was a commodity boom ended, and they have to look for revenue through taxes and of course, cutting subsidies. Through taxes, the food and beverage industry has become a target. More importantly, I think, and it has impacted the way people look at our category. In general, governments are raising taxes and cutting subsidies, which in the end game, consumers end up paying the bill, which actually has an impact on purchasing power.
We have to adapt to that, and we've been evolving our portfolio to smaller packs, in particular, looking at magic price points that are relevant for consumers so that they stay within the franchise, and so that we can also bring more consumers into the franchise. This is very important for us. There are some good news also on political transitions. We're moving to governments that are more business-friendly now, and that bodes well for investments, for investing ahead of demand. Finally, there is a very interesting phenomenon in Latin America over the last 10 years. Latin American companies have been expanding within Latin America. They're consolidating across Latin America, which drives home a point, which is we're more similar than dissimilar in Latin America with our consumers and in general in our culture.
That's an opportunity, as I see it for us, as we expand and grow our portfolio across geographies, and looking at the best brands we have and making sure they're available across our 39 countries. We are very excited, and I want to take a look at this. $30 billion in growth over the next three years in retail value. It's a CAGR of 7%. What's interesting is that half of that growth will come from the sparkling category, which is our natural stronghold. We are very strong here, we're very confident that we can continue building our position, our strong position. As you can see on the far end, we have over a 50 value share, and we've been consistent in gaining share.
You can also see the next two categories that are almost are equal to the sparkling category in terms of opportunity for growth. There again, we have a pretty solid position, and we've been gaining share in both of them. Guess what? Our business plan is about focusing on those categories and really driving growth through those three categories in particular. Let me now jump over to quality leadership. In Latin America, quality leadership is a foundation for growth, and it's been for many years. There's two ways in which quality leadership enables growth. The first is in leader categories. You heard Francisco Crespo explain the importance of leader categories for us. When we operate in Latin America with strong leadership, we can take more risks. We can test and learn and not worry about losing our leadership position.
What we're looking for is to test and change our approach to the different problems that we face. For example, in Mexico, in 2014, a tax was placed on the food and beverage industry, along with a broader tax reform that actually put pressure on consumers and consumer spending. We had to adapt to that. What we put together is a plan that's actually ongoing, but it's a plan which had four components to it. The first one was, we need to keep consumers within the franchise, and we need to bring in more consumers. Understanding that there is a tax on the category. There's this obesity issue that's affecting the category, and we need to address it. We started looking around the world, and we found a program called Share a Coke out of Australia, and we implemented this.
This program, along with our approach to revenue growth management, helped us maintain our consumer base and helped us grow our consumer base. On revenue management, what we looked at was expanding our portfolio, particularly in single serves, packages, and focusing on magic price points to make sure that we remained relevant with consumers. The third component was about execution discipline. Francisco alluded to this. In Mexico, execution has been good consistently, but we redoubled our efforts, we actually expanded our share of visible inventory and our share of cold inventory through this period of time. We were able to gain visibility, even more visibility for our portfolio. Our strongest move is around reformulation, reducing the sugar content in our beverages, energizing Coca-Cola Zero, then moving to Coca-Cola No Sugar.
Again, I won't repeat what Francisco said, but this has been a big part of our growth in Mexico in the last couple of years. As you can see on the far right, you see the results. Sparkling value share up, NARTD value share up, more importantly, we were able to grow revenue at a 13% CAGR over the last three years. From that learning in Mexico, we go to Chile. Again, a tax on the category, on food and beverages, but with an added complication, regulation on labeling and ad ban on sugar beverages during the day. We applied the same four actions as in Mexico, but added one, which was about engaging with the government, engaging with critics, engaging with all the stakeholders to work together to find something that was more effective in addressing their concerns and our concerns around obesity.
We were able to establish thresholds of different levels of sugar. It was a staged approach on taxes. We were able to, again, adapt our portfolio. On the labeling piece, the law says that if you're high in sugars, high in sodium, high in fats, high in calories, you have to have this black label on the package. We were very focused on changing our portfolio. Today, 65% of our sales in Chile don't have a label, okay? Only 35% of our sales have one label. There are products in the food business that can have more than one. We think that by working together with the government, we found something that worked for them, worked with the critics, worked for the business, of course, at the end, we were able to transform our portfolio and reduce the content of sugar.
On the far right, again, the results. We grew our consumer base. We were able to reduce our sugar content in our products by 9%, we grew the mix of Coca-Cola Zero, now Sin Azúcar, No Sugar, by five points. Again, we were able to double revenue growth from one year to the next. With those learnings, what we're doing is taking these learnings to all the other markets that we have in Latin America and basically asking them to focus on three things. Expand the portfolio, focus on reducing sugar, focus on developing small packages positioning them with magic price points. Second, execute relentlessly every day. We have to generate transaction growth price smart so we get consumers to continue to buy our products, executing at the point of sale to win. Finally, engaging in dialogue.
I think that the big learning for us is that people want to sit down and talk and find solutions to the concerns they have. Finally, what's making this successful, in my opinion, is that we have a strong backbone, which is a strong marketing, sales, and distribution structure that we have across Latin America. This is important because this is what allows us then to move aggressively in changing our formulations to less sugar across our portfolio. Then some of those work and some of those don't. I was talking to, I think it was Steve earlier, about a problem we had in Costa Rica. We put a Fanta out there. I think James addressed this in a past meeting. It didn't work. Took it out. We continue working on new variants.
Our commitment is to find a great-tasting product that's going to have less sugar in the market, and we think we can do it. In conclusion on this piece is we feel confident that $14 billion in incremental growth in the sparkling category, that we're going to be able to capture more than our fair share of that going forward by doing these things. The second thing that quality leadership enables us to do is to invest, expand, and win in our challenger and explorer categories. It also helps us to move, actually shorten the learning curve by using the best practices from our leader categories and applying them to these categories. Let me take you through an example. In Mexico in 2006, we were the number 6 player in non-sparkling categories. 10 years ago.
Today, by 2016, we were in the number 1 position in non-sparkling categories. This came from a commitment from the system to go into those categories and win. Those categories where we had relevant profit pools, go in and win. We put together a vision. We put together an operating model different than the concentrate model. We agreed on a joint venture with our bottling partners. Then we looked out and looked to acquire and build capabilities. All this using the platform of our system, marketing, sales, and distribution to grow. What have been the results? We have grown our volume almost by three times in the 10-year period. More importantly We have been able to improve our operating income almost six times over that period of time. Another aspect, building on what I've been saying on acquisition.
Jugos del Valle was our acquisition in 2007. It was the number 2 juice player in Mexico at the time. We've been able to gain 31 points of value share over that 10-year period. More importantly, this has been a platform for growth in other categories as we put it inside the joint venture. On category development, Francisco talked about Powerade, I'm not going to repeat it, but we went from, I would even say, explorer to challenger very quickly, then from challenger to leader over that 10-year period. Again, we've gained 39 value share points in the last 10 years. Finally, on the hydration category, we created a master brand. We acquired a bottler brands, created one master brand, and in a low-value category, we were able to be more efficient and also launch flavored waters that helped our profitability.
We've been able to make this a profitable category for us. Having this roadmap has helped us think how we can accelerate growth across Latin America, where we do have number 1 and number 2 positions across several markets, but we're still very small in those markets. We believe that with this roadmap, we'll be successful. Again, as I mentioned in sparkling, we're confident that we can capture more than our fair share of the growth that's coming, particularly in the juice, dairy, and plant category and in the hydration category. Boy, I went through this very fast. Good. To close, I want to leave with a thought about quality leadership.
Quality leadership allows us to take more risks because we believe that there's so much advantage that we have relative to competitors that we can make mistakes and we can recover in time. Back to James' point on culture is we're trying to convince everyone in our organization is that we can go faster, we can learn faster, we can adapt faster, and we will continue to have leadership. As a matter of fact, I think that's what's going to help us sustain our leadership position going forward. The second piece is around investing. Quality leadership generates the resources we need to invest in explorers and challengers. Finally, it focuses on executing with discipline, which, as Francisco mentioned several times, discipline is a very important word now in The Coca-Cola Company. But it's been for a long time in Latin America.
If we do this, we should be able to profitably expand Beverages for Life. Thank you very much.
Ladies and gentlemen, please welcome the President of Europe, Middle East, and Africa Group, Brian Smith.
Good afternoon. Thanks for being here. I'm going to talk to you about EMEA. Actually, just a year ago, when Alfredo moved to the head of Latin America, I moved to the head of EMEA from Latin America. I want to leave you with three messages today. The first is that we have extremely compelling growth opportunities in EMEA. I'll try to give you the proof points around that. The second is the way we're going to drive that growth and capitalize on that growth opportunity is by going back to execution basics in our base business, the leader business that Francisco and James talked to you about.
The third one is, as we do that over the next two or three years, we're going to layer in brand platforms from other parts of the world, to those white spaces that we have in the categories, so that we can build explorers, eventually challengers, and then drive our top-line growth with our base business from 2020 onward. With hope, you'll walk away with a little more belief that we in fact have those growth opportunities and know how to capitalize upon them. What's EMEA? It's big, it's vast. It goes all the way from Iceland, all the way to the easternmost tip of Russia, down through Pakistan, down to the southernmost tip of Africa. We have 2.5 billion consumers. It's a $275 billion retail industry. Our share in that is about 25%.
It's very diverse in terms of the kinds of markets that we have, from a mature Europe, all the way down to low per capita sub-Sahara countries. We have four bottlers. We have four big bottlers. We have six business units. Our base business is 80% of our business is in sparkling, followed by water. It's vast, it's diverse. It's very diverse demographically, culturally, but there are commonalities in terms of the growth opportunities across all the BUs and the way that we're going to go about addressing them. The first message, why is it a compelling growth opportunity? Well, if you look across all the different categories that we have, there's a lot of growth going forward. We expect to grow between now and 2020. The industry growth is about $45 billion in incremental growth. All of the categories are growing, even sparkling at 3%.
If you don't see this as compelling, just consider for a minute that our share in sparkling is 50%, but in everything else, they're relatively low. There's a high ceiling in terms of what we can go after, in terms of the opportunities. Again, the leader, challenger, explorer model. What we're going to do, the gist of our strategy, is to go back to execution basics with our leaders to be able to drive top-line growth. That's the basic business that we're doing. It's something that we know how to do. It's something that we know how to do because it's something we're doing in a lot of places around the world, and what we want to do is upscale our standards in EMEA.
that will then fuel our challengers and our explorers over the next 3 years to build explorers into challengers and hopefully challengers into leaders, then we can drive our growth going forward. You may be asking yourselves, why is this going to work? Why do we believe this is going to work? Because we could have said the same thing to you 3 years ago, and you'd say, "Well, why haven't you done it yet?" One of the biggest shifts that we've made as a system is to pivot from volume to value. We keep saying it, but it's really important. The reason it's important is because, if we're not aligned with our bottling system, if we get misaligned, we have a lot of weak flanks.
if we are totally aligned with our bottling system, there's no other system in the world that can beat us in terms of what we're doing, brand building and distribution and building value in the beverage sector. What happens if you chase volume, especially in, say, mature markets like in Europe, where you have strong chains and private labels, where you have to discount to be able to chase that volume, or in emerging markets where you have a lot of B brands, and you also have to discount to be able to go after volume, you essentially have diminishing returns. That drives system misalignment because we're essentially fighting over what the pie is. We under-invest in terms of capabilities, we get little traction in new categories, and essentially, it's a vicious cycle.
