Part 5: Coca-Cola Amatil: Making steps towards recycling, and sugar & carbon reduction
Will Baylis and Allison Watkins, CEO of Coca-Cola Amatil discuss why Sustainability is so important to achieving their business strategy, and the progress they are making towards the Sustainability stretch goals they have set themselves.
We want to create value for our shareholders. We want to do it in a way that also creates value for society.
Will: Good morning, my name is Will Baylis. I’m a Portfolio Manager with Martin Currie, and as part of my responsibilities I’m also responsible for the Sustainable Equity Fund, recently launched by Martin Currie.
With me today is Allison Watkins, who is the chief executive officer of Coca-Cola Amatil. Coca-Cola Amatil, we've identified as a company that's been quite innovative and advanced in relation to Sustainability, and so we're delighted to have Allison with us here this morning to talk about Coca-Cola Amatil and their approach to Sustainability.
Good morning Allison.
Alison: Good morning Will, and it’s a pleasure to be with you.
Will: We delighted to have you Allison.
As the CEO of Coca-Cola Amatil, in our work that we've been doing on Sustainability, we've noted that Coca-Cola Amatil's being taking some quite innovative steps in relation to Sustainability. And so, the chat with you today will be to explore more about how Coca-Cola Amatil has focused on Sustainability as part of your strategy.
So, on that note, why is Sustainability so important to Coca-Cola Amatil, Allison?
Allison: Well we've really thought a lot as a company about how we create value and how we want to think about ourselves, and obviously there's been a lot of I think really useful debate about the role of companies in society and how to reconcile the different tensions.
So, for us, you know, we really clear that we want to create value for our shareholders. We want to do it in a way that also creates value for society, and that means achieving a lot of outcomes around our Sustainability objectives which we believe absolutely directly linked to achieving a great outcome for shareholders as well.
Will: What are the key objectives of your company in relation to Sustainability targets?
Allison: Well the way we think about ourselves is that we put customers at the centre of what we do, and how we want to first and foremost create value for our customers, and to do that we know that we also need to be creating value for consumers, for our brand partners, for the environment and also for our people.
And when we sort of drill into and challenge ourselves and think about what our customers care about, we pretty quickly get to elements like plastic, and reducing waste, sugar, but we think about water efficiency, we think about overall their impact on the environment as far as carbon emissions.
These are things that are pretty hard wired to the central purpose that we have as an organisation, which is to serve our customers really well, because consumers care about these things, our people care about these things, our partners care about these things, and so therefore if we want to succeed in creating value for shareholders in a way that also creates value for society, it's very important that we advance on all of those objectives.
Will: And in relation to plastic, because I think your company and actually some of the associated bottling companies around the world have made some quite significant progress on using recycled PET. Can you just explain your innovation, and I note your advertising campaign here in Australia has a strong focus on recycle plastic and recycled plastic used in your containers and you're bottling. Would you like to expand on that and the innovation behind that please?
Allison: Yeah, we are really proud of the progress we've made in the area of recycled plastic. And overall, know our goal is to reduce waste in our business. And we use a lot of different formats of packaging, of end packaging for consumers. You know there is cans, glass bottles and plastic.
And plastic is actually an incredibly efficient material in a lot of ways, however it needs to be recycled to really maximise those efficiencies. And so, we've put a lot of focus on increasing the recycled content in our plastic bottles, and in Australia we're very proud now that 7 out of 10 of our plastic bottles are made from 100% recycled plastic.
And that actually was no mean feat to achieve from a technical point of view. We're very proud of our future works packaging innovation team who worked very hard over quite a period of years to make it actually feasible to make a bottle out of 100% recycled plastic - a bottle that would still look good and perform well in the market.
Will: And then the other, I suppose, area of innovation is your own product design. Because you clearly are introducing products that have zero sugar, for example, and this seems to be a sort of focus on the health of and the well-being of your customers. Can you expand on that as well and also perhaps talk about how you think about that issue in say the Pacific islands or in Indonesia where you also operate?
Allison: Yeah sure, so I mean reducing sugar, this is a sugar intake, it's a really important theme for consumers and also for governments. There's obviously a lot of concern around obesity, and while the causes of obesity are many and solving obesity is very complex, we know that we can play a part in that, and we know that consumers also want choice. And we’ve seen low and no sugar variants growing fast.
