Recently, Jim Tonkin, co-founder of SupplySide Beverage Insights (a sister brand to Food Product Design) and principal of HealthyBrandBuilders, sat down with Ron Lewis, Chief Procurement Officer for The Coca-Cola Company. Lewis is this year’s Featured Speaker at the SupplySide West Global Expo and Conference, taking time out from his daily responsibilities of stewarding in excess of $38 billion in external spending across the Coca-Cola system, to talk about sustainability and innovation across the food and beverage market.
In this exclusive interview, hear from Lewis about the changes he’s seeing in supply chain management, how regulatory changes could impact global business, and the state of sustainability and innovation in the beverage marketplace.
Jim Tonkin: What kind of changes in the process of supply chain management have you seen enacted in the past four to five years that are impacting the current procurement process?
Ron Lewis: We live in an increasingly complex world. You can see that in our business. We started with one product, sold one way, and now we have 3,500 different beverages that we sell around the world and each one of those products is more complex. Therefore, the first theme from a supply chain perspective is how you manage that complexity. The second theme would be connectivity to our extended supply chain. We have an increased dependence on—and interdependence with--our suppliers. They provide us with technical capabilities and we expect that from them. We also expect them to drive innovation, for us and in collaboration with us.
Tonkin: Can you share an example as to how things have gotten more complex in recent years?
Lewis: Consider that the 3,500 beverages we offer today globally is 10 times the number of beverages we offered 20 years ago and three times the amount we offered a decade ago. We all have an unbelievable amount of choice and selection in our lives. Individuals want to choose individual things. You want to have "your" product. I'll give you a packaging example. If you walk outside of your home and get in your car, within a 10-mile radius, you could buy a Coca-Cola in a 7.5-ounce aluminum bottle, an 8-ounce glass bottle; you could buy a 12-ounce can; you could buy a 12.5-ounce, a 16-ounce, a 20-ounce, 24 ounce, 1 liter, 1.25 liter, or 2 liter PET bottle and a variety of multipacks. If you look on the grocery shelf, you'll see up to 11 different formats of Coke in one aisle of the grocery store.
We do that for good reason, because consumers want choice. We have different brands for different occasions, but one brand can suit so many occasions just based on different package offerings. Consumers demand choice, so we work to deliver it.
Tonkin: Given the globalization of current ingredient use, what issues do you see that typical U.S.-centric companies need to be aware of going forward?
Lewis: First, all ingredients we use are safe, meet the highest quality standards and comply with the laws of all countries in which we operate. We want to continue to have the reputation of a brand that people can trust. If it says "Coca-Cola" on the package, you can trust that product. Wherever you are in the world, you know if you order a Coca-Cola product, it's safe. That is foremost and we take that very seriously. From a Global perspective, our biggest accomplishment in the ingredient space is our work with the Consumer Goods Forum to establish the Global Food Safety Initiative. By the end of this year we will have required all of our ingredient and primary packaging suppliers—anything that touches the product and that goes into a consumer's body— to certify to the Global Food Safety Initiative. It's recognized globally and was established by the Consumer Goods Forum, which we are clearly very invested in as we have a significant amount of representation on the GFSI working groups and board.
Tonkin: What do you think the regulatory environment is going to look like in the next five to 10 years?
Lewis: Our Chairman talks about the "golden triangle" of business, government and civil society coming together from a sustainability perspective for the planet in which we all live. As a company, we embrace that. The FDA, the FTC and any other governmental organization we view as a partner in that golden triangle. The FDA is a group of dedicated professionals working to ensure the health and safety of all of us and we support that. We want to partner with them and "lean in" is the phrase I would use. We want to lean in and not only be a trusted brand, but a trusted partner of those organizations.
There is now an ability to analyze products at a molecular level from the foods that we eat and the beverages we drink. Instead of parts per billion, we now talk about parts per trillion as we “chase zero." Things that were previously undetectable are now detectable. That's a trend that will continue. We all need to learn how to manage in that world. I don't see—and this is just my opinion—a global standard coming together. I don't see FDA and EFSA [European Food Safety Authority] and other regulatory bodies coming together to create one common standard, so we'll continue to collaborate with all partners—on continents, in countries, and in states and municipalities for that matter.
Tonkin: Is The Coca-Cola Company continuing to speak regularly and help promote the "golden triangle" process within everything you do from a sustainability platform within Coke?
