Coca-Cola Co. is working to ramp up the resilience of its supply chain and build buffer stocks as the drinks giant navigates an increasingly volatile world, Chief Executive James Quincey said Wednesday.
Like many of its peers, Coca-Cola is grappling with a multitude of big economic and geopolitical events that have come together in recent months, including inflation, supply-chain snarls, new Covid-19 lockdowns and Russia’s invasion of Ukraine.
In the face of all that, Mr. Quincey said at The Wall Street Journal’s CEO Council Summit in London that the company feels little pressure to deglobalize. It has, though, been working to build buffer stocks of crucial ingredients, partly to protect itself from potential future disruptions should China’s lockdowns cause port closures, hitting exports.
“Resilience is more important now,” he said. “We need more of that.”
When asked about the leaking of a Supreme Court draft opinion indicating the court may be preparing to overturn Roe v. Wade, the 1973 precedent that established a constitutional right to an abortion, the CEO described the situation as “unfortunate,” noting that it complicates deliberations.
In response to a question about whether Coca-Cola would follow in the footsteps of Amazon.com Inc. and pay for employees to travel out-of-state to get abortions, should this become necessary, Mr. Quincey said the issue currently doesn’t affect the drinks company. “The vast majority of our employees are in Atlanta, Georgia, and that’s not a matter on the table at the moment,” he said.
On Russia, Mr. Quincey said Coca-Cola could see its business in the country “disappear completely at some point” if the war in Ukraine becomes protracted. The company said in March that it would stop selling its beverage base to franchisees in Russia.
Coca-Cola had drawn some criticism from consumers for not suspending sales to the country sooner following the invasion of Ukraine. But Mr. Quincey questioned the influence that moves by companies like Coca-Cola could have on putting pressure on governments.
“The symbolism is important but it’s not going to be the decisive factor,” said Mr. Quincey.
Mr. Quincey said that environmental, social and governance, or ESG, issues top investors’ list of questions nowadays. However, he said that had Coca-Cola’s financial results been weaker, shareholders would likely focus on that instead.
Coca-Cola recently reported first-quarter results showing a jump on organic sales, driven partly by strong price increases. Mr. Quincey said consumers, so far, have continued to be receptive to price rises. “We have not yet arrived at the crunch point,” he said.
Still, he warned that things will likely get tougher. “Inflation is rising more quickly than wages are,” he said. “That tends to end badly.”
For its part, Coca-Cola has had to increase hourly wages for staff in areas like logistics and warehousing where the company is seeing major shortages of employees like truck drivers, said Mr. Quincey. He described the driver shortages as structural, saying these have been accelerated by the pandemic but also preceded it, driven by issues like stricter regulation and an aging workforce. In response, Coca-Cola has given money to the state of Georgia to set up instructor schools to try to address this, while a supplier recently ran a Superbowl ad advertising driver positions.
In Shanghai, and other towns hit by lockdowns in China, Mr. Quincey said Coca-Cola’s volumes were negative. Coca-Cola isn’t alone in trying to build buffer stocks to protect against disruptions, he said, adding that the rush is only exacerbating supply-chain problems. “The logic is to want those buffer stocks even if it’s a small pebble on a huge pile of problems.”
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