If you pivot over to value, what happens is, you immediately start to take some of the unprofitable volume out of the margin. What that does is it drives higher returns, and if you combine that with refranchising your bottling system, you essentially have the wherewithal to continue or to begin to reinvest in a more dynamic and a bigger way into execution fundamentals and ultimately into new categories. You then have a virtuous circle. Don't underestimate the impact that this decision that's been made about a year and a half ago, or thereabouts, on our ability to go after top-line growth. It's fundamental in our ability to enable that to happen. Again, what's the strategy to upscale our execution? What does that mean?
It means essentially, it's an iterative and integrative process through which our consumer marketing and our bottler execution self-reinforce and leverage on the competitive advantages that we have in our system. It's kind of a mouthful, so let me just give you an example. In Poland, which is a market that we did revenue growth management in a couple of years ago, as a result of that work, we came up with Hellenic, we came up with one of the key initiatives was a 200 ml can. A great example of pivoting from volume to value. Right? Smaller pack, higher price, consumer-centric, it's a great package to go out and market to our consumer base to bring more people into our franchise.
Once we decided with Hellenic that it was the right pack, we decided which price through the revenue growth management analysis, which was essentially 80% of what a bus fare would be for young adults and teens. We decided, on the one hand, to invest in marketing commercials specifically for that package and package graphics which had celebrities which would resonate with our consumer target base. Hellenic, on their hand, increased distribution up to 50%, put racks in the marketplace, and also, most importantly, put that package next to the highest frequency packages they had in the market, which they have in the market today, which is the regular can. By doing that, what we've been able to do is to grow that package 40% year-over-year and increase our immediate consumption transactions by 10% year-over-year as well.
It's one example of the kinds of things that we're doing, and we're going to do more of, because what we're going to do is essentially roll out RGM across between now and the mid of next year, 25 markets, of which 14 are top markets in EMEA. We're also going to double our placement of incremental coolers, which we found to be highly correlated with our ability to drive top-line growth. Let me just tell you a little bit more about RGM, for those of you that may not be familiar with it. It's an analysis, and what it takes as data is all the competitive information from our system. It would be our products, our brands, our packs, our channels, blah, blah.
Our competitors and other information, it puts it in, and through algorithms, we figure out what the right initiatives are to be able to capitalize on our strengths as a system and our competitors' weaknesses. When you do that, you come up with initiatives, such as you can see here, that are perfectly aimed to be able to drive top-line growth, hence Revenue Growth Management. If we do that, when we do that, we're able to drive at least 1% more top-line growth in the markets in which we do it and then implement it. We have to do it and then put the money behind, as I just described in that example, to be able to make it happen. Let me show you some proof points. Yes, they're selected. I selected them.
Not all our markets are like this, but these are proof points that there's some green shoots. We know what we're doing. We know what we have to do. Again, we're not doing it everywhere all at the same time and so on and so forth, but we are rolling this out. Over the next year or so, we'll be in 25 markets implementing, executing this, not just with Hellenic, but with CCEP, with CCVA, and the other bottlers. We're not only able to drive absolute revenue growth anywhere from 2% in Spain to 29% in Nigeria, but we're also gaining value share. Which is the acid test, right? If we were doing the first part and we were losing share, then you'd say, "Well, you're mortgaging the future." We're not. We're able to do both of those things. I think that's the trick.
The trick for us is to be able to measure ourselves, to keep ourselves honest, that we're taking the price mix that we can take without going overboard and balancing that with volume growth in such a way that we have the top-line growth that will generate the cash flows to be able to fund the investments that we need to make, not only in the base business, but in all the new categories that we want to go after. That's my first part of my first message, which is how are we going to build, how are we going to grow the base. Second part of my message is, how are we going to layer in the stuff in the other categories where we have white spaces, and we have many across EMEA.
As you saw before, our share is relatively low in a lot of the categories. What we're going to do, or what we're actually doing as we speak, is taking brand platforms like smartwater, Honest, Fuze Tea, and we're rolling those across Europe. Obviously sequentially as fast as we can, but obviously, we need to do it in such a way that the bottler can handle the new brands successfully and not drop the ball on the base business. We're also solidifying our position with Chi in Nigeria, which is a fantastic company that makes juices and makes dairy products, and is a very strong challenger in Nigeria, and which we hope to be able to take and expand across other parts of Africa in the future. I have two developments I want to tell you about today. Two new things. We alluded to them before.
James alluded to it. The first is VEB. We've launched VEB in Central and Eastern Europe business unit with Hellenic. It's a joint effort between us and the bottler. We've launched three products, smartwater, ZICO, and Appletiser from South Africa. It's a dedicated sales force, it's a dedicated set of people, and all they do is that. It's kind of like the mini me of the North America VEB because we're much smaller, but the intent is in the future that we'll be able to build that, not only in CEE, but in other business units as well. The other development is we're bringing AdeS from Latin America to Europe. By January 2018, we will launch AdeS. It's been changed somewhat from Latin America.
My instructions to the team were, "Don't change anything." They changed everything, but it's a much better product believe me. It's fantastic. It's a huge, growing market in plant-based throughout Europe, not only in Western, but in Eastern Europe. We're going to launch in Spain, and then we're going to roll out from there. That's what we're doing in terms of. There's other things that are going on. There's all kinds of things, depending on the business units, where they are, where the starting point is, where are the best opportunities in terms of profit pools, and so on and so forth. Remember, what we said is they're empowered to make their own choices with respect to how they are going to build the spaces into the white spaces that they need to build into.
We will be prescriptive in terms of ensuring that they don't drag their feet in terms of getting in, leaning into those spaces. It's okay to fail. It's okay to experiment. It's okay to bring the platforms in, to adapt them, to make them work, eventually to make them grow. With that, let me just reiterate my three key messages. First, compelling opportunity. Second, our growth is already happening. This year, we've had a step change in terms of what we're doing in terms of top line. We are going to continue to push that going forward. As I said, RGM in 25 markets by mid-next year. Doubling the cooler placements. Back to basics in terms of bottler execution. What we do as in The Coca-Cola Company. One of the areas of opportunity that we have is the way that we invest our DME monies.
We believe that we can be more effective in spending those, more intelligent in how we allocate those across brands, across the different types of media, across different types of market assets as well. We will also be, to a certain extent, prescriptive in ensuring that the business units, even though they're empowered to make their own decisions, are paying attention to the things that are coming out of the growth office that are helping to shape and make understand how those expenditures could be used most effectively. A combination of us spending more intelligently, the bottler investing more, in terms of their execution acumen, will drive our base business, our current base business.
All the other stuff we're going to layer in over the next two or three years, we'll get growth from it, really, those are the kinds of things that will eventually fuel much more material growth from 2020 onward. Let me just say that we're super bullish with respect to the opportunities. We're fully convinced that we know how to capitalize on them. We're in the process of building a winning mindset in EMEA with our associates through massive amount of talent deployment, the right people in the right place to do the right job, restructuring in such a way that we're more agile with our bottling system. Thank you very much.
Ladies and gentlemen, please welcome the President of the Asia Pacific Group, John Murphy.
Good afternoon to everybody here, good morning to the brave few who are listening live from my part of the world in Asia. My name is John Murphy, it's a great privilege actually to be here to represent those people on the other side of the world. I'd like to talk about three topics. First of all, the runway for growth that we have across Asia Pacific. Secondly, to talk about some of the lessons that we are not only learning, but applying in many of our markets. Thirdly, I'd like to talk about the playbook that Francisco is leading and how it can be applied differently depending on the market context. With that, let me start, like my colleagues have done, with a little context on Asia Pacific. 52% of the world's population live here.
Brian's impressive 2.5 billion consumers pales in comparison to my 4.5 billion. They live in 32 countries of every shape, size, and stage of development. We service The Coca-Cola system. I had to double-check this today because the number seemed too big, but we service, either directly or indirectly, 15 million customers. There's 15 million more we don't service. We're organized into 5 business units, we work with a handful of pretty good partners, about whom I'll talk a little bit as we go forward. Our core business, like the other guys, we have 60% of our business is in sparkling. The other 40% tells you we're not immaterial when it comes to the other categories. The runway for growth ahead is significant. Over the next three years, the industry will add $50 billion of retail value. All the core categories will grow.
Some at different rates of growth than you've seen in some other parts of the world. If that's not an advertisement for beverages for life, well then, I don't know what is. If there was one slide I was going to rip out of my deck and make sure I had on my desk every morning, it's this one. The beverage landscape in Asia Pacific is very different today than you see in other parts of the world. 7 out of every 10 beverages consumed in Asia Pacific today is non-commercial. That compares in the developed world, for 7 out of every 10 beverages is commercial. If we were just to get to the global average, we would create almost $120 billion of value. I'm pretty excited with that chart, I have it close by in the good and the not so good days.
To better understand, though, the why of that chart, to tap into what does it take to make a difference as we go forward, the obvious place to start is with the consumer. Far be it from me to broad brush the Asian consumer, but there are common traits that one can pick up, whether you're talking about the Japanese, whether you're talking about India, or whether you're talking about China. Home rituals are important, hence the prevalence of home brew teas, homemade juices. They love a lot of stuff. Sweet, unsweet, hot, cold, gooey, ungooey, you name it. They're very trend conscious, increasingly in today's environment, those trends are influencing the repertoire of beverages that they're trying. They love to try. They love to try new stuff. They love to try it frequently.
With the adoption of digital technologies, the rate of trial is even higher because of the access that digital is creating. We've got a pretty decent portfolio today. In fact, over the last 3 years, we've launched in Asia Pacific alone over 500 new products, some of which you've seen in the booths earlier. I've got 3 or 4 favorites. Coca-Cola Plus is a good example of what Francisco talked about earlier today, and how you can create value in a leader category. Coca-Cola Plus has got some fiber. It's scientifically stamped with the approval of the Japanese government, which only takes you 2 years to secure. It helps to absorb the fat in your blood. The sign-up sheet is outside. We also are excited with what we're doing in India. James and I launched Minute Maid Mosambi with the Chief Minister of Maharashtra a few months ago.
