Coca-Cola eyes quality not quantity from media to make revenues fizz
Coca-Cola is getting closer to the quality its marketing lacked last year though feels it could do more to extract quality not quantity from media in its revamped global versus local model.
Coke blamed poor quality marketing for a sales slump in 2014 but believes it has turned a corner going into what it predicts will be a “transition year”. It is a confidence born from the green shoots of recovery in its key US market, powered by a double-digit increase in media investment worldwide.
The company’s North America revenue climbed 2 per cent year-on-year to $5.37bn in the three months to December, the biggest quarterly sales increase in two years. It is a region in rude health when compared to global revenue, which slipped 2 per cent to $10.87bn in the period.
Sales in the US had been slipping due to consumers’ harsher view of fizzy drinks. Through a tighter mix of targeted media spend and increased pricing the business was able to cut through to shoppers in a rebounding economy, while also establishing a template to take to other markets.
For the approach to work globally, the business has had to assign each market a specific role in a revamp of its global versus local marketing model. Some markets focus on price, while others prioritise volume or balance the two so that the business can more easily plan and scale its media investments. Part of the incremental media spend is being pumped from promotional activity over the next three years.
Coca-Cola chief executive Muhtar Kent told analysts on a conference call yesterday evening (10 February) that the actions it was taking were in pursuit of better quality media. In an industry where personalisation at scale is fast becoming a possibility, media is a more potent tool in the marketers’ warchest.
“We are able to target our investments in media and the way we're doing it is by segmenting them by the different countries and the different regions of the world,” said Kent. [“We’re] improving not just the quantity but also the quality of the media. That’s one of the main factors that we see driving a better revenue number -- a better price mix number. So the two are really connected and that’s what I really want to do.”
The challenge of balancing both efficiencies and effectiveness from its media outlay falls to Coke’s new chief marketing officer Marcos de Quinto. Like rival FMCG players Diageo and Mondelez, Coke is trying to pack distribution and marketing closer together and it is de Quinto’s operational expertise it hopes can close the gap.
Changes are already underway to bolster Coke’s branding in line with the five-point marketing plan it introduced last year. The business hired its first vice president of content at the end of last year, a signal of the company’s strategic priorities moving forward.
Marketing spend in the quarter rose by high singled digits. Investment is likely to continue in 2015 albeit in a more structured way as result of Coke’s senior marketers having to utilise a more sustainable approach to cost planning through zero-based-budgeting.
Kent said that would take time for the company to see the full benefits of its marketing shakeup given that it is happening amid wider costs cuts and tough economic conditions. Coke hopes to make an extra $3bn in productivity savings by 2019, a significant portion of which it will reinvest back into marketing.
While Coke spent generously on marketing in 2014 to drive sales, it failed on more than one occasion to generate sufficient demand from its products. To prevent a repeat of this happening, the business said it would push into a “new range of consumption occasions” through the launch of Minute Maid Fairlife milk alongside its tie-ups with Monster energy drinks and Keirig Green Mountain brands it plans to invest in over the next 12 months.