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Profile: Muhtar Kent of Coca-Cola

Published by Current on 2007-12-06

Muhtar Kent, who was named by The Coca-Cola Company today as its next chief executive officer - exactly a year to the day the Turkish-born 55-year-old was appointed president and chief operating officer -will need to squarely confront three critical issues when he takes over from the current CEO, E. Neville Isdell, in July 2008.

Taken together, how he deals with these issues will determine whether Coke, which has a market cap of $144 billion and 71,000 employees worldwide or its archrival PepsiCo - whose market cap is $130 billion, and 168,000 employees globally, and is also led by a foreign-born CEO, India's Indra Nooyi - will dominate the $800 billion global beverage marketplace.

One issue concerns his personal ethics. In 1996, Kent - who's worked for Coke on and off since 1978 -- was judged guilty of insider trading in civil court in Australia, where he held a senior-level position at Coca-Cola Amatil Ltd., a regional bottler based in Sydney. He was required not only to give up the profit he made of $324,000, but also pay $30,000 to cover the cost of an investigation by the Australian Securities Commission. Kent has since claimed that his then financial adviser sold short some 100,000 shares of the company on Kent's behalf a mere hours before the profit announcement. In the event, the Australian controversy continued to dog him because two years later - in 1998 - Kent resigned from Coca-Cola Amatil-Europe.

Kent has said that there was no wrongdoing on his part in Australia. He told reporters who'd asked about the timing of his stock sale that it was a "bad coincidence." Isdell - who was on the Australian company's board at the time of the Kent situation - has said that the episode "was a small mistake," and that "We need to consign it to history." And a Coke spokesman said not long ago that the incident did not constitute insider trading or a violation of company rules. Nevertheless, Coke's critics are likely to continue to ask: If there was no guilt involved, why return the huge profit and also pay a fine?

There's a sense among many critics - and his well-wishers, too - that Kent will need to undertake a sustained campaign to rehabilitate his reputation in the public perception - and in the eyes of the media. He would also need to freshly establish a public persona of integrity, especially since so much of America's corporate world has been in upheaval over such issues as insider trading, ethics and excess compensation of top executives. And, perhaps in anticipation of succeeding Isdell - who will remain Coke's chairman until April 2009 - Kent has been making several public appearances of late, highlighting the linkages between the business community in a world of galloping globalization, and consumer constituencies. Isdell has repeatedly characterized Kent as an effective spokesman and good will ambassador for the company - not an undeserved characterization in view of Kent's congenial and emollient personality.

The second issue that will most certainly hound Coke - and Kent - concerns globalization. For many critics in developing countries, Coke is a symbol of a multinational corporation that has benefited from globalization, generally defined as the freer flow of capital, goods, services, people and ideas across increasingly porous borders.

In particular, this issue is being played out in one of Coke's biggest markets, India, where its battle for market share against Pepsi is especially vicious. Left-wing critics, fueled by populist propaganda and reportedly funded by Coke's political and business enemies, claim that Coca-Cola is destroying the food security of the people of the land. As one India-based critic puts it, Coke, by "stealing the water and poisoning the water and soil," is also responsible for creating misery for community residents - many of whom are from underprivileged castes whose welfare the Indian government is especially promoting through educational and employment quotas.

The anti-Coke campaign has gone international, with some of its leaders working out of California and London. Coke's responses - mainly through India-based PR agencies - are widely perceived as being defensive and ineffectual. The Indian media seem to have climbed abroad the critics' campaign; and left-wing politicians - who remain popular in the country - are contributing to a crescendo of outcries against Coke. Court cases against Coke seem to be dragging on.

The critics are demanding that Coke must permanently shut down its huge bottling facilities in Mehdiganj (in 'largest state, Uttar Pradesh); Kala Dera (in the western state of Rajasthan); and Plachimada (in the southwestern state of Kerala). The critics want Coke to compensate the affected community members. They want Coke to recharge the depleted groundwater; clean up the contaminated water and soil; and ensure that workers laid off as a result of Coca-Cola's "negligence" are retrained and relocated in "a more sustainable industry." And the anti-Coke campaign is demanding that Coke must admit liability for the long-term consequences of exposure to toxic waste and pesticide-laden beverages in India. None of these proposed measures is cheap, and it's doubtful if the critics are truly seeking a practical remedy. The battle has become political.

Coke is being tossed out state after state in India, the world's largest democracy with 1.2 billion people - and its biggest consumer market, with a middle-class estimated at nearly 400 million, and growing. Coke is always being ostracized at American campuses because of students' perception that the company isn't doing enough to protect the environment and that its sugary products deepen the spread of diseases such as obesity.

Kent's origins in the developing world could certainly help in dealing with the Indian critics, not the least because Turkey and India have had historical trade and political ties. If Kent is able to alleviate - if not eliminate - the anti-Coke movement in countries such as India, CEO Isdell would certainly be a grateful beneficiary.

From Isdell's perspective, a smooth transition to the next generation of Coke's leadership can be a major legacy. After all, there hasn't been a smooth transition since 1997, when then CEO Robert Goizueta died unexpectedly. CEOs such as M. Douglas Ivester and Douglas Daft came and went without putting in place a secure transition plan. Neither man distinguished himself at Coke, and, moreover, neither was fully embraced by Coke board.