Mosambi is the second most popular local fruit in India. It's a sweet lime, marrying a locally desired fruit to a global brand creates value, we're pretty excited with what we're doing. The third one is Chun Yue. Chun Yue is a water we have launched in China in the last couple of years with a view to bringing the consumer up the value curve in their ongoing pursuit for more quality and for more purity. The reality, though, is we're really just getting started. The size of the gray bars tells you that. That's all that we do not own and participate today. Keep in mind, we still have just a 15% value share. We're not starting from scratch, is the good news.
In one of our markets, Japan, we have what has now become an example, indeed an inspiration, not only for those of us in Asia, but for across the world with what has evolved in Japan over the last 20, 25 years. I was actually in Japan in my first assignment in the early '90s, at that time, the business there launched a strategy to become a total beverage company with a simple vision to provide consumers a superior choice for every beverage occasion. In those days, we were primarily a sparkling business with some momentum in coffee. Fast-forward to today, we've got a very diverse portfolio. We have leader positions in 3 of the largest categories and strong number 2s in 2 of the other ones.
As a side point, it's interesting that even with that evolution, even with following the consumer, the brand, the product that generates the most retail value in Japan today is Coca-Cola. Again, permission to believe in the importance of sustaining leadership positions and leveraging them. I thought it would be instructive to share with you just a few of the lessons that we have learned and we're applying from the experience in Japan, not only in Asia Pacific, but around the world. Some of these fuse nicely, actually, with the playbook that Francisco has been talking about. Firstly, it's critical to anchor the portfolio around a few leader brands. Today in Japan, we have a stable north of 30 brands, yet of those 30, 7 of them represent the lion's share of both revenue and profit. Scale is critical, as we know. This is a proof point.
Innovation actually, paradoxically, works better on scale brands. It doesn't happen by chance. It requires a long-term commitment to selecting the categories you want to play and win in. It requires consistent multi-year investments. It requires a systematic approach to learning how to build categories. Once you have brands, you can't rest on your laurels. Keeping brands relevant is a 24/7 job. My first visit to Japan, Georgia Coffee was available in one can. It was a 250 ml long can, and it was called Georgia Original. It was a sweetened flavored milk with coffee sweetener. Today, we have a stable of sub-brands built for different consumer segments. Within those segments, there are flavors and pack variants to meet needs on specific occasions. Underneath that, we have tactical extensions.
I was talking to somebody earlier today about in Fukuoka, they prefer a sweeter coffee, so we got one there. We leverage the seasons. We leverage the rhythm of the country. This is a 365-day job. Yeah, we have big time. Failed but persisted. In my second tour of duty in Japan, we thought we'd cracked the code on green tea. The paradoxical thing about expect failure is you don't actually set up to fail. You don't say, "Okay, I'm gonna fail gloriously next month." You set out in search of those unique insights. You search out in search of the ability to convert those into product solutions. We thought we had it with Marôcha. We filled every vending machine in Japan in one night. Best, biggest product launch in the history of Japan. Six months later, the consumer said, "No, thanks.
We don't like you." We were out of the market. It's important to set realistic expectations on these exploration journeys. It's important to have the ability to have many irons in the fire. Perhaps the most important lesson we're religious about at the moment is never stop searching for those unique insights. Consumer-led is not for the faint-hearted. Following them is Olympian in task and in persistence required. This thing here is not designed for this presentation. This is a copy of the Japan plan from last year. This is our launch calendar. To be able to execute that launch calendar, it's a different skill. It requires us to embrace complexity and not be afraid of it. In order to embrace complexity, you need to build sophistication into how you work end to end.
It requires the courage to invest ahead of the curve before the consumer has actually got there, and more importantly, before your competitor has gotten there. It requires, yes, in that pursuit of the new, it requires incredible discipline to stay with it. When I had my first bottler meeting in Japan, we needed a room around this size to house all of the attendees. We had a big system, lots of bottlers. Today, we would need one of the small meeting rooms over there. The journey to get from where we were to where we are, it's a never-ending pursuit. It's about leadership. It's about trust. It's about shared vision, alignment for what's required, what will win in the longer term. It's something that we can never forget, no matter where we're operating or with whomever we're operating with.
As we search for the path to quality leadership in Asia Pacific, and as I segment all of our markets, we've got about 90 important country category combinations. Most of them are in the left-hand side of the chart, and the objective over the next few years is to have most of them on the right-hand side of the chart. As James alluded to earlier, we have very different starting points. India, we have leader brands, but we have an industry that is very underdeveloped. On the other hand, in China, we have a 9% value share of an industry that is actually quite huge. The good news about both Beverages for Life and the playbook and the lessons from Japan, is that we can apply them differently to different contexts. Take China, for example.
In China, it's a stretch, frankly speaking, to say that for you to take away that these brands here are leader brands. When you've got a 9% share, it's a bit of a stretch. What we are clear on is we believe they will be and can be leader brands, and we're doing the things that Francisco and the other guys have talked about to get there. We also recognize that there's a couple of other categories that we need systematic plays in, and we're excited with some of the work we have in our pipeline. We're investing in really understanding the Chinese consumer. When you've got a country where you've got 100 cities with a population of more than one million people, you need to dig pretty deep to really understand the rhythm of the nation, what's happening and why, and we're investing significantly there.
We have rewired completely our supply chain with our R&D center in Shanghai. I'd invite any of you, if you're in China, to let us know. I'd love to show you around some of the things we're building and developing. With the refranchising that took place earlier this year, I believe we have in place a tremendous platform with COFCO and Swire to really drive our business in China towards this vision of being a total beverage company. India is a different story. We have leader brands. Sprite, Maaza, Thums Up in particular, own their categories. Tremendous equity. Our job now is to leverage those brands to help grow the industry. We're excited with the work we have underway to do that. In addition, we have a couple of other categories that we believe we have tremendous room for growth as we go forward.
The good news is, there are not too many there yet who've cracked the code on leadership in those categories. The triangle in the middle, the bottom half of the pyramid in India is almost 300 million people. We have tried so many times in my time in the Coca-Cola system to crack the code there, and we haven't done it. We've got a team of pretty smart people who want to have the legacy to be the first to do so. We're excited with some of the work that they're doing. We're also building a unique value system in India, partnering with the government, partnering with a company called Jain in the private sector, with our bottlers, to leverage the tremendous opportunity that the largest fruit-growing nation in the world offers. There'll be lots more to come on that.
Finally, with Bottling Investments Group, we have a really great partnership there to make sure that we build the right foundations over the coming years. We do so in partnership with the 13 other smaller bottlers we have there. With BIG, we can now do one system, one voice, communications and planning with our customers. We have one infrastructure plan, and most importantly, we have the executional excellence mindset being applied at the same levels across the country. I've been asked more than once, since I've taken on this role just over a year ago, I've been asked, "What's different, John? We've had many here, and they've tried it, and they've either been promoted or they've moved on. What's different?" I'd offer you four thoughts to take.
The first thing is that Beverages for Life, for me, is about opening the lens. Opening that lens creates, just in the next three years, the opportunity that we talked about earlier, $50 billion. If we move the needle from non-commercial to commercial, the sky is the limit with that broader lens. Secondly, I'd say is we have, without question, the most aligned and motivated group of a small group of partners in Asia Pacific today. I believe we've got a shared vision for the future. We've got investors who are willing to take the risks that are needed to build demand ahead of the curve. We've got the same beliefs on the importance of building world-class capabilities up and down our respective organizations. We have a great playbook on growth that we are now applying with discipline across our 32 markets.
Last but not least, as James alluded to, we have a culture that's changing. Growth is a discipline. It's also a mindset, and we're instilling that within our people. Capabilities is a broad word, but understanding the distinctive ones, the differential ones that are needed, are equally important. We're clear on what they are. Giving people belief that they can win is incredibly motivating and powerful. In fact, I invited our top 75 people to join me at a meeting earlier this year to help roll out the Beverages for Life down to the Asia PAC level. I asked them to come back to me with a slogan for the meeting. This here is what they came back with. They said, "John, this is our time to win." I really believe it is. Thank you. Pleasure being here. Thank you.
Ladies and gentlemen, we will now take a brief 10-minute break. Our program will resume at 3:05 P.M. Once again, we will take a brief 10-minute break. We will resume at 3:05 P.M. Thank you.
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Oh.
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Quiet and action.
Let's get one thing straight. I'd never tell you to drink Sprite. Even if I was in a commercial for Sprite, which I am, I wouldn't tell you to drink it, no matter what that cue card says.
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No. Even if you just eaten tacos with extra hot sauce, and you were holding an extra cold Sprite, and for some reason, were waiting for me to tell you to drink it, I still wouldn't tell you to drink that thirst-quenching Sprite. I'd ask you, "You want a Sprite?
I got a little bit of something for you. It's lyrical too. Get up in the middle of you. Like miracles do. Help you grow in your nature when your spiritual too. Help your hearing and your visual too. Tell them Gemini said it. I come to set it, break it down and phonetic. Yeah. Dip it in that white bread. Serve it up hot when I'm up in your spot. Like a tasty treat. I'm in the place to be. Gemini and his friend G-A-N-G-E-R M-O-U-S-E.
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Feels good in my heart. In this hold of your life here beside me. I don't ever want this day to end Take a little love from my heart again. I can make you feel together, be real together, be real. No, I can't stop. Can't stop the way I'm feeling. No one can ever bring me down. Taste the feeling. Taste another. Yeah. Yeah. Yeah. Feeling. Nothing could ever bring me down. No, I can't stop me when I get the feeling.
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Taste the feeling. I'm not playing with you. I can feel a little bit, a little bit. I can play a little bit, a little bit. I took a day off. I can see a little bit, a little bit. I can see a little bit, a little bit. You got a hold on me. You got a hold on me.
Alex, my name.
I got a hold on you.
Alex? Mine, too.
I got a new swimsuit with glitter and fringes. I got a case of the too many Benjamins.
It's the feeling. In my heart, in my soul. When you're right beside me. I don't ever want this feeling to end. We can watch the waves of the cool breeze hitting the sand beside me. Take a little love from my heart again. We can be. I can make you feel together, be real together.
We're real together.
No one can stop me when I get the feeling. Nothing can ever bring me down. No one can stop me when I get the feeling. Nothing can ever-
You okay?
Bring me down. No one can stop me when I get the feeling. Nothing can ever bring me down. No. Feels good in my heart, in my soul. When you're here right beside me. I don't want this feeling to end. No one can stop me. Nothing could ever bring me down. No one can stop me. When I get the feeling. Nothing could ever bring me down. Nothing could ever bring me down.
Fanta really is amazing. It's so intense and delicious. We could sell it, no problem.
Watch this. Hashtag so good, it sells itself.
Yo, what's up? Come alive. Come alive, yo.
The teens are in charge?
We here.
Are we really gonna run Fanta?
You know it. Fanta's so fruity, bubbly, and intense.
It sells itself.
Hey, you must be the new TMO.
I'm Alex.
