The world was changing. There was an era of ways companies were run, particularly large US companies, that was ending. The style of many CEOs, as you look across the landscape of the S&P 500, there was a generational shift that happened over the last 10 years. And I think we were at the front end of what was going on.
Welcome to Gray Matter. I'm Declan Kelly, founder, chairman, and CEO of Concello. I've spent the last 30 plus years advising the CEOs who are leading the world's top companies. If there's one thing I've learned in that time, the best leaders think differently. That wiring, that gray matter, separates the truly exceptional leaders from everyone else. Understanding it is what allows us at Canelo to help the best in the world be even better. This podcast exists because the most accomplished leaders agreed to sit down and talk about something they rarely discuss publicly, how their minds actually work. For nearly 140 years, the Coca-Cola Company has thrived on a simple formula, a secret recipe, a brand built on heritage and emotion, and of course, fans worldwide. When James Quincy stepped in to lead one of the most important and recognizable companies in the world, he brought with him an approach grounded in engineering principles and probabilistic thinking. The timing turned out to be very prescient. When he took over in 2017, consumer preferences were rapidly shifting. Digital platforms were reshaping how brands engaged with consumers. His response was both symbolic and surgical. He showed up in jeans on day one, signaling change was clearly coming. Then he streamlined the portfolio while also expanding into waters, sports drinks, and coffees, becoming a total beverage company. This is a story about what happens when a different kind of leader arrives at exactly the right moment. This is Gray Matter. James Quincy, welcome to Gray Matter. Thank you. Thank you for taking the time. I really appreciate it. You're welcome. Did you ever imagine having grown up in Birmingham and trained to be an engineer that you'd suddenly be in Coca-Cola running the Coca-Cola company? What did that feel like the day you walked through the doors for the first time as a leader of the business?
So, one, no, I never imagined I'd be CEO of Coca-Cola or anywhere else for that matter when I was young. The journey of coming in on the first day. I think there are two bits of it that are kind of interesting. One is when they offer you the job, they don't ask you if you're going to accept it, which was kind of entertaining. Normally, you'd ask someone if they said yes and assume that yes, which actually talks a little bit about the weight of history that sits over the job and the company. And that first day, of course, there are an amazing amount of expectations, anxiety, nervousness, and probably every other emotion under the sun in the employees, the investors, the wider world because it is such a well-known brand and company and all that sits on you. And I have to say that the thing that I carried in with me was I've got a point of view and I'm going to go for it.
And I remember when Muhtar called you aside and said, you know, it's going to be you. He described it in that moment as a generation skipping decision because you were 52 at the time. And traditionally that was not the way the company made decisions. They picked people older, later in their career, etc. It turns out to have been quite prescient because the times that came after that were close, you know, COVID everything else and unexpectedly tumultuous globally. And so it turns out that having somebody younger with a totally different perspective on the world actually ended up being a very, very good thing for the company.
Yeah. I think again perhaps as you say presciently, the world was changing. There was an era of ways companies were run, particularly large US companies, that was ending. The style of many CEOs as you look across the landscape of the S&P 500, there was a generational shift that happened over the last 10 years and I think we were at the front end of what was going on. Obviously went in parallel with the emergence of a lot of the tech sectors. So there was this shift I think already happening in general and by making a skip in the generation and choosing not just me but a new generation of leadership that was already on the front edge of this wave of where the world was going helped us unlock a lot of things that drove the growth that then came. So I think we are an example, a microcosm of what has happened around us. Perhaps we were at the front end.
And when you were growing up in Birmingham, again you went to college and became an engineer. Your father was a chemist, biochemist, and I assume that analytical capability, that very exacting sort of approach to things and reasoning which as we'll talk about in a moment became a really central part of your leadership style. I assume you were prepared very well for the job because of that. Would you agree with that?
Certainly there's an aspect of the job for which all that background mattered a lot. Not just the analytical reasoning but even more specifically, there's a thing in electronics called Boolean logic which is actually the fundamental underlying idea behind coding, or one of the underlying ideas behind coding, that really is about there's a logic tree to most things. Also the kind of grounded an engineer is not about theory, it's about getting stuff done, it's about the pragmatic reality. Of course there's some theory in it, but archetypically there are the sciences which are developing the theories and the engineers are putting them into practice. And so there's some element there of yes, you learn theory, but it has to turn into something. Every week you turn up at university and you're making something and it's got to work otherwise it fails or the experiment fails and then you got to say why did it fail and where are we going next? So I think that combination of the deep analytics, the numbers, and it's got to work in the real world was super helpful. That is not the only skill of being CEO, but it very much helped. I ended up with a kind of a probabilistic view of the world which then became very important as we went on.