Lewis: I believe so. We have a strong commitment to sustainability, as a company and as a system—with our bottling partners around the world. Companies that get sustainability right look at where they touch the world and where the world touches them. For us, water is clearly an important issue. So we seek to be as efficient as we possibly can be in our use of water. Packaging is obviously a platform as well as is energy use. Those are the environmental pieces, but we also have a major role to play in active, healthy living. Of the 3,500 products we offer, more than 800 of them are low- or no calorie. In this way, our products play a role in consumer choice. We have a whole host of programs to support active, healthy living.
Of the 3,500 products we offer, more than 800 of them are low- or no calorie. In this way, our products play a role in consumer choice. We have a whole host of programs to support active, healthy living. We've been a longstanding sponsor of the Boys & Girls Club and their commitment to youth. You know about our Olympic sponsorship, but we also sponsor the grassroots programs around the world to promote sport and exercise. We continue to be very much on our front foot as it relates to sustainability, whether it be the environment, promoting active, healthy living or supporting the communities in which we live and operate.
Tonkin: From a sustainability standpoint, can you share about the Coca-Cola Company's No. 1 position championing the new PlantBottle™ packaging?
Lewis: Innovation doesn't come just in our products. Innovation is throughout our business. In a speech that our CEO, Muhtar Kent gave recently in Denver, he said, "You either innovate or you become irrelevant." We strive and aspire to have an open innovation framework and we take steps to that end. That includes working with our supply base. What we expect our suppliers to do—and our extended supply chain—is innovate around sustainability.
Our PlantBottle™ packaging is a great example of where we've really gone above and beyond, and we're very proud of what we've done. Packaging is someplace that we touch the world and the world touches us. Traditional plastic bottles are made from non-renewable resources, and some very smart people have learned how to make a key ingredient in PET plastic bottles from renewable resources – helping us reduce our dependence on fossil fuels. Right now, we're making a PET plastic bottle that contains up to 30 percent plant-based materials; the package has launched in 24 different countries around the world , and we’ve produced more than 10 billion bottles that have saved the equivalent of 200,000 barrels of oil from our PET plastic packaging. It's only going to get better from here. I was in Brazil recently to announce a partnership we have with a supplier that's building the world's largest bioglycol plant, which is a key ingredient used to make PET. That plant-based product will be used for our packaging in Brazil, but also throughout the Americas and as far as Europe. As we build that supply chain, we'll get to sustainability both in terms of renewable product and in terms of—we believe—competitive cost relative to petro-based material. Also, it gives us a second source of supply vs. the petrochemical industry for that material.
On top of that, we are pursuing a solution to create a PlantBottle™ package made entirely from plants. It's more technologically challenging, the other key ingredient used in PET plastic isn't as easy to make from a renewable source, but we're working very hard on it. It's an inspiring project and we have multiple others like it.
For example, we also have a commitment to acquire 100 percent of our cold drink equipment with gases that come from non-hydro-fluorocarbon. We call it eKOfreshment. We have more than a half a million pieces of equipment in the world today that are HFC-free and we'll buy 100 percent of our equipment HFC-free by the end of 2015.
Tonkin: What beverage innovations are in the works at The Coca-Cola Company?
Lewis: We continue to innovate around our broad portfolio of beverages that people love today and will love in the future, either with or without calories. We continue to be consumer-focused. We are launching globally a new line of FuzeTM tea products. Clearly the world of still products is growing and tea is a growing category, so we're focusing on tea. It's just one example; we don't want to be surprised by trends, that’s why the Venturing & Emerging Brands group exists which Deryck van Rensburg leads for us in North America. They seek out opportunities to partner with innovative entrepreneurs that are bringing products to market. We want to bring them into our system—when we find the right ones—and not stifle that entrepreneurship, and not stifle that innovation. It's challenging, but I like hearing from Seth Goldman, the founder of Honest Tea, who has brought in a product to Coca-Cola that has huge credibility and brand trust. He has worked with USDA to develop it as a certified organic product; with all-natural ingredients. It's inspiring to me.
We are also driving innovation in sweetness—not sweeteners, sweetness. Whether it be sugar or high-fructose starch syrup or high-intensity sweeteners or non-nutritive natural sweeteners, you will continue to see us work on that.
You also will continue to see a real trend toward low- and no-calorie beverages, certainly in the developed world. One-quarter of our beverages are in that space. I think you will continue to see more and more variety as consumers want individual choice and have individual needs based on their lifestyle.