Teen marketing officer. Yeah, that's right.
What is it you do here?
Apparently, whatever you tell me to, boss.
Interesting. We're going to change everything.
E-everything?
The bottle, the flavors, the formula, everything. Cheers, Ted. See everyone at noon tomorrow?
Yeah.
Of course.
Help the teen marketing team take over Fanta at takeover.fanta.com
Gold Peak. It starts with ingredients like delicious mountain-grown tea
Ladies and gentlemen, our program will resume in just a few moments. Please find your seat. Once again, ladies and gentlemen, our program will resume in just a few moments. Thank you.
That always makes you feel right at home. Gold Peak, the taste that brings you home.
How honest am I on a scale of one to 10? I guess I'd have to say about an eight. I've learned not to tell white lies as much as just defer the question. My wife will ask me, "How does this dress look on me?" Or this shirt. I'll just say, "I think I got to go downstairs." I really don't know if there's anything I haven't told anyone before, because I really do tell my wife everything. The one thing I might not have told her, so she complains sometimes when I snore, and I haven't told her that sometimes she snores. Honesty is definitely the best policy.
I think Mark Twain once said, "The best part about being honest is you don't have to remember what you said." I honestly think Honest Tea, it's like there's a phrase that I hope to be the kind of person my dog thinks I am. For me, what's so neat about Honest Tea is that it's, we sort of hold it above us as like an aspirational brand that it represents, I think, a lot, so much of what we'd all like to be.
Ladies and gentlemen, please welcome to the stage the incoming president of Coca-Cola North America, Jim Dinkins.
Good afternoon, everyone. It looks like we've still got a lot of people enjoying their break. I'll just wait just a minute, we'll get started. Well, as the announcer said, I'm Jim Dinkins. I'm the incoming group president for Coca-Cola North America. I've had the chance to meet several of you while I've been here this morning, I'm looking forward to working with you. My official start date is January 1, I'm looking forward to that. How many of you are from North America, live in North America? Most of you? Okay, excellent. We'll be able to talk about the North American business.
What I want to do is share a little bit of information with you about the marketplace, which I know you're very familiar, talk about our growth model, talk about three key strategies that we're focused on in North America to drive growth. The first is building strong brands, the second is creating customer value, the third is building our capabilities to sustain and repeat results. As my colleagues have done, here's our forward-looking statement, here's an outlook on a roadmap of the marketplace. Coca-Cola North America, as many of you know, is the flagship market for The Coca-Cola Company. There are over 350 million consumers in the marketplace, of which many of you are. Thank you for your business. Please drink a lot when you're here. Really appreciate that. It's a big marketplace.
There's over $200 billion in retail value in the marketplace. As you can see, we've got a good business in North America, $10 billion in revenue in North America. We've been able to maintain and grow value share for 30 consecutive quarters. As you can see our pie chart across our portfolio, a little more diverse than some of you maybe you've seen today, except for Japan. We enjoy a number one position across many of those categories. The other thing that's material, as you've heard about, is we have finished our map. James talked about finishing the map, and you probably heard from Sandy Douglas over the last few years about that initiative, and a few weeks ago, that was complete. Really excited about that.
The other thing that might be new to you is how much growth opportunity there is in North America. You saw some of the developing markets, let's look at North America. Over $30 billion of growth over the next three years. $30 billion. In that, $20 billion of that growth is going to come from categories where we have a 25 or less share. Then there'll be over $7 billion of growth in categories where we have a leading share. I feel like coming into this role, although I've worked in North America for 25 years, that North America is a big market with big opportunity. Let's take a minute and look at the growth model that we as a team developed a few years ago, and we affectionately call it the 5-4-3-2-1 strategy. Maybe you've seen this before, our model.
It starts with our key metrics, five key metrics. Incidence, margin growth, revenue, value share, and transactions. The key takeaway, which you heard from a lot of my colleagues today, is the movement from volume to value. The fourth element, or the fourth number in the 5-4-3-2-1, is around categories. 4 category clusters around sparkling and hydration and juice, plant, and dairy, tea and coffee, and our partnership with Monster. Three advantage routes to market, which is really unique for our North American business. A strong food service business, a DSD business that most of you are familiar with our bottlers, but also having one of the largest warehouse chill businesses in the U.S. Where our brands come to life is through our sales force. Two large sales forces in the food service and on-premise business, and also with national retail sales.
Most recently, I was working in national retail sales and the Minute Maid business unit in chilled, so I enjoyed doing that. That all comes together for one vision and one team. A vision and a team for Canada and for the U.S. That team is focused on three key strategies: building strong brands, creating customer value, and building our capabilities to sustain and repeat results. I'm going to spend the rest of my time talking about those areas. Before I do that, I want to talk about what have been our results. How have our results been? We can see that we've been driving growth. For the last three years, organic revenue of plus four, price mix of plus four, with a combination of movement in the categories and also diversification of packages.
Profit before tax of 6% by doing the two things I just mentioned and also leveraging productivity. Which has translated into value share. Value share across the categories above, soft drinks, juice, dairy, plant, tea and coffee and energy, but some work to do in hydration. We're developing plans right now and implementing them in the marketplace to address that opportunity. Let's talk about building strong brands. North America is well positioned to execute the Beverages for Life strategy. As you heard today, I'm going to talk about the leadership position the explorer position. The leadership position around our sparkling portfolio, and the explorer position around how you've heard about VEB, or Venturing & Emerging Brands. I'm going to talk more about that, about how we build explorers by finding and nurturing early brands. Let's talk about sparkling.
As you see in our sparkling portfolio, we've been successful around base core Coca-Cola, one Coke, with original Coke and Coke Zero growing at +1%. You can see Fanta and Sprite at +6%. Diet Coke isn't doing what we want so far. As you can see, it's minus 4. We're working hard on Diet Coke. We have plans to improve that number. The model for success that we've implemented in North America around our sparkling business is really comprised of 4 key elements. The first one is around media investment. Having great content where we can reach the target consumers in ways that they want, and invest at a double-digit level in investment in media to reach those consumers. The second is around segmentation, having the right packages in the marketplace that meet consumers' needs. The third is around innovation.
Innovation not only in packaging and products and promotions, but also in technology and equipment. You might be familiar with the Freestyle platform. The Freestyle platform is an excellent example of innovation in sparkling that unlocked the choice barrier for us in sparkling beverages and fountain. It also gives us information about how consumers buy our products so that we can then innovate around that information. Last but not least is execution. Making sure we work with our bottling partners in this example to meet the consumer's needs quickly in the stores they serve. I want to double-click on Coke Zero Sugar. We talked about that a lot today, but I want to talk about what we're doing in North America, and specifically in the U.S. We've talked about sharing information between countries.
This is an example of how we've imported a best practice from the U.K. We imported that best practice around a lot of the things you see at the bottom linked to the model that I just explained. First, we had significant media investment. Media investment where the core target lives, and the platform we used for that was ESPN College GameDay. The second area was segmentation. You can see mini cans, you can see glass packages, you also see a frequency pack in 12 packs. Innovation. Changing the recipe. Having the product taste more like original Coca-Cola with 0 sugar and 0 calories. Execution. Making sure that we develop the stores and hit the stores quickly and get that up to speed quickly with our new bottling system, our new franchise bottling system. What have been the results?
A plus seven-point increase in trends since we've implemented this process. Really great success on Coca-Cola Zero Sugar. Let's pivot to explorer brands. You've heard about VEB during the day, but I want to give you some more detail and dig into that a little closer. Venturing & Emerging Brands is a group we have that goes and finds explorer brands, and they have a model that they implement around 4 key areas. The first one is leveraging the industry know-how that we have across our system. A lot of that has to do with insights about the business and insights about consumers. The second area is around leveraging our world-class commercialization capabilities across lots of areas of the business, but specifically brand building, helping these young brands understand their consumer and understand the opportunity. The third area is around the business model.
You can see we use a venture approach or either a minority investment or either actually an outright acquisition. Lastly, what's really great about our model in North America is our multiple routes to market. We can leverage these brands and leverage those routes to market to drive these brands faster. Let's look at an example that we feel like is a brand that has real edge, in Francisco's terms, and that's fairlife. Has everybody tried fairlife out in the back? If you don't, please get a chance to do it. It's an amazing brand. Venturing & Emerging Brands were able to find fairlife and find it in the marketplace and see the edge that it had. The edge that it had really fell in 3 areas.
One is that one of the founders was a veterinarian, and that veterinarian believed there was a better way to run a dairy farm. The second was a patented filtration system where we could actually take the best parts of milk and provide them to the consumer. The third was state-of-the-art manufacturing to make sure we could get to market quickly with these brands. The fourth was leveraging the model and the marketplace that we talked about with our Coca-Cola brands. We looked at information, we looked at brand building, we looked at the routes to market that we have. For example, the chilled products are distributed through our warehouse business, our ambient products are distributed through the bottlers, and we have natural channel distributors and food service distributors as well.
That's where we can really build our brands and bring those brands to life in North America, which is a key strategic pillar for us. Let's pivot to customer value creation. Having strong brands is a great way to build customer value. Having great customer relationships is a great way to build strong brands. Some of you said to me, "How is it working in a tough market environment with customers today?" Really, what I'd tell you, the key is a couple of things. When you're growing faster than your customer, you're accretive to their business and you're in a different position. How do you get that way? Well, the way that we do that in Coca-Cola North America has art and science to it, and here's the science.
The science is we have a collaborative planning process that we use, business planning process that we use with customers that really digs in deep with them to understand their objectives, understand their strategies, developing joint plans, often beyond beverages. We go to our value proposition, which we call The Coca-Cola Commitment, that value proposition brings out unique elements to the customer's needs that provides customized solutions to their needs against growth. That helps us drive our growth faster than them, and we're accretive to their business. What's happened? You can see that we've been the number one in ARTD in driving retail value growth for customers. We're doing it in a way that they feel really good about because they've ranked us at the top quartile of people that do business with them.
We're going to continue to build strong brands and continue to build customer value in North America. The third element, I would say, that we're focused on is around building our own capabilities to sustain and repeat results. The first starts with our refranchised bottling system. You heard James talk about that earlier. You heard some of my colleagues talk about that. The map is complete. With that map that's complete, we have an energized bottling system that's investing in the market, both in people and capital, to drive results. We're going to leverage that. The third area, hopefully, you had a chance to see to the right here today with our showcase, is around digitization and accelerating that. The first example is Sip & Scan. Are you familiar with My Coke Rewards? Used to be on the top of a cap.
You'd punch in codes. We've digitized that. Now it's a package to mobile interaction with consumers right away for them to interact with our products and receive rewards. The other area is around e-commerce. You're able to see that as well in the e-commerce space, which is a broad definition I think James talked about. We're really focused on e-commerce. From click and collect, we have white papers on that with our customers to make sure we help them in that space. We're working on things such as meal kits. In the food service, how we participate in meal kits that come to bear. Also forward-looking things like voice. We're actively involved in that. With our pure-play players, the digital shelf. We're really focused on e-commerce. Then last is a productivity mindset.
