Beverage Makers Seek Efficiencies

Coke versus Pepsi, the decades-long competition between the world's top two soft-drink brands, is increasingly being waged in an area where blind taste tests won't determine the winner. The rivals are engaged in organizational changes that involve closer alignment of key business processes and IT initiatives, both internally and with partners. The moves are intended to drive growth, increase productivity, and foster innovation in an industry where success these days is measured in ounces.

Coca-Cola Co.'s chairman and CEO, Doug Daft, outlined a plan Jan. 30 to combine three North American business units--Coca-Cola North America, Minute Maid, and Fountain--into an integrated operating model. "There will be one integrated team, executing a clear strategy with common processes and procedures," Daft wrote in a memo to employees. Coke will unify functionally similar business units, including IT departments, to strip out redundancies, and it plans to simplify procurement and supply chains. Last week, when Coke reported its year-end financial results, the company said it expects to realize at least $50 million in savings this year and $100 million in subsequent years as a result of these changes.

A week earlier, in conjunction with its earnings announcement, PepsiCo disclosed plans for its own business-process makeover. Among other changes, president and CFO Indra Nooyi takes on the added responsibility of "cross-divisional advances in portfolio innovation, productivity, and systems," according to the company. Her priorities include consolidating business processes with IT and integrating the systems and processes used to get PepsiCo's food and beverage products to retailers.

Increasingly, PepsiCo's customers want a single point of contact and just one invoice, a spokesman says, adding "Those things are related to our IT systems."

Marketing campaigns, point-of-sale data, and customer service can all benefit from an integrated IT infrastructure and interdepartmental coordination, says Jim Taylor, an author and expert on corporate branding. "If consistency is the most important brand issue, and it is, and the lion's share of a company's messages are electronic, then unifying the means of correspondence is a critical brand issue."

Using IT to improve processes and reduce costs is "a huge trend" in the consumer packaged-goods industry, says a senior executive with a major consulting company that has Coke as a client. "It's really difficult to grow the top line," he says.

One way to take costs out of the system is to hone supply-chain and procurement strategies. PepsiCo cites progress it's made in automating the way its products are delivered to retail outlets. A new "prepick" system uses handheld devices and databases to cost-effectively replenish stock to retailers, letting the company accommodate more kinds of products and maximize delivery-truck space.

Coke and PepsiCo are both investing in Transora, an online exchange that's developing a standard approach to data synchronization for direct-store delivery, the practice of moving time-sensitive goods directly from manufacturer to merchant. Next quarter, Transora will test its method of replicating direct-store delivery data in standard formats between parties.

Here, too, the tech initiative requires close alignment with the business processes it means to support. "You can build the technology," says Bill James, VP of investor relations with Transora, "but it's all about the processes."