26 May 2011 | By Mark Choueke
“A brand is a promise. A good brand is a promise kept.” The Coca-Cola Company chairman and chief executive Muhtar Kent is musing on how to keep his company on the growth trail, without succumbing to the “arrogance” of the past.
On the eve of the iconic drinks brand’s 125th anniversary, the Coca-Cola Company invited a selection of the world’s leading business press to its headquarters in Atlanta, Georgia, to spend four days with those responsible for growing Coca-Cola’s brands including Coke, Fanta, Sprite and Powerade. Marketing Week was the only UK business magazine in attendance.
We arrived with the expectation that Coke’s top executives would want only to celebrate past successes – but in fact they were keen to explain how Coca-Cola continues to pioneer marketing and eager to show they had learnt from the lessons of their past.
While instilling in his troops the confidence and optimism necessary to double Coca-Cola’s revenue to $200bn (£123.4bn) in the next decade – part of the company’s 2020 corporate vision which launched last year – Kent says the company must keep at bay the failings which he says nearly brought Coca-Cola to its knees in the Nineties.
Kent’s caution against repeating certain mistakes of old – and more recent – is shared by every member of Coca-Cola’s senior management team.
A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same. Liz Taylor knows it, the President knows it and the bum on the corner knows it
Andy Warhol, artist
Kent said: “We have to stay close to our partners, our retail customers and our consumers. We must earn their trust every single day. We cannot afford, in any sense, to take a victory lap or to become arrogant again.”
It seems strange to think that the narrative surrounding Coca-Cola could be about anything but success. Last year, the company sold 25.5 billion unit cases of drinks across its 500 brands. In doing so it added 1.1 billion unit cases to its volume, representing impressive growth of 5% in a tough climate. Coca-Cola currently sells 1.7 billion drinks every day and the Coca-Cola brand itself is available in all but three countries – Cuba, North Korea and Burma.
But sure enough, in the short time that Marketing Week spent in Atlanta, several leading figures at Coke referred back to a darker time when complacency threatened to wreck any chance the business stood of reaching such milestones.
Many of the company’s senior management team have served it for a decade or more and most have been there far longer. For them, the current success looks like something of a turnaround. Clyde Tuggle, senior vice-president of global public affairs and communications, joined in 1989. He has seen the good times and the very bad. “Believing your own hype is like breathing in your own exhaust fumes,” he says.
He points to a number of times when the company hit trouble, including the insolvency that nearly saw Coca-Cola shut its doors due to a massive spike in sugar prices in 1923, a government rationing of sugar in 1940 and a ten-year period between 1970 and 1980 when compound growth was only 1%.
By way of contrast, the Eighties and early Nineties, under legendary chairman and CEO Roberto Goizueta, was a period of growth and success thanks to some outstanding marketing. A dangerous complacency though crept in at the end of the 1990s and lasted early into the new millennium, says Tuggle.
“There was a feeling that we were the almighty and could do no wrong. Success, if you’re not careful, will create that feeling that you know better than anybody else.”
Perhaps inevitably, such arrogance led to a string of PR disasters. There was a crisis in Belgium when dozens of schoolchildren became sick after drinking Coca-Cola products. There was a famous diversity lawsuit when Coca-Cola employees felt discriminated against on the basis of race. There were accusations over the killing of labour organisers in Columbia. And a verbal slip to a journalist left the world in no doubt about how the company viewed consumers when then CEO Douglas Ivester said he was considering creating a drinks vending machine that charged more money as the weather got warmer.
Coca-Cola is more than just a drink. It is an idea, it’s a vision, a feeling. It is about great connections and shared experiences. It is one of the truly common threads that bonds the world together.
Muhtar Kent, Chairman & chief executive, The Coca-Cola Company
Then Neville Isdell took the helm in 2004 and stabilised the company, before Muhtar Kent took over in 2008. Tuggle says Kent’s presence has been hugely significant. “What Muhtar has done is to bring everyone together, all our bottlers and partners, to focus on the brand, and show us what success can look like in the future.”
The challenge for Coca-Cola now is to achieve its planned growth and double its size in a very different world to the one the company grew up in. Chief marketing and commercial officer Joe Tripodi tells Marketing Week: “What has got us to 125 years is not going to sustain us through the next 125.”
That much Kent knew from day one of his appointment as CEO, gathering together company leaders at a special summit to talk about how things would change. He recognised that the pace of global socio-economic change would impact heavily on the business and that Coca-Cola needed to start operating differently if it was to thrive. “We knew what was occurring would fundamentally reshape our industry and the world,” says Kent. “Such changes were going to make the previous decade seem tranquil.”
