david: coca-cola, a 130-year-old iconic brand and a dominant force in the $800 billion soft drink industry. synonymous with globalization, coca-cola operates in 200 countries worldwide. the behemoth now has a new ceo. james quincey spent the last two decades rising through the ranks at coca-cola. now, quincy aims to win over a new generation that shuns sugar and show the world he takes the environment seriously, even as he adapts to a new world of technology. james quincey sat down with us for an extended conversation. we wanted to understand how he

plans to use innovation to transform every aspect of coca-cola, change its culture while managing a checkerboard of regulations and regimes. >> coca-cola operates in a lot of different countries, you have to adapt to those. the tax cuts, how does it affect coca-cola? james: we are still working through the numbers. our tax rate last year was 24%. we are an international company. the absolute rate -- hasn't affected us as much. are positive on moving the territorial system. i think the simple petition is positive in the extent that will help create demand in the long run. we're working on the numbers we will lay out on our own. part of it is having money

overseas, but if we generate more economic growth, that will lift all boats. david: does the expensing help you at all? james: that is not the biggest moving piece. david: have you decided the cash goes into capital investment, buybacks of shares, dividends? james: we were not short of cash at the end of the day. we have a successful company. we have the resources we need to invest. we are working how the puts and takes work. we are looking at how we use all that and make capital allocations. david: one of the big issues for the united states are the so-called dreamers, the young people brought here as children. the question is do they get to stay as adults essentially. do you have people at coca-cola who are uncertain they will stay or not?

james: we have some people in our company and partners who fall under the dreamers or daca program. we would love government to find a way to make proper underlying immigration reform, and including finding a solution for the dreamers that is not so disruptive and they can stay, so hopefully they will find a path to that. of course partial solutions may be necessary, but we would love to see fundamental reform. david: you ran mexico for coca-cola. you have seen this on both sides of the border. did you see a constructive path for it on immigration? james: there is the path for it. it is also connected and cannot be disassociated when you talk about long-term fundamental reform to get both economies to grow. part of what drives the informal immigration is the disparity in the economic outlook, so having

a community of north america where all the economies are growing helps solve that problem. leadership in the united states to drive growth will help some of these other issues. david: you have seen nafta from both sides of the border. has it been good or bad for the united states? james: free trade deals are good overall for all participants, and i think it has been good for north america and all the countries in it. it does not mean it is perfect. can it be made better? yes, but i don't think we should start deconstructing global trade. i think it has been a powerful engine for lifting all boats. it does not mean it solves our problems. there are questions of income inequality, that all the rules are not perfect and need to be improved. david: when president trump came in, he was closely aligned with

people in business. do you get to talk to president or the administration about things like that? do you make your views known to them? james: when we have a view or it affects our business, we make our views known to the administration or many of the business forums. there are enough points of intersection within the administration that they know what we think. david: do you have any sense of where we are headed with nafta? the canadians seem to be preparing for u.s. withdraw. a lot of people in washington said we will not withdraw. any sense where we are headed? james: you have to let the negotiators negotiate. if you are not in the room, you don't know the answer and tell it comes out. the important thing is to say what they believe to be true, the areas where things can be

made better, and work it out. david: your native country has voted in a referendum to leave the eu, and i want to ask you what you think about that, about how is that developing? is there a soft landing? james: it goes back to my point about negotiations. you are never really sure until the cake is cooked. myself, i think the logic of economics is a softer rather than a harder brexit. i think in the end while it won't be a catastrophe one way or the other, life will be better. there will be more economic growth. there are a lot of details and points of view to work out, because in the end the referendum was not between this or that.

it was like this or not this. it was not a referendum of the exit, which is where we are trapped at the moment. it is important to get it right for the u.k., and to some extent europe. david: how do these trade issues affect coca-cola's business? james: we are global, but extremely local. we manufacture in virtually every country we sell in. everything sold in the u.s. is made in the u.s., everything sold in the u.k. or france is in that individual country, so the global trade restrictions don't tend to affect this heavily in the moment. to the extent they reduce or increase total economic growth, that is what matters to us.

