Coca-Cola is using AI to read the facial expressions of product testers – then using computer responses to things like a customer spitting a mouthful of Cherry Vanilla out in disgust, into its product development.
“AI is being used in the research and development process to enhance product innovation success rates and speed to launch by more accurately gauging consumer reactions through multi-sensorial facial coding during product testing” as Coca-Cola put it in a third-quarter earnings release.
The approach is being used to add “unique flavors and aromas into new product developments, including the successful reformulations of Sprite and Fanta” said the company. It was not immediately clear if it had used AI to test reactions to its “Coca-Cola Spiced”, a “permanent” new product release that was discontinued after just six months after presumably woeful sales. (The company does not break out individual product sales.)
Coca-Cola AI use: "A huge opportunity"
The Coca-Cola AI use was revealed this week as the company reported a slump in operating income, operating margin, and earnings per share on currency headwinds and falling sales in most categories globally.
Consumers are reducing their consumption of sugary sodas and towards “hydration” drinks experts say. Coca-Cola, having embarked on a broader cull of over 200 drinks that started four years ago, is looking to sell more fancy bottled water and also alcohol in response to the consumer shift.
The earnings report revealed that Coca‑Cola Zero Sugar sales grew 11% during Q3. Juice, value-added dairy and plant-based beverage sales fell 3%, as did sports drinks. Water, sports, coffee and tea sales declined 4%.
Coca Cola’s CEO James Quincey said on a Q3 earnings call: “Leveraging data and digitally enabled solutions, including AI, is a huge opportunity.”
Recommendation engines...
Electronic ordering systems for retailers will increasingly be augmented with AI recommendation engines, right down to the “mom-and-pop traditional trade or independent trade” marketplace he suggested.
One example is Coca-Cola’s ability to “provide a platform which allows the retailer to engage with the ordering system 24/7… as we start to get into AI, the system can also start interacting with the retailers… suggesting orders because of whatever is happening; there might be some events coming up, [or] people like you buy these sorts of things you should add.”
Quincey emphasised: “A topic across many companies going into 2025, is that you can never take your foot off the productivity accelerator…”
Coca-Cola CIO on AI use
Coca-Cola CIO Neeraj Tolmare earlier said that the company was experimenting widely with generative AI and had been since 2022.
“We’re beginning to scale key pilots globally. From using generative AI to predict which products consumers will want and when, to enabling personalized recommendations for customers” he wrote on LinkedIn.
The Coca-Cola CIO added that the company had partnered early with OpenAI in 2022, teaming up to release a “Coca-Cola GPT inside our protected environment… So our approach to AI has been learn by doing.”
Speaking during a Bloomberg event he added: “A lot of this technology is evolving almost on a daily basis, and the only way to learn about it is by doing things… we see tremendous value” said Tolmare.
“We have roughly 200+ truly global brands and an ability to create a hyper local message in [different] languages and diverse cultural ethnicities around the world is quite complex… There is no technology out there that will allow that other than AI…” Coca-Cola’s CIO said at the event.
He added that the company had made “significant progress on our multi-year digital transformation journey by… consolidating to fewer, high-quality platforms, and investing in talent and partnerships. These investments have positioned us well to be a pioneer in the generative AI space…”
(In April the company announced a $1.1 billion partnership with Microsoft and said that “Coca‑Cola has migrated all its applications to Microsoft Azure, with most major independent bottling partners following suit.”)
The CIO said: “We have launched a platform called Shop X, where we have an ability to create… various hyper local messages across the various outlets. We did a pilot where we created 20 assets and deployed 10,000 variations of those at 3X the speed of which we were able to do in the old world.”
“To elevate the company's revenue growth management capabilities, the company is piloting an AI-based price-pack-channel optimization tool to drive increased volume and retail sales” Coca-Cola added in a Q3 release.
$16 billion IRS row continues
Coca-Cola also faces a huge tax bill after a US judge in August ruled against it in a transfer pricing case, Coca-Cola paid $6 billion in taxes and accrued interest during the past quarter whilst appealing the decision.
In a 10-Q quarterly report filed with the Securities & Exchange Commission on July 31, 2024, the firm warned that if the IRS applies the same argument to other tax years and wins it would owe some $16 billion in back taxes. It will “vigorously defend” its position executives said.
