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Published 19 March 2013 11:53, Updated 06 May 2013 12:05
Terry Davis has given unusually long notice that he will step down as managing director of Coca-Cola Amatil in 17 months. Photo: Louise Kennerley
The announcement that the long-time group managing director of Coca-Cola Amatil, Terry Davis, will step down on August 31, 2014, is partly sound succession management. It was also necessary to bring to an end almost two years of speculation about Davis’s future.
Davis has been at the helm of CCA since November 2001. By the time he departs he will have been in the position for almost 13 years. But until then there will be many challenges to occupy him before he hands over to his successor, as CCA chairman David Gonski notes.
“The next 18 months will be crucial for CCA in the further development of its alcoholic beverage strategy and the accelerated plans for growth of the Indonesian business,” Gonski says. “The board felt it was prudent to provide the market with certainty as to Terry’s tenure.”
Davis will shepherd CCA back into the Australian beer market, having vacated that space in December 2011 when it sold its 50 per cent interest in Pacific Beverages to its joint-venture partner SABMiller for $305 million. Under the terms of the transaction, CCA was restrained from selling, distributing or manufacturing beer or alcoholic cider in Australia until December 16, 2013.
Davis has already paved the way to re-enter the beer business at the premium end of the market. In August 2012 he struck a deal with NSW family-owned winery Casella Wines – best known for its Yellowtail label – to form a 50-50 joint venture, Australian Beer Company. From 2014 CCA will have access to Casella’s state-of-the-art brewery in Yenda, near Griffith, and a chance to capture 15 per cent of the premium beer market. (Casella brews the Arvo range of premium beers.)
The Australian Beer Company, as well as being a brewer in its own right, will pursue contract manufacturing and licensing rights from overseas beer and alcoholic beverage companies wanting to enter the Australian market.
The agreement will make CCA a major Australian player in the domestic beer market which is dominated by foreign brewers: Lion, owned by Kirin of Japan, and Foster’s, owned by London-based SABMiller, control 90 per cent of Australia’s beer market. The Australian Beer Company will join Adelaide-based Coopers Brewery as the biggest Australian-owned brewers.
Davis has also created a strategic stake for CCA in the alcoholic beverages market, with a long-term exclusive agreement to distribute Sweden’s Rekorderlig alcoholic cider in Australia from January 1, 2014. Alcoholic cider is the fastest-growing alcoholic beverage category in Australia, generating sales of $550 million and increasing by 20 per cent annually.
Another critical challenge for Davis before he passes on the mantle is to cement CCA’s position in the lucrative and fast-growing Indonesian market for non-alcoholic beverages, fuelled by that nation’s rapidly growing middle class.
Gonski says a board sub-committee will be formed “over the coming months” to search for Davis’s replacement, a search that will include internal and external candidates. Internally, the favourites are CCA’s managing director for Australia, Warwick White, a 28-year Coca-Cola veteran, and the managing director of CCA’s Australian beverages division, John Murphy, who is a former managing director of Foster’s in Australia.
An overseas choice is not out of the question – especially as The Coca-Cola Company of the US holds 30 per cent of CCA, which is listed on the Australian Securities Exchange. Davis is one of Australia’s highest-paid chief executives, last year earning a total package worth $7.8 million.
Terry Davis has ensured, through the plans for CCA’s future growth, that whoever takes over in 2014 will be in charge of a very different operation.