How Coca-Cola's Black Book algorithm ensures consistently fresh orange juice

Coca-Cola: The World's Largest Non-Alcoholic Beverage Company

Case Application 1 Tasting Success
The Coca-Cola Company (Coke) is in a league by itself.56 As the world’s largest and number one nonalcoholic beverage company, Coke makes or licenses more than 3500 drinks in more than 200 countries. Coke has built $15-billion brands and also claims four of the top five soft-drink brands (Coke, Diet Coke, Fanta, and Sprite). Although it fell to the number-three spot in 2013, each year since 2001, global brand consulting firm Interbrand, in conjunction with Bloomberg BusinessWeek, identified Coke as the number-one best global brand. Coke’s executives and managers are focusing on ambitious, long-term growth for the company—doubling Coke’s business by 2020. A big part of achieving this goal is building up its Simply Orange juice business into a powerful global juice brand. Decision making is playing a crucial role as managers try to beat rival PepsiCo, which has a 40 percent market share in the not-from-concentrate juice category compared to Coke’s 28 percent share. And those managers aren’t leaving anything to chance in this hot—umm, cold—pursuit!
You’d think that making orange juice (OJ) would be relatively simple—pick, squeeze, pour. While that would probably be the case in your own kitchen, in Coke’s case, that glass of 100 percent OJ is possible only through “satellite imagery, complicated data algorithms, and even a juice pipeline.” The purchasing director for Coke’s massive Florida juice packaging facility says, “Mother Nature doesn’t like to be standardized.” Yet, standardization is what it takes for Coke to make this work profitably. And producing a juice beverage is far more complicated than bottling soda.
Using what it calls its “Black Book model,” Coke wants to ensure that customers have consistently fresh, tasty OJ 12 months a year despite a peak growing season that’s only three months long. To help in this, Coke is relying on a “revenue analytic consultant.” He says, “Orange juice is definitely one of the most complex applications of business analytics.” To consistently deliver an optimal blend given the challenges of nature requires some 1 quintillion (that’s 1 followed by 18 zeroes) decisions.
There’s no secret formula to Black Book; it’s simply an algorithm. It includes detailed data about the more than 600 different flavours that make up an orange and about customer preferences. This data is correlated to a profile of each batch of raw juice. The algorithm then determines how to blend batches to match a certain taste and consistency. At the juice bottling plant, “blend technicians carry out Black Book instructions prior to bottling.” The weekly OJ recipe they use is “tweaked” constantly. Black Book also includes data on external factors such as weather patterns, crop yields, and other cost pressures. This is useful for Coke’s decision makers as they ensure they’ll have enough supplies for at least 15 months. One Coke executive says, “If we have a hurricane or freeze, we can quickly replan the business in 5 or 10 minutes just because we’ve mathematically modeled it.


Discussion Questions
1.Which decisions in this story could be considered unstructured problems? Structured problems?
2.How does the Black Book help Coke’s managers and other employees in decision making?
3.What does Coke’s big data have to do with its goals?