A productivity mindset that challenges every dollar, that simplifies how we work, that makes sure that we're leveraging technology to do those things as well, to invest back in the business for growth and drive margins. As you think about Coke North America, there's a couple of things I'd ask you to think about. One is, it's a big business with big opportunity. The second is there's a proven growth model of how we plan to drive growth in the marketplace, and three key strategic pillars to do that. Building strong brands, creating customer value, and then building our own capabilities to sustain and repeat. The consumer's in charge, and the marketplace is evolving. We're going to continue to evolve in North America to make sure that we're capturing all the opportunities.
I look forward to working with all of you in my new role and to seeing you out in New York or wherever you might be. As I close, I want to leave you with a clip from a campaign we're running now, and hopefully, you've seen it in your own homes. It's a clip that we believe pulls together many of the elements that I've talked about today and helps demonstrate how in North America we plan to bring Beverages for Life to life. Thank you, and let's roll the clip.
Imagine how much good one person can do. Now, imagine a business that employs over 90,000 people in the U.S. alone. Imagine a company of that size dedicated to not only doing good business, but good for the world too. We are The Coca-Cola Company. We didn't just teach the world to sing. We are Coca-Cola and so much more. We're an organic tea company, a coconut water company, a premium juice company. We've got drinks for long days. For birthdays, for turning over new leaves. Everything we make relies on the same thing we all do, clean water. It's why for every drop we use, we work to give one back. We're also helping to replenish the Rio Grande and over 100 communities in nearly every corner of the country, because chances are, we're in that corner too.
We believe our business thrives when our communities thrive, which is just one of the reasons we help make college a reality for thousands of students. Today, companies need to lead more than ever. We're trying to do just that. Thank you for listening. We're listening too.
Ladies and gentlemen, please welcome to the stage the Chief Financial Officer of The Coca-Cola Company, Ms. Kathy Waller.
Good afternoon. Last presentation of the day before we go into Q&A. You've heard about our strategies to accelerate growth and expand into other categories. Our group presidents walked you through the examples of how they're going to make these strategies come to life. Now, I get to put the pieces together and demonstrate how we create value and how we're going to deliver our revenue and our profit targets, supported by our capital structure. Francisco Crespo and the group presidents talked about the ways we were going to drive sustainable revenue growth. I'm going to just do a quick and high-level recap of those things. We absolutely have a disciplined approach to gain scale and category leadership based upon the explorer, challenger, and leader model. Now we're going to broaden the portfolio. Many ways to do that.
Innovation, premium options, this reapplication, the lift and shift. Take a great product from one market and move it to another market. As you get category leadership, you get pricing ability. We have a very strong global system, and we're going to continue to use bulk on M&A. We absolutely believe, and we will deliver our 4%-6% long-term growth target. I'm going to break down a little bit of how we're going to do that. The industry is expected to grow approximately 4% by 2020. That's $150 billion. You see the categories grow at different rates. On the left-hand side, we're going to start with sparkling, and I'm going to break this down in terms of sparkling and then all other products. Sparkling, you see the industry is expected to grow at 3%-4%.
The outer ring is industry, the inner ring is us, Coca-Cola. We skew more to sparkling, as you saw in the presentations. Over 50% of our portfolio is in sparkling beverages. Now, we talked about the drivers that will help us to continue to grow sparkling, and we believe sparkling will continue to grow. The one I'm going to focus on for just a minute is renewing category growth initiatives. For us, that means continuing to reduce the sugar content out of our beverages around the world. We offer our consumers choice, right? Our consumers can have a full-calorie, great-tasting beverage, or they can have a reduced-calorie, reduced sugar content, or zero-calorie, zero sugar content, great-tasting beverage. It's all about consumers having choice. In sparkling, again, we said we'll continue to grow.
When you look at the other categories, we obviously need to gain share in the other categories and balance out that portfolio a bit. We definitely have products in those other categories, and you see the retail value growth that we anticipate over the next three years for those categories. We've talked about those drivers as well, it's been in all of their presentations. The one I would point out would be the export VEB model internationally. The Venturing & Emerging Brands model started in North America, as it's been discussed, and it is our way to incubate products and allow them to grow without the weight of the entire Coca-Cola system on them. It has been great for North America.
It is a capability that we need to continue to build, we're now going to shift, lift and shift, that capability to other parts of the world. A great example of the things I was just talking about would be Innocent. We did not buy all of Innocent initially. We made our first investment in 2009, when it was the number 1 smoothie brand in the U.K. We took that great company with a great entrepreneurial culture and a passion for their brands, we combined that with our resources and our consumer reach. Together, we improved the company, we improved innovation. One example, recent example being, we took our knowledge about coconut water and ZICO from the U.S., we helped them to launch a coconut water in Europe. Now they've got a expansive portfolio.
We invested behind the brands to grow brand awareness. Using our full experience and their experience, it became a national brand. It's in all major retailers, it is now the number 1 chilled juice brand in Europe. Even better, to this day, they maintain their entrepreneurial culture. Let's pivot to talk a little bit about M&A. We have used both on M&A to help us to, over the years, to drive our consumer-centric portfolio. We have purchased brands. We have purchased and refranchised bottlers. We have created alliances and partnerships. Maybe what you don't think about, though, is we've created capabilities, and AdeS is a great example of that. We bought this great brand in Latin America, it's a plant-based, protein-based beverage company. We needed to learn about that supply chain. We needed to learn about that manufacturing process.
We now, as we built out those capabilities, we can transport those capabilities around the world. It was important to get that great brand, just as importantly, we got great capabilities that we can now use around the world. I recognize that this chart is a little busy, it is only an illustration of how we have taken great products around the world, lifted them, and shifted them to other places around the world. We will do more of that. AdeS, again, being another great example, as Brian mentioned, although he changed it, maybe a little different, we did lift and shift the brand to Europe this year, and we will be in next year. I go back to where I started from in revenue of this chart. We start with the 4% industry retail value growth.
We took off a point because we skewed to sparkling. Sparkling is growing at 3%-4%. We said, "In all fairness, we take off a point." We've got great growth initiatives, some of which you've seen today, that will give us that 1%-2% point of growth, which then gives us 4%-5% at revenue that we absolutely control. When emerging markets rebound, we believe they will rebound. I can't tell you when, we believe that rebound will occur. We pick up another point that gets us to our 4%-6% long-term growth target. We absolutely believe that we can deliver the 4%-6% long-term target. Let's shift to profitability and our margins.
We announced earlier today that we will deliver operating margin expansion, and that our margins will be 35%+ by the year 2020. Refranchising helps that significantly, as well as productivity. Productivity has helped us to deliver that. In addition, making the right portfolio choices helps. Continuing to grow sparkling helps. Getting scale helps. If I break that down a little further, on the left-hand side is gross margin by category cluster, relative gross margin by category cluster. It's very clear that category margins will vary. It's not lost on anyone that sparkling gross margins are superior to the other categories. We've all known that. When we expand, we know we're going to get the margin pressure. We absolutely believe in any one year, we can manage that pressure.
We don't believe any one year will be significant enough that we cannot manage it. We believe we will be able to manage that margin pressure, and there are lots of different ways in which you can manage the pressure. One of these ways people have been talking about all morning, all afternoon, Francisco being one of them, is our explorer, challenger, leader framework. Our products will go through that framework at different stages, at different rates. The one thing that's very clear is as they get category leadership and scale, our margins improve. We have a very positive impact to our margins. The other things you can do, an example on this page is, within a category, you have options. The example here would be juice in North America. We got Minute Maid, great brand, and we've got Simply. More premium.
Simply's margins are a little bit better than the Minute Maid margins. We've got options that will allow us to improve our margins over time. The good news is sparkling continues to grow, which is a positive, and we will continue to take products to category leadership to allow us to get to that margin level and beyond. Let's talk about productivity. I need to say productivity is ongoing, and it is absolutely built into our long-term growth targets. We have current program underway, and it is focused against all categories of our spend, including our latest program, Lean Enterprise. Lean Enterprise started earlier this year, as James talked about. Purpose of it being to flatten the organization and to drive faster and more effective decision-making. Across our category spend, we've done other things. In marketing, we drove more efficient marketing.
The goal was to reduce the amount of promotional marketing and non-media spend, absolutely invest in our brands and invest in media spending. We've done things in the supply chain. We've changed designs of our packaging, and this example is that we've light-weighted bottles. We've taken cost out of our manufacturing systems. We have standardized and reformulated manufacturing. You've heard examples of reformulations. We've standardized recipes around the world, which also took out costs. We have leveraged technology and automation to continue to drive costs down. The IT systems and capabilities is ongoing. We are upgrading our systems, including, I'm happy to say, our financial systems. We've trained our associates on the Agile methodology. The Agile methodology is a different way of working.
It's a way of problem-solving, where you take big problems and you put them into small, manageable pieces, and you solve them in a couple of weeks at a time until you solve the entire problem. The beauty about Agile is that it gives them a different way of thinking about their work, and the work that seemed daunting and very difficult to change, becomes easier to change. We've taken the productivity, and we have reinvested in our brands, and in innovation. We've absolutely used it to cover category mix, inflation, and currency. We've expanded our margins. The beauty of the productivity program is that we've been involved in productivity for a long time, and it's always been part of our long-term targets. It is now become just part of the DNA. It is part of the way our employees think about doing their jobs.
Part of the reason is because they know it's an absolute expectation because it can't go away. We'll always be using productivity to fuel growth. It becomes an enabler for the organization, and we've given them different ways to think about how to go about it through the Agile methodology and other ways that has helped them not be as concerned about it and be more excited about it. One example of why they're excited is about digitizing the organization. Our associates will benefit greatly from us digitizing the organization. They will benefit more than anybody else, and they are really looking forward to it. When I gave someone an example earlier this afternoon about my finance associates looking forward to the SAP re-implementation, they looked at me like I had lost my mind.
However, when you know when it's over, what it does to their lives, and how it makes their lives and their jobs much easier, you understand why they're looking forward to that work. It's a lot of work. They're absolutely up for it, and they're looking forward to it. It allows them to continue to find ways to be more productive, to continue to change the way in which they work, and to have more balance in their lives. It's very simple. We have done things and are continuing to do things to digitize the organization. Our infrastructure is moving to a service-based model, moving to the cloud. We've created tools, collaboration tools. We have done more in automation. We have robotics. We've done a lot of different things that have absolutely helped us reduce costs.
