♪ 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 beverage behemoth now has a new ceo. james quincey spent the last two decades rising through the ranks at coca-cola. now, as head of the company, 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 global checkerboard of regulations and tax regimes. coca-cola operates in a lot of different countries which means there are a lot of different regulatory schemes that 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 has not affected us as perhaps more domestically-focused enterprises. territorialg the system. we think that the indication is positive in the long run. to the extent it creates more demand, that will be good news. we are still working through 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? we will lay that out, but 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 been 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? there are about 700,000 nationwide. 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 our southern 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. in the end, 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. it is another hot issue in the united states. has it been overall 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. very few free trade deals are 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 -- solves all problems. there are questions of income inequality, that all the rules are not perfect and need to be improved. but let's go forward, not

backwards. david: when president trump came in, he was closely aligned with people in business. he had panels that he would talk to. 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, like the business roundtable. there are enough points of intersection within the administration that they know what we think. where we are headed with nafta? there are conflicting reports. the canadians seem to be preparing for u.s. withdraw. a lot of people in washington said we will not withdraw. do you have any sense from your point of view of 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 until 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. trying to work out what color the smoke is coming from the room doesn't leave you anywhere until they come out and tell you what the answer is. 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? how do we get to it? 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. if it is a softer brexit, 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. there are a lot of negotiations going on. it is important to get it right for the u.k., and to some extent europe as well. david: how do these trade issues affect coca-cola's business? james: one of the great benefits of the coca-cola system is that we are global, but extremely local. we manufacture in virtually every country we sell in. virtually everything that is sold in the u.s. is made in the u.s., everything sold in the u.k. or france is in that individual country. 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.

philosophically, we are pro-global free trade because it drives economic growth, so let's focus on making those deals better because it will provide the wealth to then solve a lot of society's 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. with that means is 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. it is a very 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 to the other parts of the system. 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. have a version 1.0, 2.0, 3.0. 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? if you are sitting on top of a very large organization, a lot of people spread around the

world. people arejudge if already changing their behavior? james: it is hard to know. the only way ford is to look for multiple signals. there is no one number or one metric. we have employees surveys where we ask people. we can look at the sales number and 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 pipeline is generating. are we getting new patents, are we making progress? one has to have a dashboard to look across. 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 relationship with 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 advertising, now there is social media. the ways of engagement are changing rapidly. who the customer is and how the shopping happens is changing rapidly.

and internally is changing rapidly. with the consumer, tv is still the biggest vehicle, maybe less so in the developed economies. around the world, it is still the biggest. 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. in the end, someone has to pay for the content to be developed, whether that is through 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 -- it will be different in five years and 10 years. 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 , but i can tell you that it is very 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. it is on the menu. you don't have that when you are on your app. james: no, but you have to get it. two or three years ago in china when they a lot of 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 that had no way of being in the delivery system. 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 food orders delivered are 30% of restaurant sales. that is the relationship with the consumer. talk about coca-cola 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. everything can be done on the phone. let's move everything to mobile on the phone. in the old day, i.t. had training budgets. why? everyone knows how to use the apps on the phone. it is profoundly changing the way that we work, and i think it will continue to flow through the organization. we have a big program in digitizing the company. 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

digital startups trying to recruit the young computer scientists? 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 local political system has done a great job, so has the city. it is a very competitive economy and we do very well in it. we are happy to see atlanta and georgia growing, and they have done a lot to invest in tech startups and the media industry in and near atlanta. it has been very successful. david: as you look towards new growth in these beverage categories, are you looking at acquisitions, 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

on acquisitions, the small brands. where we see something is a good with them,est sometimes we buy them, but we 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 the number of billion-dollar brands we sell. i think it will be in and "and"think it will be an 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, forgive me for saying, even for acquisition? there are some big consolidations in the food industry out there. james: firstly, 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 got.

beverage 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. it is a question of choices. 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. west, in terms of how 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. i am pretty clear, if 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

-- for everyone that 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. this announcement is about the big missing piece in generating a world without waste, 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. idea ofo give you an 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. there are places where it is reasonably advanced in europe to more informal economies where the collection happens. there will be different solutions everywhere. we have to work with ngos, companies andal governments. it is absolutely doable. that is what is exciting about setting the objective. david: what about other places china, for example?

countries -- and the emerging countries is where there is more of a problem 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. a little more than 10 years, it was less than 10% of the plastic that was recycled. now it is 60%. how? informal economy was collecting the waste, but there was no market for it. we invested in factories to 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 basically to get away a bit 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. what is important within that growing market of beverages is that they want more choice. different people want different things. if we want to be able to serve the consumer, we have to follow them. we have to get into more categories. 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 what they want. we have to offer choice. that is what will drive us forward. in a way, it goes back to where we started. if 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? how much of the total market share of total 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. it is a competitive marketplace. 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? our objective is to create value for everyone who touches that business system, whether the economics and people in the value chain, or society with initiatives like the packaging one. it 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 achieved it a few years early.

we returned to the environment all of the water that we use. we get business growth and do it in the right way for society. david: ok, thank you so much. terrific. james: thank you. ♪ ♪

yousef: welcome to "best of bloomberg markets: middle east." i am yousef gamal el-din. here are the major stories this week. keep the cuts, opec and russia and says no early end to output curbs and signal readiness to extend the deal into 2019. we speak to the world's two most powerful energy ministers. the saudi aramco ipo is still likely. keep calm and carry on.