Coca-Cola is realigning its marketing around customer clusters and hailed its early impact on its first quarterly sales gains in two years.
The drinks maker’s chief executive Muhtar Kent let slip the strategic shift today (22 April) when he told analysts on a conference call that its focus on “customer clusters” had helped put sales on the road to recovery. Sales jumped 1.3 per cent to $10.7bn in the three months to March, propelled by a 6 per cent boost in North America, its biggest market.
While Kent urged caution despite the uplift, he said the signs its marketing were improving were there. Coke’s marketing has taken the brunt of the blame for sluggish sales over the last 18 months and a restructure is underway to right some of the wrongs.
“We’re rewiring our marketing organisation around consumer clusters to drive speed, efficiency and effectiveness. This will allow us to better leverage learnings from similar markets regardless of the geographic location and improve the quality of our advertising through our networked marketing model,” said Kent.
He singled out the 100th anniversary campaign for the Coca-Cola contour bottle currently being rolled out as an example of how its networked marketing model was taking shape. By pulling marketing, commercial and innovation under one umbrella, the company hopes to strengthen its grip on the beverage sector in around 140 markets.
“This campaign centres on the magic of drinking a coke with the emphasis on the experience as much as the bottle. As such it’s focused on driving profitable immediate consumption packages and purchase transactions,” added Kent.
“Importantly, this is not simply a global campaign. Rather it’s a new way of networked marketing that has led to the creation of 20 marketing assets that markets can leverage in a more cost - effective, modular manner. Some of our markets will leverage the campaign throughout the year while others will do so quarter by quarter. As a result we have significantly been able to reduce our production and develop our cost per growth rating points, allowing for more dollars to be focused against the consumer.”
A key beneficiary of this new approach has been the company’s price mix. A tighter mix in the US was credited for lifting sales in the region in the quarter and through the network marketing model Coke is sharing those learnings with other markets, most notably Europe. Last year, the business launched aggressive pricing throughout the region which saw it lose market share despite having better pricing. Armed with the insights, it is moderating its mix to get more balanced growth of volume and revenue.
Coke hinted at the network marketing model in the prior quarterly call when it pointed to changes it had made to ease the flow of marketing ideas between its global and local teams. It stems from a need to curb costs while maintaining quality and early signs of the outcome can already been gleaned from its decision to unite its four Coca-Cola brands – Coca-Cola, Diet Coke, Coke Zero and Coke Life – in western Europe under one brand strategy that introduces similar on-pack branding.
The need for speed from Coke’s realignment around customers chimes with wider operational changes that has seen the business remove a layer from many of its functions at group level in different markets. It has then linked its corporate centre directly to business units. In R&D, this means connecting its corporate efforts to its global development centres, enabling it to scale efforts in innovation, share developments faster and accelerate the development of new products.
Elsewhere, the business revealed Diet Coke volumes plummeted 6 per cent globally last quarter. Diet drinks have come under scrutiny recently with consumers and health groups questioning how healthy they are. Coke has already moved to reverse the decline in Europe with the appointment of Dawson Pickering to work on a new brief for the brand.
The wholesale changes come as Coke continues to carve out savings from the business in order to pump more into marketing. Kent said the business was on track to find $3bn in annual savings by 2019 and reiterated previous assurances that the impact of upweighted media spend would be felt in the long-term rather than immediately. Coke’s senior marketers have to plan strategies to a cost-focused framework, dubbed zero-based-budgeting, that sees them regularly weed out non-working media costs.
“Media investments take about 1 to 2 months to realise their full value. We’re more encouraged by the knowledge that’s it’s early in the process and have tremendous runway,” he added. “We remain focused on driving cost out of the business. That change in culture is reflected in the incorporation of zero-based-budgeting into all phases of annual planning cycles."