Coca-Cola increases marketing spend to ‘earn’ higher prices – Marketing Week | Region & Cash

Coca-Cola increased its investments in consumer-focused marketing in the second quarter of 2022 while executing an average price increase of 12%.

Speaking to investors today (July 26), Chief Financial Officer John Murphy said the decision to increase spending was made to “create more value” for Coca-Cola’s brands and “to maintain respect for to earn prize points”.

“We use a dynamic resource allocation framework to ensure our investments are targeted to combinations of country categories that are driving the highest growth, thereby maximizing our returns,” he added.

His comments echo those of CEO James Quincey last October, when he insisted that Coca-Cola’s brands “must earn the right to adjust their prices” even with steep inflation looming on the horizon.

Speaking today, Quincey said consumer resilience has held up “broadly better than expected” as price increases were implemented without “significant withdrawal” from customers. Consumers tend to back away from “high-ticket items” during a cost of living crisis, he explained.

“They then start saving on the lower ticket items and trade them into categories with weaker leading brands,” he said.

He added that the company is “watching closely for signs of changing consumer behavior” throughout the year.

“As the average cost of the consumer basket continues to rise, we anticipate a more challenging consumer environment and are preparing accordingly,” he said.

With new faces and new platforms for some of our multi-billion dollar brands, we’re creating excitement and recruiting a new generation of drinkers.

James Quincey, Coca-Cola

Coca-Cola today reported a 16% increase in organic sales growth, beating the company’s expectations of 7-8%. Net sales growth was 12% to $11.3 billion (£9.3 billion).

Looking ahead to the second half of the year, Quincey said the company will “remain focused on raising the bar on the elements of our flywheels for revenue growth” and “broadening what we can control.”

These include continuing to build capabilities in branding, innovation, revenue growth management (RGM) and execution, as well as “capturing economies of scale while maintaining local relevance to consumers.”

The beverage giant is also focused on “understanding and providing what consumers want” to provide “more reasons” to choose Coca-Cola brands.

The new marketing model

Last year, Coca-Cola unveiled a new marketing model aimed at driving profitable long-term growth across its portfolio of brands. His model’s “aggressive” “transformation and modernization” agenda included a complete overhaul of its agency structure, with creative, media and strategy hires.

Quincey said today, “Our new marketing model is focused on attracting and retaining customers. And we do this through an ecosystem of experiences that connect consumption opportunities with consumer passions.”

In April, Coca-Cola launched the Magic Weekends campaign under its new global brand platform Real Magic. Quincey said the campaign has shown “great results” so far.

The brand saw a three-and-a-half-fold increase in retention rate for Coca-Cola meal plans compared to pre-campaign levels and a 50 percent increase in Coca-Cola Zero Sugar outlet stores.

Coca-Cola marketers add innovation to the “primary focus.” The company also launched a digital-first campaign for Smart Water and Vitamin Water, which featured “global icons” like Zendaya and Lil Nas X.

“Partnering on TikTok is a different engagement approach than marketing that’s already delivering strong results,” Quincey said.

“With new faces and new platforms for some of our multi-billion dollar brands, we’re creating excitement and recruiting a new generation of drinkers.”

inflation mitigation

This week, UK price inflation hit 9.4% for the year to June – the highest rate in more than 40 years, according to the Office for National Statistics (ONS). Meanwhile, the amount of excess cash the average family had to spend fell by £135, down 12.1% year-on-year, according to data from the Retail Economics-HyperJar Cost of Living Tracker.

For Coca-Cola, there are “a number of channels and categories where things are looking a little tougher in the near term,” CFO Murphy said, such as in the grocery and convenience channels in developed markets. However, in “away-from-home” channels like theme parks and travel, “it’s as good as it’s ever been.”

He added that there are “a lot of opinions” about how this will play out in the second half of the year, but said, “I don’t think anyone will know until we actually get there.”

Quincey said the company’s brands will anchor themselves in affordability “to retain the customer base” through revenue growth management strategies to keep entry prices as low as possible.

He said Coca-Cola tends to have “some lead time to go into a normal recession” but the company doesn’t see “a big impact” from it just yet.

Regarding pricing, he said the company “doesn’t want to get into a recession with a big accumulation of cost increases that haven’t gone through,” but also doesn’t want to “move forward and anticipate inflation through pricing before that.”

Leave a Comment