And I think history will show that your leadership of the company involved a completely different way of running the company than had been the case in the past. Not that anything was wrong with the way it was run in the past, but you were forced to do things differently. You had to take out a lot more costs. You had to simplify the business. You had to remake the relationship with the rest of the ecosystem. You killed over 250 zombie brands. You totally radically changed the way people thought of the company. It was like when Larry Culp, who was being interviewed in his series, got rid of the GE light bulb. It's unthinkable. But now it seems all so logical because of how the world has changed around you. So that thinking during that time, how much of that was sort of learned behavior, how much of it was organic to you, and how much of it was situational?
I think that most of what it ends up being is some combination of all of it. It's situational or it's organic, it's intuitive, but in the end it's analytically correct. And so if you would ask me on day one did I foresee everything that would come, the answer is no, but I knew the direction of travel in general and I knew specifically the next few things that needed to be done. And as they were being executed on, I was able to see the next wave of the next few things that needed to be done. So if you look at the last 9, 10 years, it is not one constant set of 10 things. It is waves of three or four things that each build on each other and lead to continued growth over the long term. And each one is kind of like if you're going over lots of rolling hills. You can see the top of the hill. As you get there, you see the next one and you can see where the journey is going to take you, but you kind of know you're heading that way, but not the exact topography of all the twists and turns that you're going to face somewhere down the road.
But at the center of it though, this is the world's biggest marketing company. Fundamentally, this business markets the most important brand in the world and has done for a century and a half. And the idea of being a cost-centric, cost-native business where you focus on everything and what it costs before you figure out what you spend was new. And so you brought a completely different ideology to how the company was run. And I remember being here at that entire time and it was anathema to lots of people's thinking. But if you were not a cost-driven business today, people would say, 'Oh my god, what are you doing?' Because everyone else has had to follow suit. But again you were forced, which is the history of the company, finding the right moment at the right time to be in the right place and make the right decision as the leader of the industry. That is going to be one of your biggest legacies, which was critical to the growth of the business.
Yeah, in the end there was this central feeling you have to do the right thing on each variable. By that I mean, one of the first ones we did was what's known internally as lean center, which was reducing the size of the corporate office. All the previous attempts at cost reduction had largely not touched the Atlanta head office. And the simple reality was it was too big. We were expending too many resources with too little output from the head office and not investing enough in the brands. And everyone knew it was true. It was not rocket science to know that was true. The hard part was the go now we're going to change it. And so I think that there's an important element here. One of the hardest things for leaders to do is to make the decision. People say, 'I'd love to be a CEO.' I go, 'Well, you do all these cool things.' There's lots of... I said, 'Trust me, none of the cool stuff comes to the top. Everything that's nice and easy has been done or decided by someone else. The stuff that ends up with you and it's kind of well talked about and well known is the difficult decisions, imperfect information, uncertain set of choices, unknowns about the future world. No one's going to make those hard decisions for you.' And that's what ultimately the leadership is about. And having the courage, no, the head office needs to be a lot smaller. And everyone's like, 'Yeah, we knew that.' It's like, 'Okay, but you didn't do it and now we're going to do it.' And then you can redirect those resources to growth and really drive the business and give the best people an opportunity to shine. Because the other thing that happens is when there's too much of a resource, the A players go, 'Well, what's the point? The C players are getting almost the same bonus. Why am I doing the extra mile?' No, it has to be we're here for the A players and we're going to drive the business. And the CEO, one of the number one things they have to do is make the courageous decisions that everyone knows is true, but no one's going to make it for you.
Of course, this company is very different in that it sits in an ecosystem and not many people understand that outside of the business because you have so many partners. The bottlers are central to the relationship matrix of everything that goes on. Doing this kind of a thing and bringing that community along with you because they've seen huge change over multiple decades. The company has gone from one extreme to the other in terms of its relationship with them and how they work together. That can't have been easy. Bringing them along, they may have been willing, but you still had to bring everybody along with you.
Yeah. I mean, look, any change is always difficult. In whichever direction you want to change, it's going to be complicated. What was important about the refranchising was not just we were able to find a whole set of families and investors who wanted to dedicate themselves to being in this ecosystem and this relationship with the Coca-Cola company and that were great at being bottlers, about chasing the details, about managing large numbers of people, about deploying huge amounts of capital, none of which we were particularly good at. The bit that goes with that is knowing what you actually are good at and sticking to your own swim lane. There's often a case, having sat through this for a number of years, where you get business proposals from people in the field that fall into one of two camps. 'Well, we're doing this thing in 10 different ways. Why don't we just do it once?' The sort of centralization view of the world. The other is, 'Well, if we vertically integrated, we're already doing this and we're buying it from everyone else. Why don't we just do it? Then we can eliminate their profit margin.' Both of them assume that you can do it better. They make an implicit assumption that is never verbalized. And the reality is someone else is doing it because they're better at it. And actually we're not good at it. So then you have to draw a line on vertical integration. Otherwise, why buy anything from anyone else? The reason you do is they're better at it. They have scale, they have capabilities, they have better economics. Stay in your swim lane. And we had not had the discipline to stay doing what we were good at: marketing, the innovation, the franchise strategy of the brands and the portfolio. And by doing that and resisting the temptation to do someone else's business, we grew faster and they grew faster. Getting out of each other's way made us both much better. And the same with centralization. There needs to be some degree of competition of ideas, a bit like a capitalist economy. If there's only ever one idea, there's nothing new. And so there has to be some allowance for that in order to drive the ecosystem forward. It becomes a bit of a struggle of ideas. But when you align around one and stick your swim lane, it's the most powerful system.
