Plans to use innovation to transform every aspect of cocacola, change its culture while managing a global checkerboard of regulations and tax regimes. Cocacola operates in a lot of Different Countries which means there are a lot of different regulatory schemes that you have to adapt to those. First, in the United States. The tax cuts, how does it affect cocacola . James we are still working through the numbers. Our tax rate last year was 24 . It is not the biggest change to us. Because we are an International Company the absolute rate has not affected us as perhaps more domesticallyfocused enterprises. But we are positive on moving the territorial system. We think that the indication is positive in the long run. To the extent it helps create more demand, that will be good news. We are still working through the numbers we will lay out on our earnings call. Of course we are part of having some of the money overseas, but in the end, if we generate more economic growth, that will lift all boats. David does the expensing of Capital Investment help you at all . James we will lay that out, but that is not the biggest moving piece for us. David have you decided the cash goes into Capital Investment, buybacks of shares . Does it go into 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 in the marketplace. We are still working how the puts and takes work. You have to pay tax on the cash first in addition. But we heard looking at how we use all that and make the right capital allocations. David one of the big issues for the United States are the socalled dreamers, the young people brought here as children. The question is do they get to stay as adults, essentially . Do you have people at cocacola who are uncertain they will stay or not . There are about 700,000 nationwide. James we have some people in our company and in our bottling 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 so that it 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 cocacola. You have seen this on both sides , at least our southern border. Do you see a constructive path forward on immigration . James i think there is a path forward, but it is also connected and cannot be disassociated when you talk about longterm 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. I think leadership in the United States to drive growth will help solve some of these other issues too. David you have seen nafta from both sides of the border. It is another hot issue in the United States. Has nafta overall 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. Very few free trade deals are perfect. Can it be made better . Yes, i hope they can make it better, but i dont think we should start deconstructing global trade. I think it has been a powerful engine for lifting all boats. It does not mean it has solved all problems. There are questions of income inequality. There are questions where not all the rules are perfect and need to be improved. But lets go forward, not backwards. David when President Trump came in, he was closely aligned with people in business. He consulted and he had panels that he would talk to. Do you get to talk to President Trump or the administration about things like nafta . Do they consult you . Or do you make your views known to them . James when we have a view or it affects our business, we make our views known, either directly to the administration or many of the business forums, like the business roundtable. There are enough points of intersection collectively and individually within the administration that they know what we think. David so from that do you have any sense 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 say we will not withdraw. Do you have any sense from your point of view of where we are headed . James my view on negotiations is you have to let the negotiators negotiate. If you are not in the room, you dont know the answer until it comes out. The important thing for those who are not in the room is to continue to say what they believe to be true, the areas where things can be made better, and the negotiators have to get in the room and thrash it out. Trying to work out what color the smoke is coming from the room doesnt 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 wont ask you what you think about that, about how but tell us how bad is 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 the economics is a softer rather than a harder brexit. I think in the end, whilst it wont 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 a lot of different 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 around the version of the exit, which is where we are trapped at the moment. And of course there are a lot of negotiations going on. It is very important to get it right for the u. K. , and to some extent for europe as well. Orid whether it is brexit whether it is nafta, how do these trade issues affect cocacolas business . James i think one of the great benefits of the cocacola system is that we are global, but extremely local. We manufacture in every country virtually we sell in. Virtually everything that is sold in the u. S. Is made in the u. S. , everything sold in the mexico is made in mexico, everything sold in the u. K. Or france is in that individual country. So global trade restrictions dont tend to affect us heavily in the moment. To the extent that they reduce or increase total economic growth, that is what matters to us. And so i think philosophically we are proglobal free trade because it drives economic growth, therefore lets focus on making those deals better because it will provide the wealth to then solve a lot of societys problems. David you came in and took over cocacola and really trumpeted innovation as critical to your future. I believe you have a chief innovation officer, but maybe you are the chief innovation officer in some sense. How do you innovate in a 130 your company that is so well known around the world 130yearold company with such an entrenched perception of peoples 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 im not the chief innovator, i am certainly the chief agitator for innovation. And what that means is driving the culture to try and do a few things, on top of Everything Else we do. Stay curious. If you are not curious about the outside world, about the consumer, what is changing, how will we innovate . But curiosity just leads you to an insight. It is very passive. You need to drive empowerment of so people feel like they can do something, that they can get up in the morning and go do something. I think the next thing is you have to be inclusive, connect the pieces. We have tremendous Global Knowledge and a tremendous global system. Sometimes your idea has been already been tried somewhere else, so connect to the other parts of the system. And lastly, we probably fell in the trap of trying to make things perfect before we did anything in the past. No, we need to learn from software companies. Have version 1. 