They've helped us make decisions faster and will continue to. As important, they've improved the employee experience, which means a lot to me and a lot of others around here personally. Let's talk about our capital allocation strategy and cash flow. We have had a very consistent capital allocation strategy forever. Our priorities haven't changed. We reinvest in our business. Our cash from operations, we generate great cash from operations, and we will continue to. Our capital expenditures, as we've been refranchising, have declined. We have given cash back to our investors, primarily in the form of dividends, and that will continue. We've used bolt-on M&A. Going forward, given all of the strategies you saw and the needs to expand and accelerate our expansion into other categories, there may be an incremental need for more bolt-on M&A in the near term.
As a result, we are tapering our share repurchase program and will only cover dilution going forward. As we are always looking at how we can continue to improve, we've taken cost out of net working capital. We're improving our net working capital. One example would be the extended payment terms that we are introducing, and we started with Japan and the United States. Just those two really resulted in $1.5 billion in improvement in our net working capital, and we are looking at other markets around the world. Our cash conversion cycle has reduced from approximately 64, 65 days down to 35 days. Improvement in net working capital. We have, as I said, reduced our capital intensity. As we refranchised, our capital expenses have gone down, but also as we refranchised, we have divested insignificant amounts of revenue.
Going forward, you may want to think about, or we thought a better way to think about the capital expenses would be as a percent of net revenue. That's in the long term. In the near and intermediate term, we are going to continue to invest in digitization and other things that help us to continue our productivity programs. In the near term, the capital expenditures numbers are coming down as much as we are investing. Over the long term, 4.5%-5% is probably a good way to think about as a percent of net revenue is probably a good way to think about capital expenditures. Then our free cash flow and our free cash flow margins. On the left-hand side, I think that we showed this at CAGNY. That number in 2016 is 16%.
Assumes that if we had finished the refranchising at the beginning of 2016, so effectively 12/31/15, we would have increased our free cash flow margin by about 700 basis points. The refranchising will complete. USA completed and got a little bit left to go. Refranchising does complete, then we determined that it was probably a good idea to put a target range out there. Reinvestment, we'll need to do different things to support the business going forward. We put a target range of 95%-100% for free cash flow conversion ratio. James showed you this chart at the beginning. We clearly are a global leader. We have a strong foundation. Hopefully, you've seen through all the presentations this afternoon that there is a clear destination. Hopefully you've heard how our culture is changing and our teams are aligned for growth.
That means, to me, over the long term, that we will absolutely, and we are committed to delivering on our long-term targets, including our new adjusted free cash flow conversion ratio target. With that, I will ask you guys to sit tight. I'm going to invite my colleagues back. They're going to bring up chairs, and we are going to have Q&A. Right? Give us a few minutes to get set up, and we will start Q&A. Thank you.
This is Willie. He's on his way to work in Alaska. This is John. He's on his way to work in New Mexico. Willie and John both work for us, a business that employs over 90,000 people in the U.S. alone. We are The Coca-Cola Company, we make much more than our name suggests. We're an organic tea company, a premium juice company. We've got drinks for long days, for birthdays, for turning over new leaves. All of our products rely on the same thing we all do, clean water, which is why we have John leading our efforts to replenish every drop of water we use. We believe our business thrives when our communities thrive, which is just one of the reasons we help make college a reality for thousands of students.
Today, companies need to do more, John and Willie are trying to do just that. Thank you for listening. We're listening too. We may be one of the world's most familiar companies, we make more than our name suggests. We're an organic tea company, a premium juice company, a coconut water company. We've got drinks for long days, for birthdays, for turning over new leaves. We make them for every moment in every corner of the country. We are The Coca-Cola Company, we're proud to offer so much more.
Here, let me sit at the end here. I'm going to take the end spot.
I was going to sit down there.
When we get going, I'm going to obviously call on folks in the audience. When I call on you, if you can please keep your hand up. We're going to have folks with microphones, so they're going to need to be able to find you. If you'll please wait until the microphone gets to you before you start asking the question, because it's not just for folks here in the room, but obviously we have people on the webcast, we want to make sure that they get a chance to hear the question. With that said, we'll open it up. Bill was the first one to raise his hand.
Again, once I call his name, if the rest of the people can put their hands down, it'll make it a whole lot easier for them to figure out who is being called on.
Thank you. I think we'll zero in on Kathy, your comment about M&A and holding back on share repurchase, because obviously we're thinking of size deals of Topo Chico and others where they shouldn't be mutually exclusive. If you or James want to give us a little more color about what you have in mind, when that's going to happen, anything else would be great.
I was clear, it will continue to be both on M&A that we will be looking to do. Let me step back and say we have a cash allocation strategy, right? You all know better than anybody that we have been doing share repurchase through debt, right? Our gross debt numbers are high. We need to be careful on how as we move forward. Since none of us know at this point about what tax reform is going to look like or what's going to happen, we need to be more cautious. Part of that caution is going to give us opportunity to, as we need to expand and accelerate our growth, because top line growth is what we absolutely need, and that's the driver for everything, as James said this morning.
Will give us opportunities to be able to invest in more both on M&A if we need it, to deliver our numbers and to grow our business for the next 130 years. It's just simple mathematics.
Mark.
Thank you too. Really great presentation. James, two-part question. You've heard the phrase culture eats strategy. On the strategy side of things, what gives you the confidence in these big numbers for sparkling category growth and juice dairy growth? If those numbers don't play out, then your strategy's at risk. On the culture side of things, we've got a number of veterans here in the company who are demonstrably demonstrating habit change. Could you speak a little bit about this culture that has been criticized, how you think you're having some success leading habit change so that culture can-
Sure
prevail over this strategy risk?
Prevail with the strategy, hopefully. I think on the growth of sparkling and the juice and the plant and the dairy, the growth is largely there. The sparkling category, notwithstanding that people want to keep saying that sparkling is not right, the factual reality remains the same. Revenue of the sparkling category is growing in that 3% sort of range. It's not a radically different number than what's been happening recently. Yes, any RTD category softened probably coming into the end of last year and the beginning of this year. You can see in the Nielsen it's starting to tick back up. Sparkling category is in growth globally in revenue terms, and so is juice, dairy, and plant. What's required for this strategy to win is not some massive step change in the growth rate of the industry.
There's a little bit more as the emerging markets come back, as Kathy had in her deck, but it's not a radical change. It's not like it's heading down, it's got to head up. It's heading up, we just expect to see it go a little faster. There's so much innovation to be brought to it, that we're very confident that those numbers are going to continue to hold true and be robust. In terms of the culture, I think the simple fact remains that while some of the old dogs here are managing to learn new tricks, including myself, the most important thing is that the organization we won't say which ones are the older.
The most important thing is that the organization feels unleashed, because the reality is that those successes are going to be generated by the people in the field, supported by the people in the head office. All we can do is encourage them and set broad corridors of direction into the future. They're the ones that need to feel empowered, and I think you can absolutely feel that. You go around this campus, you go to any of the other offices, you can feel the change. They feel unleashed. They feel empowered to go and chase things. Is everyone with everything? No, nor would you ever expect it to be. I think you see an energy and a momentum. Ali. Hand up.
Thanks, guys. I want to ask a question about margins in particular, probably a surprise that I'm asking that question. If you think about structurally, you're already going to 33%. That's structurally already there. You're then doing $3.8 billion. You've been doing, to be fair, some of it is complete, $3.8 billion of gross cost savings, call it. That's 14 point something like that from a top-line perspective post refranchising. You're then talking about further productivity, perhaps with lean. You're talking about scale benefits. You're talking about portfolio choices. You're going from 33 to 35, right? That's what you're saying. Are you saying you're going to have to reinvest all of this back in? If you are, how does that jive at all with what you just said, James, from a top line that we're not expecting much change in top line.
We're not expecting a heroic effort, I guess, from a top-line perspective.
No, I didn't say that.
I don't get that. In particular, I ask that question in terms of we've heard a lot about growth today. I don't think anybody said the words return on investment or return, at least so far on stage. Really pushing to try to understand a little bit better, please.
The 33% that you're referring to is what we showed at CAGNY, I believe, that given the currency impact, that starts at 32%, really, because currency took about a point, about 100 basis points. Yes, we're going to 32%-35% plus. The plus is very important, by the way, don't discount my plus. I've got line of sight to what I gave you, 35% plus at this point. I don't think any of us want to over-commit to anything, but we believe that we can get there. Yes, we have delivered a little over $2 billion of the original $3 billion program, and then we've had the other program that started this year. Yes, we are reinvesting. Yes, not just in marketing, we are investing in innovation.
We're investing in a lot of the things that you saw today, and we're investing in digitization and our people, right? We are investing. In the things that we are doing, we believe make us a stronger company going forward. We committed to the 35% plus, and we will see where we go, but we've committed to by 2020, the 35% plus.
Maybe let me just add a couple of thoughts. I think over the last year or so, especially given all the induced complexity in the numbers of refranchising, we kind of got lost in the maze of tracking all the moving pieces of productivity, reinvestment, drop into the bottom line, inflation, category mix, channel mix, geography and currency, and it's just become very difficult to follow the breadcrumbs. Rather than trying to keep passing those down and then everyone making different assumptions about, well, okay, what are you assuming on? Well, if productivity's on one side, is everything else constant margin or not? It's like, okay, let's put a margin target out there so everyone has clarity on the sum of all the breadcrumbs. That's kind of what we've done. Judy.
Thank you. Obviously I think Coke is very focused on putting a growth mindset into the organization, so we heard a lot about that today. I'm just wondering, just realistically, how does sort of change in the mindset actually translate into the performance? Because year-to-date, still category performance has been still a little bit lackluster. Clearly, given the category mix issues, you need to accelerate that growth. Realistically, how quickly can we see that in 2018? Can we see that mid-single digit growth emerging from a top-line perspective?
Yeah. Obviously, we're not planning to give guidance on 2018. Let me offer a few thoughts. There's no question that, as I commented earlier, the category slowed at the back end. Any RTD globally slowed at the back end of last year through Nielsen, coming into the first half, and you can start to see it come back out now. It was in the two and a half range rather than before. You can start to see that come back up. I think there's a part of it that's that. We expect, and we see the category rebuilding, so that's partly going to lift the boat. The other thing, within the context that we're still gaining share. We have made our own choices in the short term on where we want to focus in some stills, and particularly in China, for example.
We said, okay, look, we want to deprioritize some of this very low margin bulk water. It took at least three points off the growth rate, in China, just in the third quarter. As we are more driving people to be choiceful, and in the words that Francisco says, kill off the zombies, the things that aren't going anywhere, that aren't making any money. To be a bit more rigorous, we're starting to shed some volume at the edges, which is partly pressuring the other categories. That's a short-term effect. Kevin.
Great. Thanks. A question on the U.S. business, probably for James, Francisco, and Jim, maybe for you as well. Just with the benefit of hindsight, maybe some of the learnings for some of these smaller competing brands that have had some success. Like LaCroix in sparkling, BODYARMOR in sports drinks. Bai has had a lot of success. A lot of the strategies you guys went through makes a lot of sense. Coke seemingly was very well-positioned to capitalize on these trends and obviously does a ton of work around the consumer, but yet you've had these smaller sort of niche brands that don't have anywhere near the scale of The Coca-Cola Company, and they've had a good amount of success.
