This month’s newsletter (video here) is about Coke trimming their portfolio. The leader of Coke Asia – Shakir Moin kicked off more than a few of our SABRE Coke Asia programs in Shanghai. He moved to Atlanta to head up Coke’s Portfolio management team – this story is a direct outcome of Shakir’s work. It’s called Trim the Portfolio.
Heading into a New Year is always a good time to review your business strategy and re-ask that all important question…..are the resources of our business (or our business unit) aligned with the opportunities in the market. Given what’s happened in 2020 the answer is likely a resounding NO. There is no better time than right now to fix this starting with your Portfolio strategy. Here’s why….
Portfolio is all the products and services your company offers. Over time the list of these tends to grow to the point where it overwhelms your ability to properly manage your business. Without a good portfolio pruning, production and service efficiencies are lost and unit costs climb rather than decline like they should. A case in point is Coca Cola.
In the fall of 2020 Coke announced it’s eliminating fifty percent of its portfolio. That a whopping 200 of the approximately 400 Coke brands are that are going to be axed from the current portfolio. If you have shares in Coke don’t despair, Coke is only eliminating half its portfolio not half its sales. Those 200 brands on the chopping block represent only 2% of all Coke’s sales and likely account for a lot more than 2% of all their costs. Explaining the cuts Coke’s CEO stated underperforming beverages have “little to no scale”. Since these brands only represented 2% of all Coke’s revenues it leaves one wondering why they weren’t cut sooner!
Over time Coke’s brand portfolio continued to grow as their hydration business moved from soda pop into water, coffee, sports drinks and local specialty drinks. Items were readily added but rarely removed from the portfolio. As the volume of brands grew, efficiencies were lost putting a drag on profits. Efficiency losses are easily found in the obvious places like packaging where more products means more line change overs and down time. However, there are also the less obvious lost efficiencies as more inventory needs to be managed, package design and sizing headaches must be resolved and securing outlet shelf space for all these marginal items all are resource sink holes.
Remember the 80 /20? ….. Yeah everyone does but no one puts it into practice. Coke’s blotted portfolio issues probably date back to the 1980’s. Too often we get emotionally attached to our products and services that we lose our objectivity. However, there is a steep cost to our complacency as resources that could be better deployed to grow the business are being vacuumed up by an underperforming portfolio.
Start 2021 right! Be a leader and get your resources aligned with your opportunities! Start by doing the analysis and plot your portfolio. You’ll likely find what Coke discovered that 50% of your portfolio is bringing in less than 2% of the sales.
More reading: Coke is canceling 200 drink brands – CNN