CCA boss speaks out about carbon tax and R&D grants [Q&A]

Terry Davis, Coca-Cola Amatil group managing director, talks to Manufacturers’ Monthly about the carbon tax, the difficulties obtaining government assistance, the company’s new preform bottling line, and how he always takes the drinks to his mates’ BBQs.

1. What’s the best thing about being group MD of CCA? 

The ability to encourage and motivate people to be the best they can be at work. We have more than 15000 staff across the Group (Australia, New Zealand, Indonesia, Papua New Guinea and Fiji) and we have tried hard to create an environment where staff come to work motivated and enthused about delivering the best possible service to our customers as possible. And if it’s not good enough, being honest about it and then thinking of innovative ways to improve how we service them.  

2. How much time do you spend at CCA production facilities, and which is the most fun? 

I spend as much time outside the office as I can visiting our facilities across the Group – we have 15 in Australia, 8 in Indonesia, five in New Zealand and one each in Papua New Guinea and in Fiji, as well as hundreds of distribution centres. We are currently undertaking the biggest and most comprehensive capital infrastructure and equipment investment program across the Group in the past 10 years, so reviewing the progress at any of our facilities which are installing our high-tech “blow fill” bottle self-manufacturing technology onto the production lines has been very important.

I have always enjoyed being reminded of the popularity of our iconic brands when I see our high speed production lines producing cans of Coke at the rate of 2000 per minute, 24/7.   It was also an important landmark to turn the first sod on our new $120 million Bluetongue Brewery – we opened it in July 2010 – and also more recently, on the Eastern Creek site of our new $57 million facility which will produce the closures and pre-forms we use in the self-manufacture of our PET resin bottles –  just one more important step in the vertical integration of our supply chain.  

3. What’s the one piece of technology/equipment that CCA production facilities couldn’t live without? 

The self-bottle manufacturing, or “blow fill” technology, which has revolutionised our bottle manufacturing processes in that we are no longer fully dependent on suppliers of PET beverage containers. “Blow-fill” enables us to design our PET bottles to our own unique designs, using less PET resin, and reducing the requirement to transport pallets of empty bottles from the supplier to our production facilities. The technology has delivered a 20% reduction of the carbon footprint of each individual bottle, a significant reduction in energy and carbon for our business.          

4. How much is the new preform and closure manufacturing facility likely to save CCA annually on materials and freight costs? Can we expect to see some funky new bottle designs? 

The preform facility, along with the bottle self-manufacture project, will deliver greater efficiencies in production, input costs and customer service, resulting in an estimated $90 million annualised total savings when the rollout is completed in 2015.

The new technology allows us to invest in some great new designs in the future – although one thing will never change – the distinctive contour shape of the Coca-Cola bottle has stayed the same for 125 years and I expect will stay the same for the next 100 years.   

5. When CCA bought SPC Ardmona in 2005, was streamlining production part of the plan?

 Yes, we have invested significantly in new plant and equipment to modernise production and processing, and we also invested in new, larger distribution centres which replaced multiple warehouses.

6. CCA didn’t receive R&D funding for the new preform and closure factory. Is the government doing enough to support manufacturing R&D? 

For the preform and closure facility, we received only the standard customs duty concession for imported capital equipment for a new facility. 

The Federal Government has recently changed the rules for R&D, which we expect will limit the ability of our company to access tax relief for activities and projects that used to qualify for the R&D concession. 

It’s my view that the Government should consider reinstating reasonable R&D for the Australian food and beverage manufacturing industry. One of the biggest manufacturing sectors in the country, it is under sustained competitive market pressure from the strong Australian dollar and the influx of cheap, imported low quality produce.

7. What’s your view on the carbon tax a) as a businessman b) as a citizen? 

My personal belief is the same as the one I hold for CCA – I believe strongly that all of us, individuals and large companies, must do all we can to decrease our carbon footprint and energy use. We all have a role to play in working to use the best possible mix of energy sources.

At the same time we need to improve the energy efficiency of our manufacturing and distribution processes – which we are doing successfully at CCA, particularly with bottle self-manufacture; improving fuel use in our vehicles, installing a solar energy system in our Eastern Creek Distribution Centre, and supplying our customers with some of the most energy-efficient coolers in the world. 

However I remain concerned that a carbon tax will be discriminatory – it will impact negatively on input costs for Australian food and beverage manufacturers, which in turn will affect those who can afford it least, the farmers and growers.

The cumulative effect of driving up manufacturing costs in Australia means that we become less competitive against imported goods and more reliant on importing food and beverages. 

In the event we get a carbon tax the Government should provide offsets, such as eliminating payroll tax for Australian manufacturers. This would send a clear message that this government is serious about having a strong manufacturing sector, because we will certainly need one after the mining boom – remember – mining contributes only 8.5% of Australia’s GDP, and Australian manufacturing contributes substantially more.

8. Which Australian manufacturers do you admire, and why (people or companies — or both)?

 We have many very loyal and innovative suppliers, notably Visy and Skope Industries, who won our Overall Supplier of the Year Award in 2010 and 2011 respectively, and Amcor, which won Supplier of the Year in 2011 for the Packaging and Ingredients category. These are companies with a strong focus on innovation and customer service.

But many of our customers, large, medium and small, are great innovators. I am loath to single out individuals, but Hungry Jacks and Dominos, Oportos and Subway stand out for loyalty and an outstanding ability to grow both our businesses. 

We’re also pleased that many of our key suppliers, like Telstra and Westpac, are also our customers, as they’re installing our high-tech vending machines in their workplaces.        

9. What soft-drink and beer do you drink when you’re not at the office? 

It depends on the occasion, but I enjoy Coke Zero, Powerade Isotonic when I’m in training for Masters’ rowing events and Peroni is a great beer for enjoying at the end of the day. 

10. Do you always bring the drinks when you’re invited to a BBQ? 

Of course – my mates hit me up for the drinks – and these days it’s alcoholic as well as non-alcoholic. We have a great range to choose from, more than 80 different beverages, so it depends on the occasion. I can bring everything from Jim Beam and Cola, Peroni or Bluetongue, through to Coke and Mother, and even Goulburn Valley juices and Mount Franklin for the non-drinkers.