we are pro-global free trade because it drives economic growth, so let's make those feels better, because it will provide the wealth to then solve a lot of societies problems. david: you came in and took over coca-cola and trumpeted innovation to your future. you have a chief information officer, but you are the chief innovation officer to some sense. how do you innovate in a 130-year-old company with such an entrenched perception of people's views. james: it is hard. any institution that has been around for a long time, it will be hard. from my point of view, if i'm not the chief innovator, i am certainly the chief agitator for innovation. that means driving the culture to try and do a few things on top of everything else we do. stay curious. if you not curious about the outside world, the consumer,

what is changing, how will we innovate? curiosity leads you to an insight that is passive. you need to drive empowerment of people feel they can do something, that they can get up in the morning and go do something. the next thing is you have to be inclusive, connect the pieces. you have tremendous global knowledge and a tremendous global system. sometimes your idea has been tried somewhere else, so connect. lastly, we probably fell in the trap of trying to make things perfect before we did anything in the past. we need to learn from software companies. that gets us innovation and speed. if we keep pushing those four things, we will make progress. david: how does james quincey know you're getting the innovation job done? a large organization, a lot of people spread around the world come how do you get word?

james: it is hard to know. the only way forward is to look for multiple signals did there is no one metric. we have employees surveys where we ask people. we can measure the success rate for the number and success rate of the things we put into the marketplace. we can look at what our research and development type line is generating. are we getting new patents, are we making progress? david: how is technology changing the way you do business, and for that matter, your workforce? ♪

david: technology is disrupting just about every company we know of today. how is it affecting coca-cola and your consumer? how you deliver to your consumer, e-commerce, how you market to your consumer? james: how we engage with consumers, there used to be tv come in now social media. the ways of engagement are changing rapidly. who the customer is and how the shopping happens is changing rapidly. with the consumer, tv is still

the biggest vehicle, maybe less so in the developed economies. a lot is going to social media. we work closely with the new tech companies and social media trying to find ways to continue to have a brand role. someone has to pay for the content we developed, whether advertising or sponsorship. there is a lot of change going on. we are adapting. we feel we are towards the front end, but it will be different it in 10 years and we have to keep investing in innovation and evolving to stay close to consumers. david: which markets do you see the fastest innovation when it comes to e-commerce, when you get on your app and it gets delivered? china, the u.s., europe? james: places like shanghai and

some parts of western europe are on the cutting edge along with some of the u.s. the u.s. in many respects there is a lot of advanced e-commerce come that it is advanced in places like shanghai and western europe, and the penetration in aggregate is higher in some places than the u.s. when you want to learn what is going on, i would be tempted to tell you to go to shanghai as stay in new york. david: how do you market? we are used to going in a fast food restaurant and coca-cola is there. you don't have that when you are on your mobile app. james: no, but you have to get it. in china when the apps and the mobile payment systems came in, we were not on the menu. even worse, we were probably trying to sell a returnable glass bottle to the restaurant.

we had to reengineer our businesses quickly to be present on the apps. what is the virtual representation of what you normally see in the store, and how to change the packaging portfolio so we can be part of the delivery system. you have a lot of places in shanghai where it is about 30% of restaurant sales. david: talk about coca-cola has -- as coca-cola. how is technology changing your business and your workforce? james: in lots of profound ways. in simple terms, go back 10-20 years. we were a large company and one of few that could invest in expensive i.t. systems and do our own stuff. today, that is no longer the model. we had to move to the cloud, to standard programs that the whole industry is using, and mobile. the one thing i always said the i.t. department is, just put it

on the phone. let's move everything to the phone. in the old day, i.t. had training budgets. why? everyone knows how to use the apps on the phone. i think it will continue to flow through the organization. david: does that translate into fewer employees because of the efficiencies from digital? james: it changes into a different profile. people adapt to do things in a different way. we have made a lot of changes in our i.t. departments to move to different skill sets, so it is changing the nature of employment and the profile. whether we buy the services ourselves or do it ourselves, it makes a difference where the employees are, but net-net, more employment is being generated. david: can coca-cola compete with silicon valley and the startups? james: atlanta is a fast-growing

economy. the state of georgia has been ranked one of the top places to do business in the u.s. for many years in a row. the city has done a great job. it is a competitive economy, and we do very well. we are happy to see atlanta and georgia growing, and they have done a lot to invest in tech startups and the media industry near atlanta and have been very successful. david: has you look towards new news you look towards growth in these beverage categories, are you looking at acquisitions come organic growth? you have been inclined to look for smaller startup brands and bringing them along. is that the path for coca-cola? james: i think it will be both. we have grown organically, and where we see something is a good idea, we invest, by them, just invest with them.

