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, according to beverage analyst Duane Stanford. Winning of one of biggest reviews of 2021 will not likely come down to cost, it will come down data. 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 $4.2 billion 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? The Drum spoke with Beverage Digest editor, and long-time Coke analyst, Duane Stanford about the beverage giant’s priorities. Here’s what he had to say:
The Drum: Coke’s global CMO Manuel Arroyo released an internal memo that says Coke ‘expects to generate cost savings, but that’s is not the sole objective of the exercise.’ What do you think is Coke’s primary motivation?
Duane Stanford: “Since CEO James Quincey took the reins, Coke has been on a mission to shake old habits and drag itself fully into the digital information age. The pandemic turned this evolving initiative into an imperative, so it was only a matter of time before a review like this happened. 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.”
The Drum: So, you anticipate that they are open to spending despite its recent 9% revenue drop?
Duane Stanford: “If you look at Coke’s statement [see below], 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.”
The Drum: What’s will Coke’s primary focus be?
Duane 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.”
“Underneath everything at Coca-Cola, where they want every part of the business to be is connected with every other part of the business. They want to be linked in a way that data is not siloed and protected from other parts of the business.”
The Drum: To win agencies will need to be focused on data?
Duane Stanford: “As an observer who watches the company very closely, I would say absolutely that. 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.”
(Editor’s note: This interview was edited for length.)
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.”
“Global incumbent media agencies that will be included in the pitch: 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.