The fact that Coke's board trusts Kent was evident when it named him president and COO in December 2006. He filled a position that has been vacant since 2004. That was when the occupant, Steven Heyer - formerly with Turner Broadcasting - left the company after being passed over for the CEO's job when Douglas Daft unexpectedly resigned. The job went to Isdell, a Coke veteran who'd already retired and was living in Barbados.

"The Board believes Neville and Muhtar have both a shared vision and a solid working relationship," James D. Robinson III, chairman of the Board Committee on Directors and Corporate Governance, said at the time. "They represent a strong team that will drive growth and shareholder value."

The team will be in place even after Kent becomes CEO in July next year because Isdell has been asked by Coke's board to stay on as chairman until April 2009, presumably to ensure a smooth transition and to oversee Kent's performance.

Kent's appointment as the next CEO at Coke - which sells nearly 400 beverage brands in 200 countries, at a rate exceeding 1.3 billion servings each day - raises a third issue, that of growth and competition in an increasingly tough global environment for the beverage industry. While company officials assert Coca-Cola is recognized as the world's most valuable brand - it markets four of the world's top five soft drink brands, including Diet Coke, Fanta and Sprite, and a wide range of other beverages, including diet and light soft drinks, waters, juices and juice drinks, teas, coffees, energy and sports drinks - Pepsi has occasionally overtaken Coke in international sales.

Moreover, Kent's appointment comes at a time when food and beverage companies are confronting soaring costs for essential ingredients including corn, sugar and oranges, and vital materials such as aluminum, as MarketWatch puts it. "Moreover, a weaker retail environment, especially in the U.S., makes it crucial for companies to expand operations overseas and to participate in the growth of developing economies," MarketWatch says.

Perhaps that's why Kent oversaw the $4.1 billion acquisition of energy drinks maker Glaceau earlier this year. It was Coke's largest-ever takeover of a rival drinks company. There was a wide perception in the beverage industry that, before acquiring Glaceau, Coke had been slower than PepsiCo to grasp the importance of still and energy drinks.

Kent is surely conscious that before his mentor, Isdell, bows out of Coke for the second time, he wants to implement his "Manifesto for Growth." The plan calls for boosting Coke's core carbonated soft drink business, particularly in the United States and Western Europe, where sales have been sluggish. Isdell wants the company to focus more on diet and light drinks. He also wants accelerate the development of new drinks that appeal to changing tastes and health-conscious consumers.

A Kent rival, Mary Minnick, had been entrusted to drive this program. She ran the new Marketing, Strategy and Innovation Group, into which Isdell put an additional $400 million not long ago. In selecting Kent to be COO, Coke's board passed Minnick, who's equally well regarded in the company on account of experience and expertise. At 46, Minnick was eight years younger than Kent, and someone who was generally regarded as better tuned in to the ethos of young people, a demographic cohort that Coke - like other beverage makers - eager cultivates.

Little wonder that a month after Kent's appointment as COO, Minnick quit her 23-year career at Coke and joined Lion Capital, an equity company in London, as a partner.

Coca-Cola has been known to prize brand loyalty - and executive loyalty. Although he's had a few forays into the corporate world outside Coke, Kent returned to Coke in May 2005 as president and chief operating officer of the North Asia, Eurasia and Middle East Group, and was named president, Coca-Cola International in January 2006. After joining Coke in his native Turkey in 1978, and has held a variety of marketing and operational roles through his career.

In 1985, he was appointed general manager of Coca-Cola Turkey and Central Asia. From 1989 to 1995, Kent was president of the East Central Europe Division and senior vice president of Coca-Cola International, overseeing 23 countries.

From 1995 to 1998, Kent was managing director of Coca-Cola Amatil - Europe, with bottling operations in 12 countries. From 1999 until his return to The Coca-Cola Company, he was president and chief executive officer of Efes Beverage Group, one of Europe's largest international beverage businesses, and the majority shareholder of Turkish bottler Coca-Cola Icecek. In addition to taking Efes Breweries International public on the London Stock Exchange, Kent led the Efes group to triple digit revenue growth and a 250 percent increase in market capitalization.

Kent holds a Bachelor of Science degree in Economics from Hull University, England and a Master of Science degree in Administrative Sciences from London City University.

His rival, Indra Nooyi born in the southern city of Chennai, India, and holds Masters degrees from Yale University and the elite Indian Institute of Management. Before joining Pepsi as senior vice president of strategic planning 16 years ago, Nooyi - who became Pepsi's CEO in October 2006 - held strategy-oriented executive positions at Asea Brown Boveri, Motorola Inc. and the Boston Consulting Group.

A recent UBS report said that under her stewardship, Pepsi recognized much earlier than Coke that carbonated soft-drink trends were at risk and that they needed to pursue "non-carbs" as well as snacks. The report also said sales of soft drinks continue to decline as consumers drink more water and sports and energy drinks.

Nooyi has driven the company's stock up 22 percent in the 12 months through December 4, near a 52-week high. Last May, the company increased its dividend 25 percent and boosted its share buyback goal to $4.3 billion from $3.3 billion. Revenue is expected to rise more than 10 percent this year.

So it's going to be a lively competition between the Indian maharani and the Turkish pasha. Stay tuned for the Battle of the Beverages.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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