there is a quid pro quo. they get the capital we inject and we introduce them to the world, not just the country, and that helped us double the number of billion-dollar brands we sell. i think it will be in and strategy rather than one or the other. david: it is a beverage company, not a food company. there are competitors who said that's become a food company, at least in part. why did you make that decision, and does it leave you vulnerable? even for acquisition. there are some big consolidations in the food industry out there. james: we are focused on beverages because that is where the greatest synergy and application of know-how and fabulous global bottling distribution system. it is the thing that is most synergistic with what we have caught. beverages is one of the best growing markets in the whole of

the supermarket, so it is a great market. we have a good position with a lot of synergies. i sometimes say never say never, which then causes confusion. it is a question of what is most logical. beverages are the most logical thing for us to do. in terms of how we think about consolidation, i am convinced investors, gold stars go to those who grow with expanding margins. growth is the name of the game. if the category has no growth, then optimize margins. we focus on driving topline growth, which we can with our strategy. we will attract an investor base that will be very happy with us. david: by 2030, you want to get one bottle back for every onen you put out there. how are you going to track all that plastic?

♪

david: world without waste, great goal, a big new packaging announcement. why is it important to coca-cola as a business? james: it is important for a very core part of our values. we have always believed to have a healthy business that you need to be operating in a healthy community, and one of today's biggest problems is packaging waste. we have done a lot on making things recyclable and have invested on reusable mug but we need to collect it weird it is about the big missing piece in generating a world without waste them at which is collecting the plastic and creating a market economy for that plastic. that will do great things to help us grow into the future without creating waste. it is good for us to it is great for communities.

david: how will you track all that plastic? that is a lot of bottles. james: i will give you an idea of the dimension. every person in the world, if they bring back two bottles month, we collect every bottle we put out. how will we do it? different systems in different countries. every country needs a solution. it won't be the same everywhere. it is advanced in europe, more informal economies, but there will be different solutions everywhere. we have to work with ngos, industrial companies come and governments. it is absolutely doable. that is what is exciting about the objective. david: what about other places like china, for example? james: the emerging and developed countries are where the problem is, as opposed to the u.s. or europe. we need to do more there, but

there is some informal collection system going on across a wide range of waste. what we need to create is the circular economy, value for that. we did this in mexico, for example. it was less than 10% of the plastic was recycled 10 years ago. now it is 60%. how? the informal economy was collecting the waist, but there was no market for it. we invested in factories to recycle that come and we used that in our bottles. i think there is a model there for china and other parts of the world on how to create value. david: you put out a bold strategic vision called total beverage company that includes things beyond coca-cola and diet coke. these five categories, what is driving that? is that to get away from sugar drinks? james: we are following the

consumer. when you look at what is happening around the world, as the world is urbanizing and people have more disposable income, they are spending more money on a range of things, including beverages. so what is important is they want more choice. different people want different things, so if we want to be able to serve the consumer, we have to follow them. coke is likely to remain the heart and soul of the company, the world's biggest fast-moving consumer good brand, but we need more. we need to offer consumers choice. that is what will drive us forward. in a way it goes back to where we started. we pay a lot of attention to what the consumer wants, they will take us to where the business needs to grow, and it is ultimate growth to the business. david: on average around the world, people consume about eight ounces a day, and coca-cola is half an ounce.

what is your goal, total market share of beverage can you take globally? james: i don't think there is an end of history moment when we reach nirvana. what we are looking to do is gain share every year. we have a lot of well-funded competitors doing a lot of exciting things. we are focused on can serve the consumers and get a little share each year and generate a growing business system, then that value is great for everybody who touches it, whether the economics and people in the value chain, or society with initiatives like the packaging one, which builds on our heritage of creating shared value in the world. 10 years ago, we set ourselves the objective of being water neutral by 2020. we return all the water to the environment.

we get business growth and do it in the right way for society. david: ok, thank you so much. terrific. james: thank you. ♪

i'm scarlet fu. this is bloomberg's"bloomberg etf iq." rewards on the risk and of exchange-traded funds. ♪ we have more than $1 dollars flowing into and we getex funds, a nation of why something these funds are freeloaders. vixstors short the