The Journal The Authority on Global Business in Japan

One of the best-known brands in the world is Coca-Cola. The soft drink first served on May 8, 1886, at Jacob’s Pharmacy in Atlanta, Ga. has bubbled to the top over the past 131 years. In 2017, Coca-Cola is the world’s fourth most-valuable brand at $69.7 billion according to Interbrand’s Best Global Brands ranking.

Some may not realize the extent to which Japan plays a role in this success. The ACCJ Journal sat down with new Coca-Cola (Japan) Co., Ltd. President Jorge Garduño to find out why the local market is so important and how the company is making a difference in the community.

CREATIVE MINDS
Japan is one of Coca-Cola’s top three markets by revenue and—with 50 brands—is home to the company’s largest portfolio. “Within the Coca-Cola system globally, Japan is seen as a center of innovation,” Garduño explained. “Usually, in any given country, we offer 250 to 350 stock keeping units [SKUs]. In Japan, we are getting close to 800 and compete in most key beverage segments.”

The annual launch of SKUs in Japan—about 250—matches the total number offered in many countries, where the annual release is just 15–20. As a result, Coca-Cola operations in other countries are looking to Japan as a model to emulate when expanding their local product offerings.

The challenges of the Japanese market have driven this innovation and provided a boost for profits abroad. “Globally, The Coca-Cola Company owns 21 brands that are worth—in terms of retail sales—more than $1 billion each,” said Garduño.

“Four of those 21—I LOHAS water, Ayataka green tea, Georgia coffee, and the sports drink Aquarius—were developed in Japan for the Japanese market, and today are commercialized beyond Japan. That is local innovation, local investment, working with our local partners here, and it’s a source of great pride.”

But, Garduño thinks a lot of untapped potential remains.

“We have a very wide portfolio, but not wide enough. We want to compete in more beverage segments and we want to lead in every segment that we compete in,” he told The ACCJ Journal. “We are very strong in some of the segments, but we definitely want to deepen our penetration in many of them. We also want to explore segments that we have not tapped into.”

That means going beyond beverages. “We have the challenge of expanding our innovation—and our ability to innovate—not only on the product front but also on the packaging front. When you look at the packaging in Japan, it is not as sophisticated or as evolved as the product and beverage segments. I think we have an opportunity to step up the design when it comes to bottle shapes and labels, and the visual identity of our products and brands.”

Materials are also ripe for innovation, according to Garduño. Should more glass be used? Perhaps more cartons would be better? These are questions being asked as Coca-Cola continues to adapt to the changing local market.

INTERACTION
For Garduño, innovation doesn’t stop with product and packaging. How Coca-Cola interacts with consumers is also open to evolution.

“We grew over the decades through delivering our products and building brands—mainly by investing in television commercials,” he said. “And we will be doing that in the future. Television is still very relevant, and will remain a relevant way of connecting with consumers.

“But, today, it is not the only way. We need to be even faster in growing and adjusting to the changing media landscape—and we are doing great things. In Japan, we are leading the global efforts when it comes to digital advertising and connecting with consumers through these methods.”

One example is the Coke ON app, which has been downloaded by more than 5.5 million consumers in Japan. “The app can be used to buy our products from a vending machine, but can do many other things, too,” Garduño explained. “We interact with consumers through the app. They can collect points and redeem these points to get more products or promotional articles. It is a great way of interacting that we are still discovering and exploring. We really believe we are just taking baby steps with that app; but it looks very promising.”

LOCAL FLAVOR
Staying attuned to the local community is also a critical part of communication and success. Despite its small geographic size, Japan is home to some very distinct regional cultures stretching from Okinawa to Hokkaido. Coca-Cola stays in touch with local needs through a network of five bottlers: Hokkaido Coca-Cola Bottling Company; Michinoku Coca-Cola Bottling Company for Iwate, Akita, and Aomori Prefectures; Hokuriku Coca-Cola Bottling Company for Nagano, Toyama, Ishikawa, and Fukui Prefectures; Okinawa Coca-Cola Bottling Company; and Coca-Cola Bottlers Japan Inc.—a new company formed on April 1, 2017, through the merging of Coca-Cola East Japan, Coca-Cola West, and Shikoku Coca-Cola Bottling—that covers the largest part of the country.

The original torch from the 1964 Tokyo Olympics at Coca-Cola headquarters in Shibuya.

“The way they execute is partly driven by the market, because conditions are different depending on where you go in the country,” explained Garduño. “If you go to Okinawa, for example, it could even feel like a different Japan. In Okinawa, the population is growing at a rate of three percent per year, which is larger than the growth in countries in Latin America. So, conditions are different from other parts of Japan, and our bottling partners help us keep very aware of the local sensitivities and local differences. This allows us to adjust our service models and our performance to those local realities.”