With the benefit of hindsight now looking at some of these brands, how comfortable, James, do you feel with how nimble the company is at this point, the processes that are in place to capitalize on these trends, et cetera? Thank you.
Sure. I think we're trying to become more nimble. As commented somewhere in one of the questions, as a Brit, it's kind of impossible to be happy or be content, so then you can never be nimble enough in a way. No, we weren't nimble enough. Now, having said that, it's not our expectation that we will capture every available opportunity and be the first to get them. I think that's an unrealistic expectation, our abilities to grow 4%-6% doesn't require us to do so. We need to consistently gain share in a growing industry, that's what'll take us to the right level of top-line growth. Competitors, new and existing, will find opportunities. They'll have ideas that are resonating with consumers and customers.
What we need to do is pay as much attention as possible to what's happening in the real world, and to be quick to act, and quicker to act in the future. The idea that there won't be other new ideas and new competitors emerging, I think, would be unrealistic. We've got to learn, and we've got to stick to our game plan of building brands, building master brands, building brands that have edge Creating leadership positions. If something new happens, we need to learn quickly from it and move on. It's a very competitive market, and there are a lot of entrants, and I think there always will be.
Laurent. Sorry, sorry. Laurent.
Thank you. James, you said the beauty of the category is it's highly diversified. You mentioned that almost 50% of the sales, of the consumption is coming from eating or drinking out. Could you please tell us a bit more, give us more color about what you would be doing in the on-premise or food service category, Freestyle. Should we expect, because it's a high number, 50%, the same level of growth in top line or profitability in that segment of the business if you compare this to retail?
Let me make a few global comments and if you want to talk about food service in the U.S. The first big data point is eating out is growing faster than eating in globally, and it has been for a long period of time. I think the chances are that bit of the pie will be faster growing than the rest of it. Yes, okay, you've got to net off the drinking at home will be supported by people coming into commercial beverages from non-commercial beverages. I think the chances are that that will continue to be vibrant because the global trend is towards eating out in all its different shapes and forms. I'll let Jim talk about Freestyle and food service in the U.S., which is the kind of the fountain end, the more organized trade end of the spectrum.
Around the world, globally, this is a growing trend. In some places, most places, it's all about smaller packaging. It's all about getting the distribution. It's one of the core strengths of the global bottling system, a bit like the mom-and-pop stores, is getting to these smaller eating and drinking outlets. Even those, case in point, China, there's an explosive use of e-commerce. Using the aggregator platforms. People order through an aggregator, direct it to a local mom-and-pop eating and drinking, and they deliver. Even there, we're having to innovate, getting on the aggregator platforms, being part of the food and beverage combo. Making sure we have a package that can be shipped, so maybe not a returnable glass bottle, but something that can be shipped to the home. We think that's going to be a vibrant part of the future.
Yeah, the only thing I was going to add. Am I on?
Yeah.
The food service business is a huge advantage for us in the U.S. It's the heritage of the company that really was never franchised in the U.S. It's been a vertically integrated business from the beginning of the company. It plays a unique role for us in a couple ways. One, it's a great brand-building opportunity in terms of brand sampling. It's also one of our biggest advantages in the U.S., is our connection with food with our brands, especially brand Coke. You've seen a lot of that advertising, I'm assuming, recently about Coke and meals, which plays itself out in restaurants. In the Freestyle question, that's continuing to be a big strategy for us to implement. Freestyle has been very successful, and food service will continue to be a big strategic focus for us.
Lauren.
You're in the middle. You're not going to get in.
I think they can see you, but I think you're okay.
Great. Thank you. I was hoping that some collection of you could talk a little bit about the process, the relationship between corporate and in the markets, specifically with the bottlers. As you're thinking about lift and shift or timeline to develop new categories. I thought it was interesting in Europe, it's like we got to get the core right first, and it's post 2020 before lift and shift matters. In Latin America, still lots of growth in CSDs, but a decision to go early with a Powerade, right, to start expanding the other categories. Just that process, and especially now with the bottling network set, how that idea and information flows goes back and forth, and who's making the decisions about what to do and when?
You want to start?
Yeah, I'm happy to start. Maybe I gave the wrong impression. We're actually doing all that stuff now. What I was trying to explain is that in terms of materially impacting the top line growth, it'll take a couple of years, because it takes time. You put them in. The minute you decide to put something in the case of AdeS, actually, it was really quick. It took us six months, which is pretty unusual for us. Even then, we launched at the beginning of the year, and you think it takes time to get it out and to begin to build some critical mass. If you think about it that way, you say, okay, by the time you get to 2020, you have enough market share, value share to be able to build from there. That's what I was trying to explain.
We're going like crazy putting different things in different places.
All right. I think a lot of it is a focus that we want a system to have, the system being the bottlers and ourselves, all our associates. For us in Latin America, our focus, our number one priority is around renewing category growth. We have the tax challenges around. We also see a movement from consumers into that space, and it's very profitable. We've all agreed that this is an area of opportunity for us. We're working very fast to reduce sugar content in our products, but at the same time, we're driving smaller packages, better margins.
We're being very focused about improving how we execute at the point of sale. The process of deciding is, we agree on what the big opportunities are. We think there are three big ones, this is the first one. The second one is expand profitably in the non-sparkling categories. Within that, I mentioned earlier, juices, value-added dairy, and plant-based, where we see a lot of room to grow, and in hydration. Again, on the value-added part of hydration, how do we make money in it? There's a lot more opportunities. We think we need to be focused. I think our bottlers agree, because then you can direct your capital to where it has the biggest impact. It's constant conversation, constant discussion around the opportunities and how to go capture them. Another piece is, are we bringing the capabilities we need?
Are we leveraging the ones we have? This is constant conversation. Our business units are tasked with identifying those opportunities, getting together with our bottlers, and then deciding what is best inside that framework that we've established, where we want them. You know that what Francisco talked about, the explorer, challenger, leader space. That's how we do it.
One example. Take the R&D area. What's changing? R&D in Shanghai reports into me. The five business unit presidents that report into me have a metric to move ideas faster and are being held accountable to not duplicate and not waste time. I'll give you an example. The R&D, the reformulation work that's been done in Asia has, I'd say, sped up sixfold in the last 12 months. We've appointed the head of R&D was in Mexico, and she took with her all the stuff that Alfredo and his team were doing in Mexico and implemented it within six to eight weeks.
Amit.
Thank you. Two quick ones for Kathy and then one for James and Francisco as well. Sorry. Kathy, you talked about SAP re-implementation. Can you talk about the scope of that and timing of that? You provided a category mix negative on the top line. Is there a way to think about that on the OI margin line as well, if there is a mix impact to think about? For James and Francisco, I think what Francisco laid out is a pretty compelling case for, "Look, let's do things differently, and that has big impact on our future growth." How much conviction you have of continuing to give him support for those initiatives if it takes four years, five years, in some cases, to pan out? Thanks.
Okay. First, the SAP re-implementation, that is just starting. We received board approval this past October. The basic finance system will be in in a year. We will be able to turn that on in 2019. We start moving to other bolt-on things, our marketing expense management system, the logistics system, manufacturing system, they start after we get the basic financial system in. All total, it's probably 24 months to 36 months, all total, but different things come in in different times, and you start getting benefits faster because different things come on different times. We start to get benefits from this system in the first six months, frankly. As far as the category, that 1% we took off because we are so skewed to sparkling, and sparkling is growing at 3%-4%.
We took the point off to recognize that in all fairness. I would say, again, sparkling will continue to grow and the margins of the sparkling can grow because as we do things like renewing category growth initiatives reformulating and changing our recipes and things, and working with our supply chain, we still find ways to expand the margins in sparkling. We will manage that, right? That's the point we wanted to make. We'll manage the margin impact, so that we get to that 35%-plus margin.
Yeah. Is this on?
Yeah.
The only thing I would add to what Kathy said is, obviously, we have mapped out the different category country combinations that we have. When we see that, at least for the markets that do the vast majority of our business, we know that we have leadership positions where we are leaving money on the table. We are not capturing all the growth. We are not going as fast as we can to collect all that value. We have been having a conversation with the BUs that are ultimately empowered on what are the things that we can do to capture that part of the equation. How can we ensure that we really are looking for growth in revenues and transactions rather than volume, particularly in those leadership positions? We have checked the amount of experiments that we have, and we have mapped out how many experiments we have.
The truth is, we need to multiply significantly the amount of experiments that we have. When you see those, it is a good number, but we should triple or quadruple that. Because not all of them are going to work, and that is what will be the seed for our future. Actually, we are not that bad in transforming, in getting exponential growth out of those experiments. Probably because we're big, we have a good execution, but that is not a bad point. We are not good in killing the zombies. We have an awful lot of things that three years, four years after they were launched, they are not getting exponential growth, and they are only dragging attention, taking space in the gondola, making our lines inefficient. We need to get better at that. More experiments, killing them faster.
In the middle area is where I think we have probably one of the largest opportunities. The vicious circle there is it does take a longer period of time to challenge and become a leader. The trap is that normally you lose hope by September, and you start cutting DME, right? The bottler already knows that. When you ask them, "Please go and execute, we're really serious about this," it's like, "Yeah, let's wait till September." That requires a different way of thinking. We have the batting average for each of these places. We do know that over 60% of our growth in the next two, three years is going to come from just getting slightly better in our leadership positions. If we get significantly better, that would be nice money on top and above.
We are considering that we will get mildly better in the middle area, and that we will put more experiments out there, but not in a massive way at the beginning. When you project that five years, 10 years, then the growth changes, because you will get some of the experiments to become leaders in that timeframe, and you will have the challengers becoming leaders. At that point, the growth comes in a very different way.
Carlos.
Thank you. I'm curious, how do you see the bottlers accelerating their digital platforms for better shopper and point of sale insights, and how do you inject yourself into the process of getting those best practices that some bottlers have transferred to other bottlers?
First, I think we're making some good progress, but the world is going to be different in 5 years. I think it's going to be a question of being at the front edge now and staying over the course of the journey, because it's for sure going to keep changing. I think depending on what the local circumstances were, different bottlers have developed different parts of the toolkit for a digital future. You can go at the one end of the spectrum in Mexico or in Latin America, where it's many more mom and pops. Companies like FEMSA and Arca have developed very extensive ways of understanding at a shop level what's going on, using many variables to drive the business. That's kind of our systems to the fragmented trade.
You've got developed markets, for example, the U.S., which have learned how do you link through customers' websites and help them sell more beverages with their things. If they're a delivery pizza, how do you help them sell more drinks? It's a very different piece of the digital puzzle. You've got perhaps in Asia, working through food aggregators and developing that. In different parts of the world, there are different pieces being developed based on the logic of the marketplace. What we've done with Barry and IT is bring all the bottlers together and start sharing. In fact, what we did is say, "Look, this is such a big puzzle. Let's all agree on one way of doing an assessment. None of them will be perfect. Let's just have one, and let's just rank out.
