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Why Coca-Cola's global agency review may all come down to data

Agencies will be thirsty for Coke business in 2021

Viewing Coca-Cola’s statement about its desire ‘to dramatically improve the effectiveness and efficiency of its marketing investments’ as just a cost-cutting measure is misguided. Winning one of the biggest reviews of 2021 will not only be a matter of price – it may have a lot to do with data, say analysts. Here’s why.

The Coca-Cola Company’s decision to launch a global media and creative agency review ensures that it will be one of the agency world’s largest prizes in the New Year. With $4.2bn of global ad spend at stake, the competition will be lining up to impress the decision makers at its Atlanta headquarters. But what will it take to win?

According to experts and the Coke memo itself, data and performance will play a significant role in the decision-making process.

“Since chief exec James Quincey took the reins, Coke has been on a mission to shake old habits and drag itself fully into the digital information age," says Beverage Digest editor Duane Stanford. “The pandemic turned this evolving initiative into an imperative, so it was only a matter of time before a review like this happened.”

Coca-Cola is eager to put data first, says Stanford: “The ball game these days is to align on how they're approaching data. Making sure that they’re capturing all the data, assimilating it and deploying it in the marketplace so they can get the most effective result. In some ways you could say it's the whole ball game because the companies that do a better job of that are going to be the ones that are going to win. That’s the level set in terms of how Coke is really viewing its entire business right now.”

Coke’s global chief marketing officer Manuel Arroyo released an internal memo this week, that says Coke’s current “reliance on highly localized agency models gives us limited control over the data, measurement, strategies, and technology critical to creating and managing a scalable marketing infrastructure that serves all stakeholders, including our consumers".

Stanford says aligning around data globally is a key motivation moving forward. “Underneath everything at Coca-Cola, where they want every part of the business to be is connected with every other part of the business,” he says. “They want to be linked in a way that data is not siloed and protected from other parts of the business.”

Gerry Khermouch, editor, Beverage Business Insights, says this is part of larger shift for the company as a whole: "They’re trying to rethink their fundamental operating style to make it easier to 'lift and shift' concepts that work from one global region to another, to cut 'long tail' brands like Tab and Odwalla, and to narrow innovation to fewer, bigger bets. So, they're changing all the plumbing to accommodate that.”

Lisa Colantuono, president, AAR Partners, isn’t surprised by Coke’s focus on performance marketing which has a common theme among pitches. “Effectiveness and efficiency for marketing investments was always a top priority but now more than ever is it vital. All brands need to understand the changed consumer, eliminate duplication and optimize spend in order to help brand growth and brand impact.”

Not necessarily a cost-savings maneuver

Like most pitches that speak of consolidation, cost-savings is a motivation. But, Coke was careful to say that this was not the primary motivation. “We believe we can unlock considerable value through a redesign of our model and consolidation of third-party agencies, and while this effort is expected to generate cost savings, this is not the sole objective of this exercise,” reads Arroyo’s memo.

Despite its recent 9% revenue drop, Stanford says to expect Coke to continue to spend. “If they can cut costs along the way, great. Coke's reflex is to invest into a crisis, however, so I'd expect a strategy – especially in developed markets like the US and UK — to shift resources to win share.

“If you look at Coke’s statement, they're talking about optimizing, they're talking about reinvesting. What Coke’s not going do is free up ‘X’ amount of savings and drop it all to their bottom line. That's not what's going to happen here. They are going to redeploy that capital in ways that they believe are going to capture those opportunities coming out of the crisis. This is what they’ve done historically during the Great Recession and other moments of global turmoil. They’re not going to just hide in a bunker.”

Ken Sadowsky, veteran beverage analyst and US advisor to the global investment group Verlinvest says streamlining its data play will be a costly endeavor for Coke "since it’s not their core competency. They are so traditional in their approach ‘to put it on the shelf and do what it takes to get it off the shelf.' In fact, former Coca-Cola CEO Robert Woodruff said that there should be a Coke ‘within an arm's reach of desire'. Digital is the new arm’s length. Their new goals are admirable and achievable if they want to spend serious money, but it’s going to be incumbent upon them to find the right people internally, and agency partners externally, to do it.”

Coke says the global incumbent media agencies that will be included in the pitch are Group M’s MediaCom, IPG’s Universal McCann, Publicis’ Starcom and Dentsu’s Carat. There was no mention of creative incumbents Anomaly, Wieden+Kennedy and others. Coke did not respond to further questions about the review.

So, will data be central to the agencies that win? “As an observer who watches the company very closely, I would say absolutely that,” says Stanford. “It’s clear it's going to require data, an understanding of the various ways that consumers are interacting with the digital world, and what Coke can do to maximize its advertising spend.

"My suspicion is that part of what Coke’s doing here is also putting the media companies on notice to say that ‘you need to come here and show us you have the capabilities to help take it to that next level and to help us fulfill our mission.’ The agencies that are able to communicate how their capabilities will help Coke carry out its mission are going to be the ones that they’re going want to do business with."

Coca-Cola’s full statement to The Drum:

“We are on a journey to fundamentally transform and dramatically improve the effectiveness and efficiency of our marketing investments. By improving our processes, eliminating duplication and optimizing spend, we will generate significant savings to fuel reinvestment in our brands.

Media and creative (includes creative, production management, shopper, and experiential marketing) agency services require significant investment from our brands. They are also a crucial component of our ongoing digital transformation journey to drive our business.

With that in mind, we have decided to undergo a complete redesign of our media and creative agency models in an effort to align the strategic, operational, and commercial needs of our new, networked organization. This will necessitate a full review of our media and creative planning and buying practices, as well as our media and creative agency appointments and commercial relationships around the world.

We expect this process will be completed by the end of 2021.”