0, 2. 0, 3. 0. That gets us both innovation and speed. And if we keep pushing those four things, we will make progress. David how do you know, how does James Quincey know whether youre getting the innovation job done . You are sitting on top of a very large organization, a lot of people spread around the world. How do you judge whether the words get down and if people are changing their behavior . James it is hard to know. The only way forward is to look for multiple signals. There is no one number or one metric that will give you the answer. We have employees surveys where we ask people. We can look at the sales number and measure the success rate for or 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 really getting new cousins . Are we making progress . I think has to have a dashboard one to look across and say, is there progress . David how is Technology Changing the way you do business, and for that matter, your workforce . David technology, it is disrupting just about every company we know of today. Talk about how is it affecting cocacola and first talk about how it is affecting your relationship with your consumer . How you deliver to your consumer, ecommerce, how you market to your consumer . James we kind of look at it in three buckets. How we engage with consumers, there used to be tv advertising, now there is social media. The ways of engaging with the consumer are changing rapidly. Who the customer is and how the shopping happens is changing rapidly. And of course in turn of the if is changing rapidly. With the consumer, around the world, tv is still the biggest vehicle, maybe less so in the developed economies. But around the world, it is still the biggest vehicle. A lot is going to social media. We work closely with a lot of the new Tech Companies in 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. So i think there is a lot of change going on. We are adapting. I think we feel we are kind of towards the front end, but it will be different in five years , and it will be very different in 10 years, and we will have to keep investing in innovation and evolving to stay close to consumers. David as you look around the world, which markets do you see the fastest innovation when it comes to ecommerce, when you and orderr app something and it gets delivered, for example . Is it china, the u. S. , europe . James i think 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 ecommerce, but i can tell you it is very advanced in places like shanghai and western europe as well, and the penetration of ecommerce in aggregate is higher in some of those places than the u. S. When you want to learn what is going on, i would be just as tempted to tell you to go to shanghai as stay in new york. David how do you market in that circumstance . We are used to going in a fast food restaurant, and cocacola is there. It is on the menu. You dont have that when you are on your app. James no, but you have to get it. If you went back even two or three years in china when a lot of the apps and the mobile Payment Systems came in, we were not on the menu. Actually even worse, we were probably trying to sell a returnable glass bottle to the restaurant, which had no way of being in the Delivery System. We had to reengineer our Business System very quickly to be present on the apps. What is the virtual representation of what you would normally see in the store, and how do we change the packaging portfolio so we can be part of the Delivery System . And you have a lot of places in shanghai where food orders on apps delivered are 30 of , 50 of restaurant sales. David that is the relationship with the consumer. Talk about cocacola as cocacola. How is Technology Changing your the way you do business, and for that matter 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. , our own programs, our own server farm. Today, that is no longer the model. We had to move to the cloud. We had to move to standard programs that the whole industry is using, and mobile. The one thing i always said to the i. T. Department is just put it on the phone. Everything can be done on the phone. Lets just move everything to mobile on the phone. In the old days, 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 of digitizing the company. David does that translate into fewer employees as practical matter because of the efficiencies from digital . James it changes into a different profile. People are having to adapt to do doing 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 certainly changing the nature of employment and the sorts of profiles you want. Whether we buy the services ourselves or do it ourselves, it makes a difference as to where the employees are, but netnet, more employment is being generated in the economies. David can cocacola compete with Silicon Valley and the Digital Startups when you are trying to recruit the young computer scientists . James atlanta is a fastgrowing economy. The state of georgia has been placestop one or two 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 there 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. And it has been very successful. David as you look towards really substantial new growth in these beverage categories, are you looking at acquisitions, argue looking at organic growth . You have been inclined, i believe, to look for smaller startup brands and bringing them along. Is that the path for cocacola . James i think it will be both. I mean we have grown organically, but we have made bolton acquisitions, the small brands. Where we see something is a good idea, we invest with them, sometimes we buy them, but we also just invest with them. There is a quid pro quo. They get the capital we inject , yet we get to introduce them to the world, not just the country, and that helped us double the number of billiondollar brands we sell around the world. I think it will be an and strategy, rather than one or the other. David it is a Beverage Company, not a food company. There are competitors who said lets become a food company, at least in part. Why did you make that decision, and does it make you anymore vulnerable, forgive me for saying, even for acquisition . A, what, 200 billion market cap . 