Is Coca Cola a good match for Costa Coffee?

September 1, 2018

This week the most powerful global soft drinks conglomerate acquired the second largest chain of coffee shops in the world. A perfect match?

The announcement has been met with near-universal enthusiasm from business and financial commentators.

According to The Guardian, Alison Brittain, the chief executive of Costa Coffee’s owner Whitbread, said the coffee chain had been approached by a number of potential buyers but Coke’s desire to snap up the 4,000-store chain was a “dream deal” for investors.

“The other suitors weren’t wearing the right suit or driving the right car,” explained Brittain of the other approaches it received. “It’s Coke we decided to go up the aisle with, with a very large ring on our finger.”

 

There is an easy-to-understand logic in the move. There is growing movement against sugary drinks as a contributing factor in the growing problem of obesity (bad pun intended). Coffee, while still suspect for its caffeine, is successful in decaf versions with only a few pedants frothing at the mouth about oxymorons. Overall, Coca Cola is investing in a healthier future.
It avoids the years of denial required of the cigarette manufacturers over links between its product and assorted life-shortening impact on consumers.

Coca Cola Innocent

 

Smoothies

The logic adds to an earlier case studied in LWD and at the Alliance Business School’s Executive MBA programmes. Coca Cola revealed its longer-term acquisition policy when it snapped up Innocent, the environmentally fragrant smoothies business.

How to screw up a good deal

Superficially, then, it’s a good deal. Onward and upward. Whitbreads are making reassuring noises that they will spend the cash responsibly and not just in helping fat cats get fatter. Shareholders will benefit. Some money will go to plugging a hole in the pension funds. So at least employees will get some benefit (even if they were already entitled to negotiated pension rights.)

Leaders we deserve has examined similar acquisitions in which a larger organisation introduces a strategically promising unit to strengthen or diversify. The process is much loved in Business Schools for providing yet another case for the Mergers and Acquisitions component of its courses. Kraft/ Cadbury; Pfizer/Astra Xenica are two important heavyweight examples.

The received wisdom is to avoid messing with the brand assets of the acquisition. This is easier said than achieved, as some of the anticipated gains call for re-organisations, consolidation of back office staff and computer systems. It helps, if there is a rationale beyond rescuing an ailing brand by liberating its potential. In this, I leave readers to decide whether project Brexit might be an example.


Leaders in the news

November 28, 2015

As November ends, more leadership stories fill the headlines

Marissa Mayer

In preparing posts for LWD I am detecting a reduction in fresh stories of heroic leaders.   Some years ago I could select from several available on any day of the week to discuss with my students. Now the stories more often report leaders whose actions and decisions have turned out badly.

Marissa Mayer

Among  leaders under attack is Yahoo’s Marissa Mayer who finds her turnaround plans in disarray, while facing criticism of a poor approach in dealing with employee engagement.

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Three Keys to Culture Transformation: Lead, engage, align

February 23, 2015

Diana Rivenburgh

by Diana Rivenburgh

What causes cultures to run amok? Why do people do things they never thought they would? Perhaps the most important question is “what can we do to create ethical, high performance, engaged cultures?”

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On the week of the School Massacre in Connecticut we ask “where have all the leaders gone”

December 21, 2012

Last week ended with news of the Sandy Hook School massacre in Newtown Connecticut and President Obama’s public agony at failures in America to protect the nation’s childrenSandy Hook School Sign

Before the dreadful week-end news, I had been scanning the net to see what leadership stories I could find. These notes are in chronological order.

Leadership training

The first item I came across was a promotional ebook from a successful experiential leadership programme at the Said Business School, Oxford . The approach offers an imaginative mix of experiences involving drama, moral philosophy, music and poetry. The book [53 pages] is worth browsing by leadership trainers.

HSBC money laundering

The next item that caught my eye was the settlement of the money-laundering charges at HSBC. The bank has agreed a $1.9 billion fine with the US Department of Justice over anti-compliance regulations.

“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again,” said Chief Executive Stuart Gulliver in a statement.

Branson Brand Bashing

The next story had a familiar feel, with cult business hero Richard Branson defending his Virgin Atlantic business from a bit of turbulence (Sorry. That cliché is almost compulsory). And alongside Sir Richard we have the egregious Willie Walsh, now fighting his corner from chief executive International Airlines Group (IAG) which now incorporates British Airways.

Sir Richard Branson pledged to keep control of his airline after his arch-rival, BA chief Willie Walsh, said that Singapore Airlines’ sale of its [49%] stake in Virgin Atlantic would lead to the demise of the brand.

From China with Love

Now that’s more like it. A full-on profile of China’s new leader as Xi Jinping, the new head of the Communist Party, made a visit over the weekend to the special economic zone of Shenzhen. The south China province has stood as a symbol of the nation’s embrace of a state-led form of capitalism since its growth over three decades from a fishing enclave to an industrial metropolis.

After Mandela

One of the all-time great leaders, Nelson Mandela, is hospitalized [later he was successfully operated on for Gall Stones]. The news comes at a time when the ruling ANC party in South Africa is engaged in further leadership struggles.

The Glass Ceiling in Oz

The Glass Ceiling has not yet been shattered in Australia, despite the influence of the mighty Rupert Murdoch and residual members of his dynasty.

Starbucks

The tax row in the UK continues to hit at Starbucks image, and perhaps its profits

Japan’s shift of leader

The Liberal Party [LPD]’s massive victory in Japan will re-elect former Prime Minister Shinzo Abe who has called for major monetary easing, an increase in the inflation target and big spending on public works to rescue the economy.

