Japan: A Living Lab for Coca-Cola’s Beverage Evolution

For John Murphy, the business lessons from living in Japan couldn’t have been more instructive. 

The Coca-Cola Co. executive vice president and chief financial officer spent nearly a decade in the country in two separate stints, first in the early 1990s, and then from 2000-05, with many trips during and since. It’s now a second home — Mr. Murphy was married there, and two of the Ireland native’s three daughters were born there. 

Throughout that time, interactions with Japanese colleagues and engagement with the market itself have shown the value of forging lasting partnerships, building trust and persevering in the face of adversity. 

And those are just a few of many ways Mr. Murphy explained how the country had affected him to packed audience at the SEUS-Japan Alliance annual conference Oct. 22.

“Living and working in Japan is a unique experience. Quite often it’s very difficult to convey the impression it leaves on one to be there. Quality is at the core of everything. Attention to detail is at a level that we often don’t understand until we see it there in action,” he told a packed audience at the three-day event in Savannah. “The ability to execute the game plan once the plan has been formulated is a core competency that I certainly have learned at a higher level in Japan than anywhere else that I have worked.” 

The dedication of the more than 20,000 system employees in Japan (including bottling partners) is now becoming even more relevant for Atlanta’s hometown beverage giant. Japan has seen it share of unique products, but it’s now providing a living laboratory for Coca-Cola’s diversification away from the bubbly soft drink that made it one of the most recognizable brands in the world. 

“Today Japan stands very tall in the Coca-Cola system around the world and is know for its innovation, forward thinking and specialness when it comes to the embodiment of what Coca-Cola stands for. Our global vision today to be a total beverage company around the world was inspired by our journey there since the early 1990s and continues to be informed by the many lessons that we have learned in doing business in Japan,” Mr. Murphy said. 

Amid a global backlash against sugary drinks, Coke has now delved into just about every new arena, from water to coffee to juice to milk. The company last year introduced its first alcoholic drink in — where else? — Japan. 

Some global growth has come through acquiring proven brands, while other wins have come by developing completely new products or enlivening classic flavors with new formulations. Mr. Murphy, who has headed up both Asia and Latin America groups for Coke, has had a front-row seat to these developments.

Even with that global perspective, Japan stands out as impressive, partly because of the strong leaders who pioneered market entry.

Coca-Cola in the 1970s was intently focused on its “sparkling” category in Japan, but local partners advocated entering the newly established canned coffee space, Mr. Murphy said. After creating “tremendous tension” with executives back in Atlanta, they won out, and the Georgia Coffee brand was born. It now leads the category. 

“Today, Georgia Coffee is a multibillion dollar brand in and of its own right and is, after Coca-Cola, perhaps the most profitable brand in our portfolio. Leadership matters in those inflection moments,” Mr. Murphy said, pointing to the aluminum sample bottles of Georgia Coffee on arrayed on lunch tables in the Westin Savannah Harbor resort ballroom. 

“They’re not there as ornaments, they’re quite drinkable,” he quipped, prompting many in the crowd to twist off the tops and take a sip of the coffee pre-mixed with milk and sugar. Georgia Coffee, naturally, is not available in Georgia. 

Coke has also introduced Coca-Cola Plus Coffee, which is infused with coffee extract and boasts half the calories and twice the caffeine, while packing both flavors into one red can. It’s one of more than 850 unique product configurations and 50 brands Coca-Cola has in the market, where rapid product turnover and health trends keep manufacturers ever on their toes. 

“We launch and delete almost 200

per year, and we do so in constant pursuit of the consumer, understanding and trying to anticipate what their needs are and building a capacity that flows from our research and development center right back into to our supply chain to get to market as fast as we can,” Mr. Murphy said. 

Global Atlanta got a chance on a May reporting trip to see and sample some of these products at the Coca-Cola Japan headquarters in Tokyo, a seven-story building that opened in 2016. 