Indeed, the company’s 2020 vision, which emerged from that meeting, is built around six global trends identified by Kent and his colleagues, which are now being realized, and faster than predicted in some cases.
The trends include an emerging middle class that Coca-Cola believes will deliver between 800 million and 1 billion more customers in the next 10 years, with 60% of that new wealth coming from emerging markets.
Chief strategy officer John Farrell says Coke’s plan is a matter of ’simple macro-economics’. “If there are about 800 million people coming into the world economy in the next 10 years,” he says, “it’s important to know where they are, who they are and whether they have some disposable income.”
Coke’s theory is that as people become wealthier and their lives become busier when they move into heavily-populated areas, they will increasingly want pre-packaged drinks. There is also a sophisticated global teen population emerging that is crucial to the company’s fortunes.
A large chunk of these potential new customers, says Farrell, will be in markets where the business has the most room to grow. While the global average for the number of Coca-Cola-manufactured drinks each person consumes per year (known as per capita consumption), is 89, the number varies hugely by market. Mexicans top the lot, drinking an average of 675 beverages per year, a figure that has more than doubled in the past 20 years (see How much do we drink, below).
“When I started managing Coca-Cola China at the start of the Nineties,” says Farrell, “the per capita consumption there was just three. I was immediately asked what my plan was and I replied ’to get it up to four’. Now it’s at 34. That’s how fast some of these markets are growing.”
Figures like these reinforce Kent’s assertion that despite Coke’s history and size, the company is “only just getting started”. And such growth plans will depend heavily on the marketing strategy evolving alongside the business strategy.
The business has been a marketing-led company for its entire existence. While the bottling operations and supply chain make up one of the corporate world’s greatest distribution systems, what the Coca-Cola Company itself has to sell are products, innovation and the promise of its powerful brands; in other words, marketing.
Brand consultancies Interbrand and Millward Brown differ slightly in their measurement of the value of the Coca-Cola brand alone. Interbrand has consistently rated Coke as its top global brand for more than a decade. Millward Brown, meanwhile, only placed it as the world’s sixth most valuable brand in its BrandZ Top 100, valued at $73.75bn (£45.5bn) (behind Microsoft, McDonald’s, IBM, Google and top-ranked Apple).
A billion hours ago, human life appeared on earth. A billion seconds ago, the Beatles changed music forever. A billion Coca-Colas ago was yesterday morning.
Roberto Goizueta, former CEO, The Coca-Cola Company (1996)
Based on the same data, however, Millward Brown gave Coca-Cola a score of nine out of 10 for ’momentum and likely growth’ in the next 12 months. Significantly perhaps, it also gave it a score of five out of five for the contribution the brand makes to the company’s sales. Nobody in the BrandZ top 10 global brands scored higher on either count (see the full BrandZ list).
Tripodi says Coke’s marketing strategy is about working hard to stay ahead of the curve, and making sure that knowledge is communicated throughout the giant business. The company, he says, is fully “wired and networked” with a view to building skills and “shortening the learning loop”.
“We’re in 206 countries. If we can learn to move new wisdom and knowledge out to the fringes of our company faster than our competitors, then we have an advantage.”
But Tripodi says the company has to break out of a TV mindset. It is aware of the role digital, social and mobile will play in helping it achieve its revenue target. “TV is not going away, it’s still very important. But we have to understand that the real game in the evolution is how you deliver compelling content out to a lot of digital endpoints.
“Mobile is the remote control for peoples’ lives and that will play an increasingly large role.”
Tripodi wants to use social media to gather teenage fans around events that the drink can associate with, such as football, festivals and music. And these fans had been dangerously forgotten by the company, admits Tripodi. He says a decade ago the business lost sight of the importance of teens and by doing so lost an entire generation of drinkers. Now though, he is resolute. “There are 1 billion teens in the world. That represents 18% of Coke’s total volume. We know that 47% of them have not had a Coca-Cola in the past month.” That is less a problem, more an opportunity, he says.
“Advocacy has replaced loyalty at the top of the pyramid of marketing,” he says. “There is too much importance in marketing given over to ’impressions’ and not enough to ’expressions’.”
The past 18 months have seen Coca-Cola and Starbucks jockey for position as the number one brand on Facebook with the most fans. Coca-Cola is currently ahead with almost 27 million and signs up 100,000 new friends every week.
For his part, Tripodi takes a dim view of Starbucks’ tendency to use its Facebook community to drive sales through promotions. The coffee brand’s fans have been able, for example, to claim a free pastry with every coffee on a given day.
“It’s more organic for us, with fans wanting to join because of our brand, and because they want to engage with one another and share content.”
