Coke CEO James Quincey explains company’s recent M&A strategy

The Coca-Cola Company CEO James Quincey has said that the firm is unlikely to make as many acquisitions in future quarters as it did in the previous one, as the company reveals the strategy behind its recent M&A spree.

Speaking after Coke published its third-quarter results – in which its organic revenues grew 6% – Quincey said that the firm is, however, still on the lookout for bolt-on acquisitions.

During the quarter, Coca-Cola invested in or acquired: sports drink brand Bodyarmor, UK coffee chain Costa, Australian kombucha drinks maker Mojo and French fruit beverage brand Tropico. And since October it bought a minority interest in Australian firm Made Group alongside Coca-Cola Amatil.

“M&A can be like buses,” said Quincey. “You wait ages, then several come at once. One thing isn’t a coincidence – if you look closely, all of these deals are part of being consumer-centric.”

He added: “M&A isn’t a strategy in and of itself but rather an enabler of our strategy.”

Quincey highlighted the reasoning behind the company’s recent mergers and acquisitions, including: filling gaps in its beverage portfolio or entering emerging categories; building capacities across its supply chain, such as ingredient or equipment solutions, or digital reach; as well as pursuing different priorities in each region of the world.

The company believes that in M&A, the best fit is a brand that is ready to move into the challenger stage, which means it is expanding distribution reach and gaining scale.

“As an example, we identified Bodyarmor as a brand with an edge in the sports drink segment,” said Quincey. “BodyArmor is moving quickly from explorer to challenger. We started with a minority investment, which was announced in August. It’s an approach similar to other deals we identified through our venturing and emerging brands unit in Coca-Cola North America.

“The initial minority stake we made in Bodyarmor gives us a path to future ownership, which is also what we did with Honest and Zico in the United States and innocent in the United Kingdom.

“Historically, some acquisitions haven’t worked out, in part because we moved too far and too fast in integrating a company or brand into our system. We’ve learned that incubation – as opposed to immediate absorption – has proven to be a better approach, even if it’s not the only approach.”

In order to get the maximum value from its investments and acquisitions, Coca-Cola has created a new group called global ventures, which will be headed Jennifer Mann.

As well as scaling brands, Mann and her team will identify and nurture the next series of fast-growing opportunities.

Her appointment was announced as Brian Smith was named new chief operating officer, a post which has been vacant since James Quincey became chief executive last year.

While Coca-Cola is expected to reign in its spending on acquisitions, the firm still remains open about future deals.

Quincey said: “You should expect that bolt-on M&A will continue to be an important tool – although far from the only one – for Coca-Cola to continue to accelerate its total beverage company strategy.”