Coca-Cola CEO James Quincey: Pay & Leadership - Sure Dividend

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Coca-Cola CEO James Quincey: Pay & Leadership

Published December 8th, 2018 by Josh Arnold

The Coca-Cola Company (KO) was founded 133 years ago and since then, has become the largest maker of non-alcoholic beverages in the world. The company operates in almost every country, serving up nearly 2 billion daily servings of its 500+ unique brands of drinks.

The Coca-Cola system employs more than 700,000 people worldwide as they provide juice, dairy and plant beverages, water and enhanced water sports drinks, ready-to-drink tea and coffee and of course, its core portfolio of sparkling beverages.

The company has more than 20 individual brands that each sell more than a billion dollars’ worth of beverages annually through a total of 27 million retail outlets, an unprecedented tally. In total, Coca-Cola generates ~$35 billion in annual revenue and has a market capitalization of just over $200 billion.

James Quincey’s Coca-Cola Journey

James Quincey (pictured below) is Coca-Coal’s CEO.

James Quincey

Source: Coca-Cola press library

Quincey became CEO of Coca-Cola on May 1, 2017, but his journey with the company started long before that. In fact, he’s been with Coca-Cola since 1996 and moved up through its executive ranks steadily before reaching the top spot in 2017.

Quincey was born in London in 1965 but his family moved around quite a bit, making a stop in the United States while his father lectured at Dartmouth College before moving back to England. He went to university in Liverpool, studying Electronic Engineering. However, he found his calling wasn’t in building semiconductors, but in the world of business.

After graduating from the University of Liverpool, Quincey joined Bain & Co., which was a burgeoning consultancy at the time. He worked for Bain for a couple of years before joining a startup formed by former Bain and McKinsey employees called the Kalchas Group. Quincey then moved back to the US with the Kalchas Group to set up US operations, first in Chicago and then eventually in New York. It was while Quincey was working in New York that Coca-Cola recruited him, and his Coke journey began.

He joined Coca-Cola in Atlanta in 1996 as the Director of Learning Strategy for the Latin America Group in an internal consultancy role. He went on to work in a series of operational roles of increasing responsibility in Latin America, eventually leading to his appointment as President of the South Latin America Division in 2003. Quincey is credited with developing and executing a successful brand, pack, price, and channel strategy that has since been replicated all over the world throughout Coca-Cola’s system.

In 2005, Quincey became President of the Mexico Division and during his time there, he led the effort to grow market share for Coke’s products, including the relaunch of Coca-Cola Zero. In addition, he led the acquisition of the Jugos de Valle brand, which is now sold in 16 countries and is one of the company’s 21 billion-dollar brands.

After three years in Mexico, Quincey was appointed President of the Northwest Europe and Nordics business. He served there for four years and is credited with leading the acquisition of the innocent juice brand in 2009, which is another of the company’s billion-dollar brands.

Following another successful stint as a regional leader, Quincey was promoted to President of the company’s Europe Group, which is comprised of 38 countries across the continent. While Quincey headed the group, it expanded its portfolio and improved efficiency, helping to drive revenue and profit growth while expanding the company’s market share leadership in its core beverage products. He also worked on the mergers of Coca-Cola Enterprises, Coca-Cola Iberian Partners and Coca-Cola Erfrischungsgetranke AG to form Coca-Cola European Partners Plc., which is now the world’s largest independent Coca-Cola bottler.

In 2015, Quincey took the job of Chief Operating Officer and his success in that position led to his eventual appointment in 2017 to CEO of the company. He took the reigns from long-time CEO Muhtar Kent, who remains Chairman of the Board until early in 2019.

Coca-Cola’s Performance Under Quincey

Coca-Cola shares have performed very well under Quincey’s leadership, owed to his fresh ideas on how the company should be run after many years of Muhtar Kent. Shares traded for $41 on the day Quincey took over as CEO and today, are in excess of $49. For the first time in a long time, Coca-Cola has actually outperformed the S&P 500 over a lengthy period of time. While the company’s outperformance over the broader market has been slight since Quincey took over, it has vastly outperformed the consumer staples sector as measured by the XLP ETF. In fact, it has outperformed the XLP by a staggering 12% during the time that Quincey has been CEO, excluding dividends. After several years of Coca-Cola shares bouncing around between the mid-$30s and low $40s, the past 18 months or so have been quite beneficial for the company’s shareholders; they have James Quincey to thank for that.