One of the challenges all packaged goods marketers face, Tripodi adds, is that the modern consumer is too used to getting freebies and discounts which can dilute brand equity.
“Everyone has a different view of the value of their own brand. We believe that giving away product like that does nothing but devalue a brand,” says Tripodi.
Even with a strong focus on social media networks and shared content, there is still a strong role for Coca-Cola’s own websites, such as Cokezone in the UK and MyCokeRewards in the US. Wendy Clark, senior vice-president for integrated marketing communications and capabilities (see Profile, below), says: “When Coke is at its best we are both global and local. The likes of Cokezone, MyCokeRewards and other similar sites in the likes of Germany and Japan have got to feel local.” These microsites all run off the same technology stack in Atlanta where they tap into one global customer database. Clark says this helps scale up activity while keeping cost to a minimum. “But the culture, tone and rewards for each site,” she insists, “are absolutely in tune with its own market.” Anything else would simply not do. Engagement with visitors is seen as crucial as they are typically Coke’s heaviest users.
The gathering of such volumes of customer data, she says, is opening up new possibilities and opportunities all the time. But she says that data isn’t worth as much to Coca-Cola without the creativity that the company’s communications are known for.
“We’re very data-driven but we never let the data get out of context. We talk a lot about the blend of science and art and the positive tension between the two. We gather a lot of data from the 100 million users in our global database but then there is the storytelling. We need it to be compelling because we don’t want to ’science’ our way to great consumer engagement.”
Where there is data there is surely a concrete measure of success. Clark says that a Coke fan on Facebook is twice as likely to consume and 10 times more likely to purchase Coca-Cola products than a non-Facebook fan.
She adds that Coca-Cola understands the difference between an activated fan base and a non-activated one. “When we activate we can increase consumption and purchase by 7% and 10% respectively. That means it’s not just people tweeting or making social commentary. They’re drinking and buying our beverages.”
Such measurements are rare and will come as music to the ears of Kent, Farrell, Tuggle and Tripodi as they seek to guide Coca-Cola through new uncharted waters of consumer engagement.
“Growing a global business in today’s climate is not a job for the faint-hearted,” says Kent. “But despite the economic, political and social upheavals in the Middle East, despite the terrible tragedy seen in one of our largest markets in Japan, we’ve seen growth in the past quarter that is north of our targets.”
However, there will be no complacency if Coca-Cola is to achieve its stated aims of doubling its size. “If we are going to lead as the world returns to growth, we are going to have to remain constructively discontent. In many ways we’re just getting started.”
Innovation: Coke’s answer to the iPad
The Freestyle, a vending machine offering up to 125 different drinks, is expected to transform the business. Why? Because of its ability to gather vast amounts of customer data each day.
Coke was aware that the US consumer wanted a lot more variety from Coke’s dispensers than it was providing. What the company didn’t foresee was exactly how much variety was being demanded.
“We initially thought it might be 20 or 30 different drinks,” says Coca-Cola Freestyle general manager Gene Farrell. “The research came back and told us it was more like 100.”
This was a huge jump from traditional vending machines that only offered six types of drink – from the 500 brands that Coca-Cola owns. “The same research told us that the customer didn’t want a bartender to serve them from behind a counter in a restaurant,” says Farrell. “They wanted to play, to make their own drinks.”
Coke is now seeing consumers mixing products to invent their own drinks and then sharing information on the Cloud to get their ’creation’ out there.
“Customers can put together their own drinks combinations using the machine, so if they want to they can combine the eight flavours of Sprite available in the US, including bitter lemon citrus grapefruit, and lemon and lime, to make what has been named by its ’inventors’ as the ’Gummy Bear’.
“And we react to feedback. We saw customers writing on Facebook that there were only two flavours of Coke Zero, so we added the full array of flavours.”
In developing the self-serve drinks mixer that became the Freestyle, Coca-Cola called in some external expertise in the fields of software, technology and design from the likes of Microsoft, Apple, Ferrari and BMW.
That industry collaboration seemed to ensure the Freestyle’s success, according to Farrell. “Consumers love it. We’ve been in the market since 2010 now and we’re seeing double-digit increases in sales. Our restaurant customers are telling us that their Freestyle machines account for increases in traffic.”
Still relatively new in the US, it is being seen as a revolution in distribution and dispensing within Coca-Cola.
Currently drinks dispensing machines in bars and restaurants account for about 30% of the business but this is expected to grow.