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 greatest application of knowhow and our fabulous global bottling Distribution System is. It is the thing that is most synergistic with what we have already got. Beverage is one of the best growing markets in the whole of the supermarket, or in the other stores. 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 because people say you havent ruled anything out. It is a question of what is most logical. Beverages are the most logical thing for us to do first. In terms of how we think about consolidation, i am convinced that investors, gold stars go to those that grow with expanding margins. Growth is the name of the game. If the category has got no growth, then optimize margins. Ok, but that is still silver price largely over the long term. I am pretty clear, if we focus on driving topline growth, which we believe we can with our strategy of beverages, we will attract an Investor Base that will be very happy with us over the long run. David by 2030, you want to get a bottle back for every one that you put out there. That is a lot of bottles for cocacola. How are you going to track all that plastic . David World Without waste, great goal. You have a big new packaging announcement. Why is it important to cocacola not just as a Corporate Citizen but as a business . James it is important to us for a very core part of our values. We have always believed that to have a healthy business, you need to be operating in a healthy community, and one of todays biggest problems is packaging waste. We have done a lot on making things recyclable. We have actually invested a lot of r d on making it reusable, but we need to collect it. This announcement is about the big missing piece in generating a World Without waste, which is collecting back the plastic and creating a market economy for that collected plastic. I think that will do great things to help us grow into the future without creating waste. Which is good for us, and it is great for communities. David how will you track all that plastic . By 2030, you want to get a bottle back for every bottle you put out there. That is a lot of bottles for cocacola. How are you going to track that plastic . James to give you an idea of the dimension, every person in the world, if they bring back to bottles a month, we collect every bottle we put out. How are we going to do it . Well, there will be different systems in Different Countries. Every country needs a solution. But it wont be the same everywhere. There are places where it is reasonably advanced in europe to more informal economies where the collection happens. So will be Different Solutions everywhere. We have to work with ngos, other Industrial Companies and governments to put in place the solutions. It is absolutely doable. I think that is what is exciting about setting the objective. David what about other places, like china, for example . James look, i think the emerging and developed countries are where there is more of a problem as opposed to the u. S. Or europe. We need to do more there, but recognize that in a lot of these countries there is some informal Collection System going on across a wide range of waste. What we need to create is the circular economy. We need to create value for that. We did this in mexico, for example. You go back a little more than 10 years, it was less than 10 of the plastic was recycled. Now it is 60 . How . The informal economy was collecting the waste, but there was no market for it. No one wanted to buy it. So we went into the marketplace and bought the plastic, invested in factories to recycle, and we reuse that in our bottles. I think there is a model there for china and other parts of the world on how to create value out of plastic. David you put out a bold Strategic Vision called total Beverage Company that includes things beyond cocacola and diet coke. To theseeyond that five categories, what is driving that . Is that basically to get away a bit from sugar drinks . James actually, we are following the consumer. When you look at what is happening around the world, as the world is urbanizing and , as people have got more disposable income, they are spending more money on a range of things, including beverages. So what is important within that growing market of beverages is they want more choice. Different people want different things. So if we really want to be able to serve the consumer, we have customer, 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 worlds biggest fastmoving consumer good brand, but we need more. We need to offer consumers what they want all day long. We have to offer choice. And i think that is what will drive us forward. And 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 then it ultimately ends up in growth for the business. David i understand that on average around the world, people consume about eight ounces of a beverage per day, and cocacola is half an ounce. What is your goal . How much of the market share of total beverage can you take globally . James i dont think there is an end of history moment when we reach nirvana. I think what we are looking to do is gain share every year. It is a competitive marketplace. We have a lot of wellfunded competitors doing a lot of exciting things. But what we are focused on is can we 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 it be the economics of the people who are in the value chain, or society with initiatives like the packaging one. Which i think builds on our heritage of creating shared value in the world. 10 years or so ago, we set ourselves the objective of being water neutral by 2020. And we achieved it a few years early. We return to the environment all of the water that we use. It is one of the things that gives us confidence that we get Business Growth and do it in the right way for society. David ok, thank you so much. This is terrific. That was really fun. James thank you. Coming up on bloomberg best, the stories that shaped the week in business around the world. Volatility returns with a vengeance. Markets little bit disorderly. It is a global contagion. The first product is blowing up. Does the weeks wild ride to signal danger ahead . Leaders of finance and Monetary Policy offer insight. The correction was waiting to happen. There were people looking for buying opportunities. So far, this is small potatoes