One of the first things Quincey did as CEO was to announce the culling of 1,200 back office support positions, particularly in the middle management levels. The move is part of a larger effort that has taken place over the past 18 months or so to make the company more agile and lean, saving ~$800 million annually in the process. Coca-Cola’s volumes had been weak before Quincey took over but have seen a resurgence since, particularly in still beverages.

Indeed, the most recent quarter’s results were driven higher by product innovation, including smartwater and Fuze Tea, in addition to its legacy sparkling products. Apart from that, Quincey has led strategic shifts in the company’s direction such as the partnership with BODYARMOR and the outright acquisition of coffee chain Costa. Quincey is betting big, with a deal price in excess of $5 billion, that hot beverages are the way forward for Coca-Cola, which is a space it hasn’t traditionally competed in. Quincey says he doesn’t want to compete with Starbucks but using his company’s world-class and unparalleled supply chain capabilities, he sees Costa as a growth engine for the years to come.

The Costa acquisition will give Coca-Cola a strong coffee brand across Europe, Asia Pacific, the Middle East, and Africa with the opportunity for additional expansion, particularly in emerging markets where Coca-Cola already has a large presence. Costa operates more than 4,000 retail locations that offer full service coffee bars as well as at-home options for consumers from its roastery. Coca-Cola is interested, and it should continue to drive revenue growth, because the Costa brand is scalable not only in its retail format, but in Coca-Cola’s core at-home revenue stream. The acquisition adds another leading brand and platform, along with industry knowledge Coca-Cola doesn’t currently have, affording it the ability to grow the brand over time and diversify its product assortment. While Quincey has been CEO for a relatively short period of time, his mark on the company is indelible already, and it is for the better.

James Quincey’s Compensation

What does the man holding the top spot get paid for all of this work? As it turns out, quite a lot. The company’s most recent proxy statement lays out Quincey’s compensation in full, which can be seen below.

James Quincey Compensation

Source: 2017 proxy statement

For the year of 2017, Quincey earned a total of $10.6 million, representing a significant increase over 2016’s total compensation of $8.4 million and 2015’s total of $6.8 million. Of course, 2017 was Quincey’s first year in his new role as CEO, so it makes sense his compensation would move meaningfully higher. Each bucket of his compensation increased in 2017 as his salary moved to $1.2 million, stock awards increased to $4.8 million, options were up to $1.3 million, cash bonus rose to $2.4 million, pension value rose to nearly $400 thousand, and all other compensation skyrocketed to $530 thousand, thanks to his relocation benefits as he moved at the company’s request. Total cash compensation was $10.2 million as the pension value is a non-cash, deferred benefit, so the company reports total compensation for executives without that line item.

For context, Muhtar Kent was Chairman for 2017 and made a total of $14.8 million for the year against Quincey’s $10.6 million. The company announced that Quincey is succeeding Kent as Chairman early in 2019 and thus, we expect his total compensation will be higher once that change takes place.

In the company’s most recent proxy statement, Quincey held a position of 780,490 shares beneficially owned. Given that his annual compensation includes ~$6 million in newly-issued shares, his position today is surely in excess of that amount. His current position is worth nearly $40 million, so his net worth and ties to the company’s performance are significant. As Quincey remains CEO and now Chairman, the link between his own net worth and Coca-Cola’s performance will only strengthen.

Final Thoughts

James Quincey has had a long and very successful career with Coca-Cola, and his efforts have been handsomely rewarded. He now holds the top operational and strategic spot with the company, and the Chairmanship is waiting for him.

Quincey’s proven strategic skills have served Coca-Cola well and given the initiatives he has implemented just since becoming CEO, it appears Coca-Cola’s future is brighter as a result.

Quincey is paid handsomely for his efforts, but his compensation is comparable to other CEOs of large corporations, so we don’t see any concerns. And given how well the stock has performed since he took over as CEO, shareholders surely don’t mind, either. We see Quincey as a huge positive for Coca-Cola in the years to come as the company is now looking for more ways to grow in addition to being a leaner, more cost-efficient company.

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