SUSTAINABILITY
Involvement in the local community also spurs commitment to the environment, and this is an area in which the Japanese market inspired one of Coca-Cola’s biggest successes: bottled water called I LOHAS. The name is a combination of the first three letters sung in the ancient Japanese ABC song­—I, LO, HA— and also stands for Lifestyles of Health and Sustainability.

“Before 2009, a bottle that was soft and light was considered low-quality,” Garduño recalled. “This team in Japan came up with a great plan to completely reshape that understanding of quality. They said it should be the opposite. The lighter the bottle, the lesser the impact on the environment. It is also easier to recycle.”

It was the lightest bottle available at the time, and the company built an entire brand around the concept of the eco-friendly bottle. It soon became the market leader for bottled water.

“This concept, as simple as it sounds, didn’t exist in the world,” Garduño added. “So, it was created in Japan, and the beauty of this concept is that it travels easily and quickly to other operations in other parts of the world. Businesses in the water segment replicate this model, and it’s helping businesses save on the cost of plastic. It’s helping the planet by using less petroleum-based material, and it’s making it easier to collect and recycle bottles because they are crushable—something that no bottles were at the time.”

The project truly embodies Coca-Cola’s sustainability efforts. “I believe that, in the case of I LOHAS, we didn’t launch a brand—we launched a concept,” said Garduño.

When it comes to Coca-Cola’s commitment to recycling, Garduño said that I LOHAS is just one example. “We started working on reducing the weight of the bottles we use in the 1970s. So, our efforts to drive tangible actions that help reduced environmental impact go back nearly four decades. We have reduced the weight of the bottles, and we continuously redesign the Coca-Cola bottle. We use less glass, less plastic, and even the cans get continuously redesigned to create the lightest packaging we can offer.

“We use polyethylene terephthalate [PET] in different proportions depending on products. Part of the plastic we use comes from the resin of recycled PET bottles, and we are increasing the proportion of recycled resin included in our packages.

“We are also pioneers of a system that incorporates resin that doesn’t come from petroleum, but instead from plants. We call it ‘plant bottle.’ In these bottles, a portion of the plastic that we use comes from plants, not oil. Ideally, we want to get to a level where most—hopefully 100 percent—of the resin we use is either recycled PET resin or plant-based resin. That’s our aim.”

Another example of adapting to environmental needs is very specific to Japan, and stems from the Great East Japan Earthquake and Tsunami of March 11, 2011. “After the earthquake, the country went through this huge crisis of energy supply. Our research and development lab in Odaiba, in a matter of months, came up with an improved version of our vending machines that saves up to 95 percent of the energy during the daytime, in summer.

“They redesigned the way the machine is isolated from external temperatures so that it better preserves its internal temperature. With that technology, we actually disconnect the machines during the day and sell the beverages cold, because they were refrigerated overnight. It was a very simple idea that is getting great results and was in response to this huge crisis that the country went through.

“Sustainability is really part of what we do, it’s embedded in our programs. It’s not an additional task or separate program that someone else is managing. Our marketing team is thinking how to develop concepts that helps us achieve not just business results, but also sustainability results.”

WATER NEUTRALITY
Another initiative related to water that extends this care for the environment is Water Neutrality, an initiative launched in 2009 to reduce depletion of water resources.

“We offer beverages, so water is a key component of our products,” Garduño said. “In 2009, we decided to commit globally that we would send back to the world the same amount of water that we use in our products. The target for reaching equilibrium was 2020, but we achieved that target four years before the deadline.

“In Asia–Pacific today, we are sending back 200 percent of the water that we use. In Japan, we are already water neutral—100 percent of the water we use, we send back. That’s already achieved. Now we are rethinking and reshaping the targets to continue this momentum.”

WOMEN IN BUSINESS
The administration of Japanese Prime Minister Shinzo Abe has set an ambitious target for increasing the number of women in leadership positions, aiming for 30 percent of such positions to be held by women by 2020. Coca-Cola’s aims are higher.

“One of our 2020 ambitions is for 50 percent of the senior managers in the company, in the different geographies, to be female,” explained Garduño. “To do that, we have some rules while recruiting—internally or externally—for specific jobs. It’s a rule, for example, that we must have at least one female candidate for each of the senior management roles.

“We also offer development programs specifically for women. There is one signature program called Women in Leadership, where—a few times a year—we invite a group of women to Atlanta or to other places in the world—the location changes every year—for them to share practices. Senior women share with younger women how they have managed to go through all the challenges that they go through on the professional and personal fronts.

“Reaching 50 percent is a tremendous challenge. It is not so easy, because the circumstances women go through in different stages of life make it way more challenging for them to reach those levels than men; but we are committed to it.”

BALANCING ACT
Another hot topic in Japan is work–life balance. What are the keys to business and career success in 2017?

