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Coke looks for comeback
CEO Neville Isdell says '05 focus is to "get our house in order" and regenerate market growth.
February 16, 2005: 1:00 PM EST

NEW YORK (CNN/Money) - Coca-Cola Co. CEO Neville Isdell swallowed a can full of pride before analysts Wednesday as he repeatedly admonished himself and the beverage behemoth he leads for not "delivering to our full potential."

"I'm not happy about it at all. I don't believe we performed as well as we could. With just a two percent increase in worldwide unit volume growth last year, it's hard to deny that," Isdell said during a morning conference call with analysts to discuss the company's fourth-quarter results.

The call was monitored via Webcast in New York.

Despite Coke (Research) recording profits and revenue for the period that topped Wall Street's forecasts, Isdell wasn't a happy man.

But he came with a bold message: "In 2005, we will not judge ourselves on earnings growth but on our ability to get the company back to its full potential and we are prepared to act with a great sense of urgency."

To that end, Isdell said Coke will stick to its policy of not issuing earnings-per-share guidance.

The gameplan for the world's biggest beverage maker to regenerate market growth will hit heavily on two areas: advertising and brand innovation.

Said Isdell, "Our primary focus is to make progress in our flagship North America market where we've lost a small percentage of volume market share."

Coca-Cola's North America unit case volume, a key sales measure in the beverage industry, fell 1 percent in the fourth quarter and was flat year-over-year.

In an effort to juice up its image, the company plans to spend about $400 million on an "accelerated" advertising and marketing campaign that uses big-media buys to target a national audience rather than tailor several different ads to reach smaller local markets.

"We're also strengthening our commitment to our core brands," Don Knauss, president and COO of Coke North America, said during the call. Coke's diet cola, water and juice brands will see the most "robust innovation," he said.

For instance, both Coke and its rival PepsiCo (Research) earlier this month announced plans to begin selling diet drinks sweetened with sugar substitute Splenda. Knauss said the company will launch a new "100 days of Diet Coke" campaign to coincide with the debut of the drink this spring.

Coke's other beverage rollouts this year include a lime-flavored version of the flagship Coca-Cola brand and an energy drink called Full Throttle. The Splenda-sweetened cola is expected to appeal more to women consumers.

Chief financial officer Gary Fayard told analysts that the increased investment in marketing and advertising and weak performance in certain markets will pressure results in 2005. "We don't expect the high single-digit growth target to apply to 2005," Fayard said, although he did not provide specific EPS guidance, in keeping with the company's policy.

Isdell said he believes Coke has a strong pipeline for 2005 and hopes that its unit cae volumes will start to pick up in 2006. He also dismissed the idea that he was open to any significant merger or acquisition plans for the company any time soon.

Said Isdell, "I am working on stabilizing the business and regenerating growth. We're in a great industry with high margin and we have the knowledge and the expertise. For now we're focused on getting our own house in order and improving shareholder value, not the size of the business."  Top of page

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