Coca-Cola says AI-driven “innovation” contributed 30% of profit growth

Coca-Cola’s CEO James Quincey credits robust innovation across products, packaging, and processes for driving a “competitive advantage” and propelling profit growth.

Speaking to investors at the company’s annual results presentation on Tuesday, Mr Quincey highlighted innovation’s contribution of approximately 30% to gross profit growth in 2023, which itself surged by 9% to $27.23 billion.

“We’re applying digital tools, ingredient processing technology, and AI to create bolder and more successful innovation,” he said, boasting that success rates tripled compared to 2019.

Notably, 2023 saw the company’s first foray into alcoholic beverages with Jack Daniels in the UK, and the “co-created with AI” Coca-Cola 3000 Zero Sugar under its Creations platform.

“Taste superiority” remains paramount for successful innovation, Mr Quincey said, citing Coca-Cola Zero Sugar’s 5% volume growth as a prime example. “We’re applying learnings from this multi-year success and driving taste superiority elsewhere,” he declared.

How innovative?

Coca-Cola is also innovating its marketing approach, shifting its media spend from TV to digital channels.

Previously, Mr Quincey explained, creating a TV ad took months, but now they generate “1,000s of pieces of content that are contextually relevant and measured in real time.” This, combined with Kantar’s $8 billion year-over-year brand valuation increase, showcases the effectiveness of their engagement strategy.

Chief financial officer John Murphy echoed this sentiment, stating that the “positive volume and top-line growth” are direct results of their effective marketing spend.

Despite inflation, Coca-Cola’s net revenues grew 6% to $45.8 billion and volumes by 2%, thanks to their “revenue growth management capabilities.” These include “price pack architecture” ensuring the right product at the right price for consumers. Importantly, Quincey reports that inflation’s impact is waning, with “normalised” pricing in over 90% of their markets.

While strategic pricing has subsided, Quincey expects continued strategic price increases where viable. “We will earn our right to take an appropriate level of pricing [in 2024],” he pledged.

Beyond trademark Coke, the company is prioritizing Fanta and Sprite. Splitting them into dedicated sub-teams “allows us to bring more clarity and focus, and drive growth there too,” Quincey explains. These efforts follow Fanta’s first-ever global identity launch and a more concerted push for Sprite globally.