So, there's all sorts of reasons why, for us, setting stretching goals, which we set ourselves the goal of reducing the sugar in our beverages by 10% in Australia and New Zealand by 2020 - that was from a 2015 baseline - that goal has tested us because we want to achieve it in ways that don't compromise the taste of our product.
As we take that intense and stretch goals across all of our markets, we need to recognise that there are different contexts in different markets, and different consumer preferences. For example, the strong consumer preference that that we see in Australia and New Zealand is not necessarily replicated in some of our other markets where there isn’t such a great focus.
But nonetheless, we feel that we we can take a leadership role there, we can raise awareness, we can make those choices available, and at the margin we can influence consumers to consider and make better choices.
So in Fiji, for example, where there are reasons to be concerned about the level of sugar intake, the launch of Coke No Sugar there has been very successful, and while it wasn't necessarily something that I would say the consumer was looking for as much as they were in Australia and New Zealand we've nonetheless seen strong growth. And that's true not only just making the choice available for people, but also through considering how we build it into for example a lot of our advertising communications, sporting sponsorship and so forth.
Will: That's fascinating. The other challenge Alison, at least from a shareholder’s point of view is when we engage with companies and encourage companies like yourselves to focus on Sustainability, we also expect as long-term shareholders an economic return. So how do you describe from a strategic point of view balancing the focus and Sustainability with a focus on generating economic returns? And is there any tension in that or do you think they're quite complimentary?
Allison: Look, certainly for us, we see them as totally integrated and complementary, in the sense that particularly with these themes that so important for consumers and for governments and for our customers around reducing sugar and also reducing and improving plastic recycling outcomes, these are absolutely existential questions for us.
So, if we don't show leadership in tackling these, certainly in the long run that will impact our shareholders because our products will be less relevant, potentially could be taxed. There are many reasons why it just makes really good sense for our shareholders that we take a lead on these.
I would say there's sometimes can be tension as sort of a short run / long run tension, and you need to kind of work through that, but with good innovation and the commitment that we've seen from our team and the ownership that we see right across the business of our Sustainability objectives, it's actually quite amazing how we've been able to balance that and find ways, for example, to move to recycle plastic that doesn't impose a cost penalty.
Will: Thank you for that insight. And if you look forward the next 10 years, how do you expect to Coca-Cola Amatil to look in terms of carbon emissions and recycling of plastics and Sustainability as a holistic design? How does Coca-Cola Amatil look in 10 years, thinking about Sustainability?
Allison: Well I think the Coca-Cola company is shown tremendous leadership here, and obviously as our major brand partner, we take a lot of inspiration from their direction. And overall, the “World Without Waste” goal that we have as part of as a member of the Coca-Cola system, I find a pretty exciting one and I think most of our people feel the same way.
For us, particularly in Amatil, we are striving to make sure that we are part of industry solutions that close the loop within our country on packaging as well. So that to the greatest extent possible, we're playing a role in making sure that we manage our own waste, we don't export waste and rely on other countries to process waste for us.
I think as far as sugar goes, we will definitely continue to make choice available, and to try to, you know, to influence choice. So, we certainly see while we have a great range of choice, there are communities, indigenous communities, for example, or lower socioeconomic communities where we still see too much sugar being consumed. And we're working with our customers in a number of those communities to proactively shape choice, so we want to continue that journey as well.
As far as carbon emissions, I think that you know we're proud of the progress that we've made towards the use of greater renewables and low carbon sources of energy, and you know I think that continuing that journey is going to be a really big priority for us. So right now, we're doing a lot of work on climate change, the risks that that creates for our business, and our response to mitigate those risks but also to play our part in reducing carbon emissions, offsetting carbon emissions.
Will: Well Alison, it's been great to have a chat to you this morning about such important issues as Sustainability and waste management and plastic recycling. I also want to commend your Sustainability team, because we've obviously engaged with your Sustainability team from time to time, and they've also provided great insight about some of the topics that we discussed this morning.
So, thank you very much for your time Allison, and best of luck with the next stage of this journey on Sustainability. Thank you.
Alison: Thanks very much Will, and you're a very important shareholder of ours, and we really welcome and value your engagement on this topic. It makes a difference to us as well, so thank you.
Will: Thank you very much.
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