Let's go out and work out where each country is on the whole digital journey from end to end, and let's see where everyone is. Actually, virtually all the bottlers signed up, including ourselves, and we've literally gone through all the big bottling countries and said, "Where do consumer, customer, all the way through, how do we stack?" Of course, it's dependent on market conditions and all the things you'd expect. There's a tremendous amount of energy across the system, both for the digital journey, sharing the learnings. Let's recognize that we don't need the same solutions everywhere at the same time because the market conditions matter.
Can I.
Sure
To that? The other thing beyond the assessment is we made the commitment in the BUs and in these bottlers to assign a digital champion that reports to the general manager. Sometimes digital was reporting into marketing, so obviously it had a heavy weight towards just marketing. One of the areas where we are making a big push is for those positions not to be filled in only with people that understand the business, but people that come from outside and bring fresh ideas and fresh blood. That is the community that will be able to agree on what is the right governance, the best practices, and the shared learnings that we have to do. That is being deployed as we speak. We have gotten five of the BUs already covered and some of the positions in the bottlers. It is a journey that we still need to do.
I strongly believe that that community will make a huge difference in making sure that we are not learning 200 times the same thing.
Brad.
Thanks. You talked today and you've talked previously about cultural change within the company. I guess the other side of the page is the bottlers and retailers. You can more easily implement change within the company you control. How do you get the bottlers to reciprocate? Can you talk about you increasing your willingness to fail, but the bottlers and the retailers willing to accept that failure and learn as well?
Let me offer a couple of thoughts. Firstly, I've always found, I think it's always been true in the Coke system, that the system is most energized when the company provides a clear path ahead, a clear vision for where the system needs to go, clear strategies on how we're going to get there, and compelling reasons to believe that there'll be returns for the company and the bottlers. I think that's the case now. I think that part of that is the cultural change. At our global system meeting in Budapest, we talked about the strategies, but we talked about the culture. We talked about the need for different talent. We talked about the need to infuse digital talent. Are all the answers there? Absolutely not. I think the bottlers are energized around the journey.
Their cultural change, their journey isn't exactly the same as they still need to do a lot of things. Think of the degree of change that's occurring in the sales force. I mean, most bottlers have been on a substantive journey to upgrade the capability of the sales force. Why? Well, if you went back 10 or even 20 years, maybe many sales force people couldn't even read or they had a low level of literacy. They didn't even know how to use digital tools. Now, most of our bottlers have rolled out, not just simple, but high-grade sales force automation. They've had to go through a process of turning over the sales force to bring in greater levels of talent and capability. This journey is not just cultural, it's also capability and skill level, and you can see that playing out in the bottling system as well.
With the customers, clearly you could go, okay, well, if you're going to fail more often, you're going to cause me more problems. In the end, the acid test is what Jim mentioned earlier. Are we helping the customers grow the beverage category faster than their average business? Because if we can help them do that, even net of the failures, we're going to be a very attractive partner for them, helping them grow their business. You can see that in Japan. I mean, in Japan, I don't know what % of SKUs we take out each year, but hundreds. Hundreds, yeah. We're taking out 10%, 20% of the SKUs every year. We're injecting another 10%, 20% of the SKUs. That's attractive for the retailers because we're driving growth.
I think it's all about the net value creation for the retailer and whether we can make beverages what we sell, and as category captains, often, what the industry sells, the beverage category sell for the customers and whether that creates value for them. That's what makes them interested in it.
Robert.
Great. I think both for James. One, can you mention any sort of disruptive force that you think that we haven't really talked about today that we'll be talking about, let's say, five years from now? Second, given everything you're doing on the digital side, given the fact that everybody in the world, more or less, in terms of your customer base, has phones and can order, why isn't direct to consumer a bigger opportunity? I think there's so much you could do driving consumer to your portal, right? Give bundling products, giving them discounts. Just from a marketing angle, that has been enabled now, and I'd like to hear your thoughts on that, please.
Sure. Let me start with the second and go to the first. I think in the end, people don't shop by category. You don't wake up and go, okay, today I'm going to buy beverages. Tomorrow I'll buy fruit. The next day, bread or whatever. They want to do a grocery shop. The consumer insight is, I want to save time. The reason I'm using my phone is because I don't want to be bothered to drive to the store, and I want it delivered to me because that optimizes the utility for me, the consumer. Now, that utility is reduced if I have to go to different portals for each of the different items. It's unlikely Not to say that we won't sell some things direct to consumer, because we do in some countries.
I still think the predominant way forward will be integration through customers' sites in the digital world and the retail. In the same way we don't have lots of beverage stores. I think that's going to be the predominant way because that's ultimately what the consumer shopper wants out of the experience. They don't start by going, I'm going to buy beverages. They start by going, I'm going to do my weekly shop or daily shop or the meal fill-in or whatever the occasion is. Beverages are a big part of it. If we can do that really well, we'll always be an essential part of or an essential partner for our customers.
I think the one thing that I think about in kind of over the horizon, not now, not in the next five years, is the disruption available from autonomous vehicles Tonight, whatever it is, Tesla's going to come out with its electric truck. Actually, the frontier is really autonomous. How is that going to change everything? Once there's it's not five, maybe it's not 10, maybe it's 20 years out. Once there's a large fleet of autonomous vehicles out there, how does it change who the customers are, what the shopping occasion is, what distribution is, economic It could change everything. It's not going to change anything in the next five years, but in 20 years, it'll have changed some things fundamentally.
Bonnie.
Thanks. Hi. Today, everything was very impressive in terms of your long-term strategy. To me, just listening to all this, clearly, the complexities of the system have increased, especially with the stepped-up innovation. I'd really like to hear from you what gives you the conviction that you're going to be able to deliver, given the greater execution risk because of everything that is going on and you're trying to do? If you could help frame that for us, that would be great, maybe a couple of examples. Thanks.
Sure. I'll say a few things and I'm going to invite John to say a few things because it's a bit like that old expression that Francisco changed. The future is here, it's just unevenly distributed. By which I mean, there are countries where we have multiples more complexity. An emerging market might have 50 or 100 SKUs. The U.S. has 600.
Yes.
600 SKUs. Japan has 1,000 SKUs. Clearly, the system has been able to adapt and manage much higher levels of complexity. The other thing is, if we can do that in and of itself becomes a competitive advantage. I think we are further ahead in being able to administer that vast ecosystem of complexity than some of our other competitors, and that will be an advantage to us over time. I don't know if you want to say something about the journey in Japan to manage that complexity.
Yeah. If I can say one other thing, though, before that.
Sure
One of the biggest opportunities in the short term is to improve our level of execution. A traditional metric that we've had all around the world is availability. You all know that. Typically, the availability metric has been relative to one. If there's one SKU of a sparkling brand, well then that's the number that's given in availability terms. In most of our markets in Asia, at least, if you take what is the availability of our top five SKUs, it goes down dramatically from the high 80s, 90s, down to the low 20s, 30s. While we need to embrace complexity as we go forward with this much broader portfolio, in the short term, there is significant upside in just going from one to three to four. Cold drink investment, we didn't really talk about a lot today.
We have four million pieces of cold drink equipment in Asia. Over the next three years, the investment commitment from our bottling system is pretty significant to really increase the footprint. Francisco, with his analytics, tells us that that is the number 1 driver of growth in the short term. I think there's a lot of tactics and tools to deliver the short term while we build for the longer term. The complexity point that James referred to when it comes to an operation like Japan, it is true. You do need a little bit more time. Like to bring in aseptic technology into Japan was a five-year journey plus. Then beyond that, when you leverage it in the marketplace, it takes another couple of years for that to scale up.
I think there's multiple levers, we are pretty focused on the ones that we think are going to make 2018 work.
Because Vivien has been so patient, you get the final question for today.
Thank you. James, my question is for you. I really appreciated the call-out in Brian's presentation of price elasticity. I know we've debated that back and forth, and I think the very clear acknowledgement of that is something that you really have to solve for with this revenue-focused model makes a lot of sense. I was hoping you could just offer a little bit more color around how you're thinking about that, in particular in Coca-Cola North America, given that that's your slowest growth market, understandably. How do you think about cross-category price elasticity is number one, and number two, can you give us some color on how price elasticities within sparkling specifically have evolved over the last five or 10 years? Thank you.
Okay. I'll start, and I may pick on Jim somewhere along the way. I think actually, in the recent history, we've been getting more price in Coca-Cola North America than we have even in EMEA, which is some of the thing about Brian's chasing. Price elasticity is not equal all around the world, quite clearly, and in part, it depends very much on what Francisco talks about. It's one of the components of the total brand picture. I think the first thought is because the world was not flat. The value of what Brian talked about of doing the deep work on the analytics and the algorithms to find out what is it by country, is super important. That's why it ultimately turns into a competitive advantage, because it's not like a competitor can do it in country A and then apply it everywhere.
You actually have to do it in the different countries. It's different by country, it's different by brand, it's different by package. I think that the important idea in there is it's the capability that drives the value rather than knowing the number is X or Y in a country or in a package. I think we have perhaps in the past been too cautious about using the price elasticity or in other words, thinking it's going to be more elastic than it is to price increases. I would argue that our recent experience over the last few years, I think the U.S. is a great example of this, is that the prices are a little more inelastic than we had previously thought.
If we're doing the other things on the brand edge correctly, if we're investing in brand equity, if we're trying to capture some of the price through smart packaging options, through mix, if we're doing justice to the visible inventory, if we're doing justice to the cold drink equipment, then the elasticity starts to work a little more in our favor. I think that's what we need to pursue. I don't know if you want to add anything.
The only thing I was just going to add was bringing more science to the question. When you've heard about RGM, we've done a lot of work in North America on price points, multiple price points. In other words, how does elasticity play itself out when you see a multiple offer on a shelf versus a single offer? How does that play versus packages? Let's say you have a package that's more of an entry package for a lighter user. Well, you may not want to have multiple price points because they're a lighter user. We've looked at all that kind of science that we've implemented, which has helped us get some of the results that you've talked about as a multiple variable equation than we've looked at before.
Great.
Very good.
That brings to an end the stage part of the day. I hope you've taken out of that we clearly believe in the growth opportunity in our ability to perform within the long-term growth model numbers. That we have been able to share with you some of the science behind how we see growth as a discipline and some of the examples and the reasons to be able to feel the texture of how we can get growth done. With that, let's bring this stage to a close. I think there's a reception somewhere.
There is.
which I presume is close by. Right outside.
Back doors.
Okay. You'll have an opportunity for all of those who didn't get your questions, I'm sure there's one more opportunity. Thank you very much, everyone.
Thank you.