December 2008: Muhtar Kent, president and CEO, Coca-Cola

His decision to set up a new facility in Wexford, creating over 100 jobs, was welcome good news in an otherwise bleak economic vista.

Why?

For adding a few bubbles of fizz to an Irish economy that is decidedly flat with the start of construction of a new Coca-Cola flavour manufacturing and innovation facility in Wexford. The facility, on a 41-acre site, will support the company’s strategic growth initiatives and will comprise manufacturing, laboratory and pilot-plant facilities to enable process development and product commercialisation. The new facility will create approximately 60 high-quality jobs after one year and over 100 jobs after five years. The ceremony, attended by Kent, brought back a touch of the old days – there were active JCBs, happy locals and even a smiling Taoiseach.

Manufacturing woes

The announcement comes at a particularly opportune time with the manufacturing sector desperate for some good news. The NCB Purchasing Managers’ Index (PMI), which measures Irish manufacturing activity, hit yet another record low in November. Output and new orders shrank at the fastest pace in a decade while employment has also fallen sharply.

Indeed this time twelve months ago, the news was not so good from Coca-Cola with regard to its operations in Ireland. Up to 250 jobs were lost when the board of the company endorsed the decision by local management to close the concentrate plant in Drogheda, Co. Louth, despite attempts locally to implement a plan to save some of the jobs. Long before the economic boom, the plant, which supplied concentrate to the European and North African markets, had provided quality employment in the Drogheda area. But while the Wexford operation will create fewer jobs, its research and development focus will ultimately mean that Coca-Cola will have moved its Irish operations up the value chain, a crucial step that the entire economy has to make.

Rising to the challenge

In October, Coca-Cola’s third quarter results showed that, despite challenging times, the company is still performing well. Third quarter earnings per share increased by 14%, net revenue grew by 9%, worldwide unit case volume increased 5% and operating income increased 20% in the quarter.

Nevertheless, the company was not entirely immune to the difficult economic environment. North American case volume and net revenues fell 2% versus the same period last year and the company blamed a slump in concentrate sales on this domestic weakness. But rival Pepsi Co appears to be having a much more difficult time. Following disappointing third quarter results, Pepsi announced plans to cut 3,300 jobs worldwide. Just how both companies will fare over the next 12 months, if economic conditions worsen, remains to be seen but the community in Wexford will be hoping that Coca-Cola continues to sparkle for them.

Future growth

Muhtar Kent, speaking at the groundbreaking ceremony, is certainly confident that this will be the case. “Over the next several years, the $650bn global non-alcoholic ready-to-drink
industry is expected to grow faster than the world’s GDP,” he said. “This facility will help to support the current and future growth strategies necessary for the Coca-Cola company to continue to succeed in a rapidly changing and dynamic marketplace. We have enjoyed a longstanding relationship with Ireland and the IDA, and we are confident that the decision to locate this facility in Ireland is the right one for our business.”

Coca-Cola facts

• CEO: Muhtar Kent joined The Coca-Cola company in 1978. He replaced Irishman Neville Isdell as chief executive in July.
• Supplies more than 2,800 products in 1.5bn consumer servings per day.
• Staff over 90,000 staff or ‘associates’.