Feature

Soft (Drink) Power

Soft (Drink) Power

The financial crisis altered the very nature of the international balance of power. Five years later, the presumption is that the crisis is in the rearview mirror — and that the volatility that shook markets and felled governments is behind us too. But we’ve entered a new order that’s vastly more uncertain than what preceded it. International coordination is breaking down. Global challenges like climate change and nuclear proliferation are becoming more intractable as no one country or group of countries is in a position to set the international agenda. The G-20 is too crowded and conflicted; the U.S.-led G-7 can no longer run the show. In such an environment, we have to ask: What are the big question marks for sustainable global prosperity going forward? How are the roles of the United States and China evolving? And where are the world’s next big opportunities?

I sat down in New York not long ago with Muhtar Kent, chairman and CEO of the Coca-Cola Co., to talk about how global power dynamics are shifting and what that means, tactically and strategically, for a $180 billion company dealing with customers and governments in more than 200 countries, from Suriname to Vietnam. Coca-Cola is a quintessential American brand — and the largest private employer in Africa. In my conversation with Kent, everything from China’s rise and the dubious fate of Europe to the safety of the secret Coke formula was in play. Here are edited excerpts:

Foreign Policy: What are some of the ways that a company like Coca-Cola can bring about positive global change in a world where governments increasingly don’t have the power to do so?

Muhtar Kent: That to me is straight down the alley of what we call the “golden triangle,” a collaborative effort between government (at every level), business, and civil society as they come together to tackle big issues — societal issues, economic issues, investment issues, governance issues — that face all of us. The future is going to be much more about closer, better, longer-term collaborations between these three entities.

Businesses need to proactively create models that make a difference in society and let everyone else use them, talk about them, emulate them — and build on them. An example is Coca-Cola’s “5 by 20” campaign, a movement to enable the economic empowerment of 5 million women entrepreneurs by 2020 by bringing capital, training, mentoring, and by working with governments. If we can create 5 million entrepreneurs in 10 years, just through one business working closely with government, working closely with organizations like the International Finance Corporation, by working with Mexico City, Kinshasa, Buenos Aires, Delhi, or Mumbai, that’s a big thing. It will lead to a better society and better community in each of those markets. And this isn’t just a charity; it’s an activity that’s good for business. That makes it self-sustainable.

FP: As the CEO of a leading multinational corporation, do you engage with governments around the world differently than someone in your role would have five or 10 years ago?

MK: Yes. I think we’ve moved much more towards a collaborative partnership model, like I’ve been describing. Before it was much more compartmentalized. There wasn’t a holistic thought process, and it was always a transactional model: I’m asking something; they’re asking something. So it’s moving from a transactional “you, me, give, take” model toward a more holistic model with government as a key stakeholder. That’s a good thing.

FP: So 10 years ago, government relations were more transactional and oriented more toward the national level. Today, increasingly, it’s much more diversified, much more localized.…

MK: Well, I’m saying, today the low-hanging fruit is in local opportunities. We need to focus on the speed with which local governments can work with businesses. I meet subnational leaders who operate like the types of CEOs or business leaders I like to work with. They can make things happen; they act faster, more flexibly. They have more risk tolerance, and they’re more entrepreneurial.

And in terms of what models lead to progress, the world is converging. Before, it was Western industrial governments who supposedly knew everything — everyone else was supposed to learn from them and emulate them. Today, the world has become a small village. If it’s governance, it’s just as important in Kinshasa or Maputo as it is in Brussels. They’ve realized that small, incremental improvement in governance is what’s leading Africa’s GDP drive. So everyone knows, whether it’s business, government, or civil society, you need governance models that work. You need to be transparent. You need to show something for the money you spend. You need more accountability from everyone.

FP: Let me ask you about this “world as a village” concept in the context of Coca-Cola. To what extent can a brand like Coca-Cola be both American and global? Isn’t that a contradiction?

MK: It’s precisely because of the local nature of our business that we’re successful and global. If Coca-Cola had not worked on a local level, when metrics for “Brand America” were at its lowest, say, six, seven, eight years ago, Coca-Cola could not have continued to prosper in many parts of the world — but it did. And that’s because Coca-Cola has a fantastic local partner in Israel, with whom we celebrated our 40th anniversary some four years ago when I was there. And we have a fantastic partner in Ramallah in the Palestinian territory; we have three factories in the West Bank, and we just celebrated 10 years with them as a Coca-Cola partner. The model of Coca-Cola is local, whether it’s investing, partnering, sourcing, producing, or selling. We market and distribute locally; we pay taxes locally. And it works. In September, we entered our 207th country with a delivery to local customers in Myanmar — our first time doing business there in more than 60 years.

FP: I could make the argument that the Obama administration’s single greatest foreign-policy success — although no one in the administration went into office anticipating it or spearheading it — was Myanmar opening up. It really worked. And Coke was in there fast. Coke was in there early. How did you do it?

MK: Earlier in my career, I guess I was fortunate to be in Vienna with the responsibility of opening up Eastern Europe — about 15 months before the Berlin Wall came down. Just like it was then, you had to make a call, that the wall would come down, and you had to spend money. And you’d look foolish spending money, opening offices behind the wall, if it didn’t come down. But everything proceeds too quickly not to prepare in advance. You just need to make a judgment call sometimes. I love Southeast Asia. As a child, I lived in that part of the world. My first time in Burma was in 1958 with my parents. And so recently we started talking to a lot of people; we have partners in Thailand. We firmly believed it [Burma] was poised for change.

FP: So the U.S. began suspending sanctions in Myanmar in May 2012. When did you start looking at the possibility of doing business there in a serious fashion?

MK: Seriously thinking we’d be in
business? About three years ago.

