Coke holds back marketing spend as it prepares for World Cup splurge
Coca-Cola’s chairman and chief executive Muhtar Kent has revealed the company spent just “5 per cent” of the additional $400m marketing budget it has set aside for this year in its first quarter as the soft drinks maker prepares for a World Cup advertising splurge.
Speaking on a call to analysts and investors after reporting the company’s first quarter results today (15 April), Kent said “only a small fraction” of incremental marketing spend was deployed in the three months to 28 March.
Outgoing chief financial officer Gary Fayard confirmed that while much of the incremental marketing spend had not hit the consumer yet, this investment would be much more weighted in the second quarter. The first quarter was about “getting the quality” of Coca-Cola’s marketing up, he added.
In February Coca-Cola announced a five-point marketing plan to drive a resurgence in revenues, following successive quarters of decline in 2013. At that time Coca-Cola announced that it plans to make an extra $1bn in productivity savings by 2016, the majority of which it will reinvest back into marketing, which includes a $400m incremental increase in marketing expenditure in 2014.
Kent today (15 April) said Coca-Cola remained “steadfastly focused” on the five strategic priorities it hopes will help it achieve its target of doubling revenues by 2020.
On its plans to accelerate sparkling growth led by brand Coca-Cola, Kent said the company was overlaying disciplined occasion, price and packaging strategies and engaging with stakeholders to promote trust and enhance the perception of the brands in this part of its portfolio.
Notable highlights included the Sochi Winter Olympics campaign it ran across Russia, which Kent said drove 7 per cent volume growth. He added that this pillar of its strategy was also underscored by marketing campaigns already underway in the second quarter, like the FIFA Brazil World Cup campaign that has been activated by the largest Coca-Cola World Cup Trophy Tour in the brand’s history.
Other key highlights in the quarter included Coca-Cola’s plans to increase media investment and the quality of marketing which Kent was evidenced by the brand’s Super Bowl ads and the FIFA World Cup viral videos targeting millennials in Latin America that have already exceeded 10 million views on YouTube.
Kent said: “While it is too early to speak of results, we are confident in our plans and approach which is based on robust analytics across our top markets. The insights from our analysis have equipped us with the necessary information to prioritise both the quantity and quality of our marketing across markets, brands and media channels.”
He added that judging by the momentum of the first quarter, he and his colleagues would be disappointed “if we don’t go back into the corridor of our long term growth algorithm of volume growth” in the remainder of 2014.
Globally, net revenues declined 4 per cent year on year to $10.6bn (£6.3bn) in the three months to 29 March. Operating income fell 1 per cent to $2.4bn (£1.4bn).
In Great Britain, Coca-Cola said it was impacted by promotional activity from rivals and by the switch to its smaller bottle size. The company added on the earnings call that it was in very close discussion and alignment with its bottlers to ensure it responds to these challenges by maintaining “rational pricing”.