“We call it engagement,” said Garduño. “We believe that if people are engaged, really connected, and inspired by the purpose of their work, they will be able to deliver various solutions for the business, and for the communities that we work for.

“We apply a flexibility principle, as we believe each individual is different. Just like our consumers and customers are different, associates are also different. We offer flexibility in terms of schedules. We offer opportunities to engage in community programs and social programs. We invest a lot of time, energy, and money in developing our talent.

“We also offer opportunities to move across functions and companies within our system—even across countries. I am a living example of that. You can go anywhere you want to go in the world working with this company. If you are willing and open, you can go and explore the world. If you want to stay in Japan, you’re welcome as well. We offer beautiful career opportunities for people who are not willing to move to other countries.”

This flexibility creates a second key to success. “I would say, probably what really makes a difference is that we really believe in the sense of purpose. People in this building are not just selling beverages—they are pursuing higher aspirations. We offer our associates opportunities to channel their energy to do well and to do good through our marketing programs, and through our social and our environmental programs. The sense of purpose is something we believe really makes a difference.”

NEXT GENERATION
“I got together earlier with our Millennial Voices, a group of under-30 professionals who work in this building,” Garduño told The ACCJ Journal. “Because of the age gap and the hierarchy—especially in a country such as Japan—it is very difficult for the senior management to have access or visibility to that younger talent.

“This group of Millennials—about 15 guys and ladies—are working together to develop specific recommendations on different topics. One is market opportunity. What opportunities are we missing because we do not have the voices of Millennials represented when we develop business solutions?

“A second topic is internal engagement. Today, they were delivering some blunt opinions about the way we do things that we, the older people, don’t realize. ‘How come you force the employees to use a specific type of laptop?’ is an example. They say that in their world that doesn’t exist. They choose the equipment they want to work with, and usually they would not pick this.

“Development of Millennial talents is a third topic. The gap between them and older staff is so huge that they say they are just hidden under a table, and never seen. So, we are developing ways to make them more visible, to listen to them.”

EMPOWERING COMMUNITY
Coca-Cola’s support of women and youth goes beyond the workplace, and is part of the company’s investment in local communities around the world—even in places that may not be at the top of its market list. The 5by20 Initiative is one example.

Garduño explained the name and goal: “We are committed to empowering five million women across the world by the year 2020. We are doing that through adapting ideas and programs to the local needs. For example, in Africa, we are helping women set up small shops where they sell our products, and we teach them how to run a small business. Through that, we help their family get a sustainable income.

“In other parts of the world, we work on education, financial education, or help women with training, depending on the local needs. That’s one more of our social commitments.”

Programs are tailored to each country, and activity surrounding one right here in Japan was taking place as The ACCJ Journal talked to Garduño. “Just today, we had a foundation from Hokkaido visiting us here at the office,” he said. “This foundation runs parks and camps for kids with severe illnesses, and we support that. In each part of the country, depending on local needs, we drive a specific effort.”

Sports is another area that has long been supported by Coca-Cola, and the upcoming Tokyo 2020 Olympics offers another opportunity for the company to do so locally.

“We believe that sports are a tremendous vehicle to develop healthy habits, especially among the youth,” said Garduño. “That’s the reason why we sponsor—and have sponsored for decades—the FIFA World Cup and the Olympic Games—both summer and winter. We sponsored the 1964 Tokyo Olympic Games, and will be proudly sponsoring again in 2020.

“Sponsoring the Olympics, sponsoring the FIFA World Cup, sponsoring football and rugby and baseball teams, has a specific purpose for us. We want to use those partnerships to inspire people—especially youth—to move and exercise, and to adopt healthy lifestyles. We want to highlight the values that those sports promote—not just physical health, but also the values, attitudes, and behaviors that those sports help instill.”

A PERSONAL NOTE
A native of Mexico, Garduño comes to Japan from Madrid, Spain where he was managing director also of Portugal, and Andorra at Coca-Cola Iberia. The ACCJ Journal asked how he is adapting to his new home.

“I am enjoying my time in Japan big time; it’s a beautiful country. We have a strong business and a very strong brand, so we have fascinating challenges ahead.

“But, the personal experience, which in the end is what you take with you—the personal experience of living in this country, working here, exploring this city, attending all those festivals across Japan —it’s been so far such an enjoyable experience. I feel lucky to be here.

“It’s different to visit Japan than to live here and getting to know up and close the texture, the culture, and the society. It is just a beautiful country, beautiful people, and the food is great. I’m enjoying my time.”

Christopher Bryan Jones is Editor-in-Chief of The ACCJ Journal. Originally from Birmingham, Alabama, he has lived in Japan since 1997.
Japan is one of Coca-Cola’s top three markets and—with 50 brands—is home to the company’s largest portfolio.