FP: I met with their minister of tourism recently. He was talking about where Myanmar is on infrastructure — they need everything. As of last year, Myanmar’s electrification rate was 26 percent. Transparency International’s Corruption Perceptions Index 2012 ranks Myanmar at 172nd out of 176 countries. Is there a role Coca-Cola is playing to help Myanmar get up the curve faster — bureaucratic capabilities, infrastructure, all these things — to more quickly join the world of nations?

MK: I think we are helping. We’re getting Myanmar on board to join the 5 by 20 initiative for the economic empowerment of women. On top of that, we’re talking with our sustainability partners to have Burma realize the incredible value they have in the natural beauty of their country. They need to learn from the lessons of other countries where the pace of development came at the extreme detriment of nature. They have this special gem that they’ll be better off in the long run if they respect. That doesn’t mean, by the way, that you trade it for poverty. In the long run, every one of the 50 million-plus citizens can benefit from utilizing the natural environment responsibly.

FP: Coca-Cola remains on the sidelines in two major countries: Cuba and North Korea. Any speculation as to whether we’ll see Coca-Cola in Cuba in the next five years?

MK: No comment.

Alexander Joe/AFP/Getty Images

FP: You said “Brand America” took a hit — and it certainly did. Where is it still useful or attractive for Coke to be seen as an American brand today?

MK: In every market that we’re operating in, no matter what region in the world, we are seen as a local brand. We are always selected as the No. 1 brand in South Africa, not as an American brand but as a South African brand. In Turkey or Russia it’s the same.

A successful global company needs to mean different things to different people. When you have Coca-Cola empowering women in Ghana or helping farmers in Haiti or building schools with youth leagues in China, that’s what makes the character of the company closer to what people want it to be. Gone are the days when you simply create a positive impression through good advertising, create good products, make sure you can get to the point of sale, and end your job there. We’re in a new era where you need to not just create positive impressions but positive expressions, so people talk about you between themselves. It’s not you talking to the consumer — they don’t want that. You want to be the company that is more than the product, that has a caring character, that’s transparent, lucid, open, and has a dialogue instead of a monologue. If you can then bring in the ecosystem that we’re talking about — all the stakeholders — with a long-term purpose, you’ll be creating value in a more multifaceted, sustainable way … and in a way that’s more resilient to geopolitical shocks.

FP: In his inaugural address, Xi Jinping spent a lot of time talking about the “Chinese dream,” in contrast with the “American dream.” It’s a much more collective vision, even if it is equally exceptionalist. What does the “Chinese dream” mean for Coca-Cola?

MK: How the Chinese engage today as a result of their dream is less important than how that dream evolves. China has clearly broken a world record in lifting people out of poverty in a given period of time. You need to peel the fruit and see inside instead of wasting time with the peel. When you look inside the fruit, it’s a tremendously noble thing to lift so many people out of poverty.

But the key question is: How does China evolve towards a model where you’re creating happiness and purpose for your people? I think that’s the next 10, 20 years for China. How does China keep building into a more sustainable model? It’s going to have to be an increasingly participative model. And what happens if you successfully build a prosperous middle class, foster true social mobility, but in the process, the environment is destroyed? That’s not a happy outcome. So that’s the challenge: There are just so many pieces that all have to fit. And I think the Chinese are educated enough, dedicated enough, and there’s enough of a legacy — we forget that out of 18 of the last 20 centuries, China not only had the largest population, but the largest GDP as well — that they can make these changes happen.

FP: So if you think ahead over the next decade, does China’s trajectory or the United States’ trajectory matter more to the global economy?

MK: It’s not an either-or. Once you think of it as either-or, you’ve lost the plot. For the world or for Coca-Cola, both the U.S. and China have to succeed. On the other hand, if Europe doesn’t succeed, the world will muddle through and find a way forward. If Europe breaks up, if it doesn’t accomplish its dream of a united Europe, the world is in a place to find a solution for that. I do not believe the world can find a solution if one or none of China and the U.S. succeed.

The U.S. is unique in that it has the youngest Western population in the world and the most diverse. If the U.S. can leverage the potential it has, if it can convert how it educates the world’s citizens into intellectual property and innovation at home — rather than sending students back to the countries they came from — then there’s a lot of potential.

Europe is a different story; Japan is a different story. It’s too late to fix the demographics in Japan to convert it into an open, dynamic, growing population in short order. The U.S. isn’t like that. I see the U.S. as a growth market for Coca-Cola. And I see China as a growth market. The rates will not be the same, but I see both of them as growth markets.

FP: What threat keeps you up at night more: cybersecurity or climate change?

MK: Because of how much I’ve seen about climate change and because it’s an even more difficult fix, I think climate change worries me more. With climate change, for starters, people don’t agree on the problem. There’s a lot of politics and complexity; there’s a lot of confusion and contradicting science. And there’s a lot of reality that’s worrying me. My fear is that if we see continued insufficient progress, volatility will rise at a pace and to an extent that we are unable to contain it. Governments can’t manage it, and business and society just can’t handle it. Climate volatility, temperature, rainfall, food prices, you name it.

So if I’m forced to choose, climate worries me more. Cybersecurity is a very real problem, but has, in my opinion, a fix that isn’t quite so daunting.

FP: So on the topic of cyber, I can’t resist asking … is Coke’s secret formula safe from IP theft and hackers?

MK: Let me just say, it’s in a very well-protected vault in our museum in Atlanta. But we have 500 brands and 3,000 products, so we’ve evolved from a one-brand, one-product business. Everything we do, in some respect, comes back to brands. A good brand is a promise kept. So to the extent that you want to keep those promises, you need to continually innovate and create new intellectual property. Something that isn’t evolving and adapting to an ever-changing global marketplace is perhaps best suited for a museum — just like Coke’s original formula.