Sandy Hook School Massacre

The Sandy Hook massacre in Connecticut http://uk.reuters.com/article/2012/12/15/uk-usa-shooting-connecticut-idUKBRE8BD0Z220121215 contributed to the sense that political leaders have to deal with forces beyond their powers to deal with. There are calls in America for tighter gun control legislation, but few commentators believe that President Obama will be able to introduce meaningful change.

Reflection

Before the New Town Massacre, I was impressed by the number of encouraging stories in the news about leaders and leadership challenges. There are still positive leadership stories around, and the leader vilification count was rather lower than I expected. Indeed there were quite a few stories offering accounts of positive leadership. However, the end-of-week news takes us back to a more nuanced views of distributed power and leadership’s struggles, rather than stories of heroic leaders with the skills to deliver transformation through a compelling vision of change.


Starbucks’ tax arrangements store up trouble for the brand

October 16, 2012

This week Starbucks was identified as a company that has used creative accounting to avoid paying any tax in the UK for three years, a period in which sales reached £1.2bn, and when its senior executives were on record as praising the UK financial performance

A special report by Reuters explains how the accounting scheme works:

We have identified three cunning, although legal, methods by which Starbucks has been able to avoid paying taxes to Her Majesty’s Revenue & Customs (HMRC), Britain’s tax authority. They involve payments between companies that fall under the greater Starbucks corporate group. By charging subsidiaries high-priced royalty fees on intellectual property, requiring chunks of funds be allocated to other subsidiaries in the supply chain, and shifting money to low-tax areas via inter-company loans, Starbucks has been able to essentially make its reported profits in the U.K. vanish into the foggy London air.

The practice of charging royalties on intellectual property is a method pioneered by tech companies like Google and Microsoft, and is used by Starbucks to drastically reduce the amount of taxable income it must report. Starbucks charges its international operations, including its U.K. unit, fees in order to use various elements of the corporation’s intellectual property, such as its brand and business processes.

Starbucks’ high ethical standards

LWD had been following Starbucks as an example of a company placing diversity at the heart of its corporate values. Its own website reads:

“Aside from extraordinary coffee, Starbucks has made a business out of human connections, community involvement and the celebration of cultures. We’re committed to upholding a culture where diversity is valued and respected. So it’s only natural that as a guiding principle, diversity is integral to everything we do.

Starbucks is dedicated to creating a workplace that values and respects people from diverse backgrounds, and enables its employees to do their best work. We honor the unique combination of talents, experiences and perspectives of each partner, making Starbucks success possible. As such we expect our partners to act with a spirit of kinship, tolerance and humanity toward all customers making our brand welcoming to everyone.”

The welcoming brand

Starbucks places ethical standards at the heart of its operations. It leaves it more vulnerable to damaging attacks on its integrity through stories of its global financial arrangements.


Leaders in the news: Winners and losers

October 13, 2008

Howard Schultz Starbucks

Howard Schultz Starbucks


In times of crisis, some leaders step forward, others are deemed to have failed. There have been examples of each, as the global financial crisis enters a new critical stage

Fred the Shred takes the fall

Pressure mounted on Sir Fred Goodwin to resign as chief executive of Royal Bank of Scotland (RBS) as the bank seeks to tap the Government’s £500 billion rescue fund. The Government is reluctant to a deal with RBS’s participation unless he relinquishes his role. Although he clung on tenaciously this has been a very bad week for Sir Fred. Another former city hero exits ignominiously.

Sir Fred Goodwin 0

Gordon Brown is no dead cat

The deeper the crisis, the more polls seem to swing towards Prime Minister Gordon Brown. David Cameron and George Osborne grudgingly offer support the government. Are we seeing a ‘dead cat bounce’, or is there life in the political career of Gordon Brown? He appears more relaxed in the last two weeks than he has been since taking over from Tony Blair as Prime Minister.

Brown 1, Cameron 0, Osborne 0

Boris Forces Resignation of Sir Ian Blair in Leadership Battle

The resignation of Sir Ian Blair [October 2nd 2008] develops into a political story. The BBC traced his turbulent career. Boris Johnson, incoming Mayor of London, is proving a hands-on leader willing to act forcefully. Sir Ian, under pressure on operational and personal fronts, was called into a ‘meeting without coffee’ by the Mayor before tending his resignation.

Boris 1 Blair 0

Obama and McCain Round 2

The second televised debate between the two candidates [October 7th 2008, Nashville, Tennessee] is as stage-managed as the first.
A key negative moment was was reported widely as

Jabbing his finger and spitting out “that one” instead of naming Barack Obama, John McCain showed an angry side

Polls suggest that Barack Obama is moving ahead.

Obama 1 McCain 0

Dick Fuld faces the music

Dick Fuld, controversial CEO of Lehmans has had a very bad few weeks. When ‘invited’ to testify before a hostile congressional committee following the crash of his company, he demonstrates his robust leadership style, denying wrong-doing or ethical weakness. He ticks the boxes for the callous Wall Street fat cat. Fuld very much the loser here.

Dick Fuld 0

Darling’s drastic rescue bid of the banks and maybe Gordon Brown

As The Times sees it
Chancellor Alistair Darling [October 8th 2008] launched a drastic rescue of Britain’s high street banks [to avoid] a cataclysmic failure of confidence by announcing a part-nationalisation plan with £50 billion of taxpayers’ money. Alistair Darling, like Gordon Brown has had a better week.

Alistair Darling 1

Starbucks, Schultz and the running taps

Howard Schultz, returned to the chief executive role at Starbucks earlier this year, faced with serious loss of froth in the business. Poor figures and closures continue. This week [October 8th 2008] the ‘running taps’ story threatens to sully the firm’s good environmental reputation.

Starbucks 0, Howard Schultz 0

And in the long run?

Not all these cats are dead. And, as we know, cats have seven lives.