The bright white lobby with the familiar Coca-Cola script and red accents greets entrants with a display of drinks that comprise more than $10 billion in sales, making Japan the No. 2 market for the company in the world.

While familiar names like Coca-Cola, Fanta, Sprite and Minute Maid are prominent, the lineup also features brands that would be unrecognizable to most Americans: Ayataka green tea, Real Gold energy drinks, Qoo juice, Aquarius sports drinks and many more. 

Even classic Coca-Cola products can take on new twists. Japan was the launch market for Coca-Cola Peach, whose pink bottle remains, ironically, unavailable in the Peach State where Coke was founded. Coca-Cola Apple debuted in September. 

Another innovation is Coca-Cola Plus, a zero-calorie soda that comes in a white bottle and includes a dose of dietary fiber. Made for drinking with meals, it slows the absorption of fats and oils into the body, winning a government classification as a Food of Specified Health Use, or FOSHU, an increasingly important mark for health-conscious consumers in Japan’s aging society. 

Global Atlanta’s hosts in Tokyo also let a reporter try Lemon-Do, a sour drink made by blending grain alcohol, or shochu, with carbonated water. The canned drinks — Coke’s first-ever experiment with booze — came with 3, 5 or 7 percent alcohol content and were being tested only on the southern island of Kyushu. Lemon-Do has been sold mainly in bars, where consumers have gravitated toward so-called Chu-Hi alcoholic sodas. 

But Coke’s sales channels are much more varied and complex in Japan. Shelf life takes on a new meaning in a market saturated with convenience stores. The 7-Eleven chain alone has more than 20,000 locations in Japan, more than double its next largest market. That means operators are always looking for products to catch customers’ their eyes — and wallets.

Coke sometimes experiments with new packaging even more than with the drinks themselves, from anime bottles to ones with QR codes that can be scanned to reveal lunar new year fortunes. The Share-a-Coke campaign, a popular marketing move in the U.S. where labels were emblazoned with names to encourage gifting, was also successful in Japan. 

With Christmas right around the corner, the company recently introduced plastic bottles with a tab that can be pulled to twist the label into a ribbon that resembles gift wrap. An embedded code can be redeemed online for song downloads. 

In his speech, Mr. Murphy pointed out that technology is interwoven with the Coca-Cola experience in Japan. Its Coke On app in 2017 crossed 4 million downloads, in part because it offered integrations with digital platforms that enabled consumers to locate and pay at one of Coke’s more than 800,000 vending machines across the country — one for every 150 people. 

“I remember in my early days in the 1990s in Japan, when most of the world were still sharpening pencils, we were transmitting daily sales from Tokyo to Atlanta. It has always been tremendously impressive the way technology has influenced how our business has developed,” he said. 

Japan is also a place where Coke has emphasized the entrepreneurial ethos of failing fast, an important point in a place where products come and go so quickly. 

“We don’t take out the successful ones, and the fact that we take out 200 gives you an indication as to how many times we miss the mark, but it has also has fostered within our system a tremendous belief that the next great one is around the corner,” Mr. Murphy said. 

With his audience in Savannah having heard both testaments to the vitality and concerns over the threats to the investment ties between Japan and the Southern U.S., Mr. Murphy said he was bullish on the trajectory of the relationship. 

SEUS-Japan was hosted in Georgia for the first time in 12 years and featured representation from seven states in what was its 42nd joint meeting. Japanese Ambassador Shinsuke J. Sugiyama was among guest speakers that included governors Brian Kemp of Georgia and Henry McMaster of South Carolina. 

For his part, Mr. Murphy urged the audience to attend the Olympics in Tokyo in 2020, while will be an occasion “for Japan to show the world why it’s such a special place,” he said, praising the care, consideration and preparedness always evident in Japanese hospitality. 

“If you want to ever ever understand how to host an event, call them up. Go to Japan. It’s impeccable.” 

One chance will be SEUS-Japan, which rotates back to Japan in the fall of 2020.