I've heard you talk before about how simplicity is such a critical part of the success of the company. In fact, one could say way back to 1886 when John Pemberton started selling his elixir for life, that will be 140 years old next year, that he really all he cared about was something simple, just a very simple moment within arms reach of desire as you call it later. When this company has historically deviated from that over many, many decades, it hasn't gone well. But when you keep it simple, it has. How do you inculcate that culture across the whole company when you're changing so quickly as a marketing firm and how are you able to do that? Because I think it's fascinating on a human level and you get people to follow you, so many tens and hundreds of thousands of people. People love the result but they don't love the process.
This is by its very essence of being a marketing company, an expansive company. We want to do more brands. We want to do more products. We want to have more ideas. We want to have more campaigns. We want to engage with more consumers. We want to engage with more customers. It's an expansive idea and the culture that gets created there is expansive, which is why you have to worry about the consequence and the unintended consequences, which tends to be extra cost because they're doing lots of stuff and the tail end of the failed projects that aren't killed. And when you mentioned earlier killing off the zombie SKUs and the zombie brands, the reason I wanted to call them zombies actually, there was a great deal of resistance to me calling them zombies because that was being mean about them, denigrating them somewhat. Like no, I'm evoking a simple idea for people. If this thing is growing, it's tiny and it's never going to grow again. It's a zombie, needs to be put out of its misery. But that's simply calling it a zombie. Mobilize the system around. 'Ah, now we know what we're looking for. Let's take them all out.' Even though, and again I was here, thank god when I saw it happen, everyone loves their individual brands and so when their zombie is put to sleep, of course they take it very personally. And at the time it must have been quite difficult to have 250 funerals so to speak.
It was difficult. The problem keeps coming back.
Think of it simply though. This sort of explanation works. We've got 30 million customers around the world, outlets we visit every week. There's about 16 million pieces of our own cold drink equipment out there. It's a single door. It has so many shelf slots. There's only so many bottles or cans you can put in there. Every zombie that's in there that doesn't sell is occupying space that could sell something else. That's not just good for the Coca-Cola company. It's good for the consumer. They get what they want. It's good for the retailer. They can sell and make more money. It's good for the bottler. They cover their overheads. So it is actually a disservice to everyone by keeping something in that cooler that doesn't sell, the zombie, and you take it out. And when you say it like that, people go, 'Okay, that makes sense.' Now as you said, that doesn't necessarily mean the consumers love the fact you've killed their favorite brand. There are a couple of brands, for example here in the US, where people constantly try and get us to relaunch. In fact, there was one campaign on Surge. We did go out with a limited edition run and came back with it. We're still not in full service on it. And Tab. Some of the viewers may remember Tab. I don't know who's done it, but someone has paid for an outdoor billboard just down the road that basically says 'Bring back Tab.' So someone actually spent a lot of money to try and convince me we should have a limited edition run of Tab. So these consumers love their brands. I love the fact that they love their brands, but they have to make economic sense for everyone in the ecosystem.
We mentioned marketing earlier and how important it is to this company. How has your view of marketing evolved over the 30 years of your tenure with the company? Because the consumer today is obviously very different, has a different buying pattern, different set of needs, and expects to be spoken to in a very different way. How do you think about that?
Now this is one of the great marriages that has to happen in the company. Let's take the brand Coca-Cola. A brand that is unchanging in almost 140 years. Basically still got the same formula, original taste, similar shape, bottle shape hasn't changed, color, red, white, script. There are so many unchanging elements of this thing and yet over the century and more, we have had to make the marketing relevant to every generation of consumers. So the Coca-Cola company was one of the first to put ads of vouchers in newspapers. We were one of the first to do giveaway influence. We were one of the first to do outdoor advertising, radio, television. Arguably a little late in social media, but as the new platforms have taken on, you've got to engage with consumers in ways that are relevant for them. That's what you've got to do. So there's a huge amount of innovation that goes on in how to engage in a marketing sense with a brand that is relatively unchanging against human values which are relatively unchanging. The magic is to bring that to life for every generation through the marketing medium that most works for them.
And what do you think AI is going to do to that? Or will it have any impact?