To the public, the Freestyle, which is now spreading in the US and should be in the UK by 2012, is nothing more than a clever dispensing machine. But for Coca-Cola this is a business reinvention story. “It required innovation in product, in packaging, in the supply chain, in route-to-market and in our consumer interaction,” says Farrell.
All the machines are connected via a wired network and each downloads consumption data by brand and day-part for every restaurant they are in.
“We can gather all that data and look at it by region, by customer type and by channel. We’re using that data in different ways. For example, we’ve developed a free iPhone app that allows the user to create their own drink by mixing the choices available. We’re putting a barcode reader into the machine so that it can talk directly to your mobile device,” says Farrell.
Coke plans to integrate this data with the American microsite MyCokeRewards. People will be able to make their own drinks via their mobiles and rack up MyCokeRewards credits when they buy a drink from the machine.
The innovation process at Coca-Cola requires that those pitching any idea build a watertight business case for the execution.
Says Farrell: “The concept of the Freestyle was already being kicked around when Coca-Cola hired me to help develop it. We didn’t have a platform to deliver our full portfolio to the consumer. The Freestyle, the mass customisation solution we’ve come up with, has been a six-year journey.”
New products can also be tested via the machines. “Historically we would test a product before launching a production run and hope that it caught on with consumers. Now we can look at what consumers are creating for themselves,” says Farrell.
“For example, a Raspberry Coke might turn out to be a very popular selection in a certain region and may mean we sell it in local stores. We can roll out ideas relatively cheaply across Freestyle and get an instantaneous verdict from the consumers. So we’re just scratching the surface for how this new information and marketing platform can be leveraged.”
Wendy Clark, Coca-Cola senior vice-president for integrated marketing communications and capabilities
With 2,700 marketers around the world, Coca-Cola requires some inspirational figures at the top of the pyramid to encourage thought leadership and build capability. Wendy Clark, reporting to chief marketing and commercial officer Joe Tripodi, is central to fulfilling that need.
A relative newcomer to Coca-Cola, she moved from a senior marketing role at mobile giant AT&T two and half years ago. She was in telecoms for nine years and prior to that worked agency-side.
“I think Joe was looking for a marketer from outside of packaged goods. He had some unparalleled talent here but wanted to add some diversity, a new dimension,” she says.
Clark was able to spend big budgets at AT&T across what she calls “a huge range of connection points across some really cutting-edge and experimental mobile technology”.
Her job now involves ensuring the marketing team is trained and ready to exploit every opportunity to engage with its customers worldwide, whether it be through sponsorships, experiential events, owned media or earned social media.
“Coca-Cola’s marketing was historically very successful,” she says, “but it needed to pivot and ready itself for a changed landscape.”
It is not uncommon for Clark to find herself briefing Coca-Cola CEO Muhtar Kent and the rest of the leadership team. “They can’t get enough of hearing about social, mobile, data and precision and so on.”
Leadership teams in other less marketing focused businesses will soon find they can’t get away from needing to understand social, says Clark. “The change in the way we talk to customers was driven by social media initially but this expanded into something we should actually now call ’social marketing’ or to be even more accurate, ’social business’.”
Considering Coca-Cola’s more than 26 million Facebook fans, Clark’s thoughts are considered. “Without doubt it’s an interesting number,” she says. “But what is a really interesting number, in the context of the 1.7 billion drinks we serve every day, is 585 million. This is the number of other people that we estimate our fans are themselves connected to [or friends with on Facebook]. It’s almost the whole universe of Facebook and is why creating sharable content and participating in other peoples’ content is our mandate.”
Mobile is also critical to the future as far as Coca-Cola is concerned and Clark is more than comfortable championing that medium.
“We see the links between engaging customers and driving sales,” she says. “When we talk to our customers in the retail environment, they tell us mobile is changing everything. When you can hold up your mobile against a product and find out its ingredients, how it was made, its carbon footprint and so on, then mobile technology is getting pervasive, both product-wise and marketing-wise.”
When Clark arrived at Coca-Cola she immediately gathered her 150-strong team together to galvanise them around a new mission that she sums up as ’big ideas, brilliantly integrated’.
“Everyone knows their job is to come to work every day and develop those really big, fertile ideas that will cut horizontally across the whole business.”
Clark says there is also a need to get away from the notion that a big idea has to be an ad. “An idea does not have to end up as a television commercial. An idea could be a glass that is made out of recycled plant material that is itself recyclable, or a great new label or a machine like Freestyle (see Coke’s answer to the iPad, above). Those are all great ideas.”
To illustrate her point she refers to Coca-Cola’s famous contoured bottle, the “greatest living embodiment of an idea that works as well as, if not better than, advertising”.
“You know the saying about the quality of brief and the ideas that come out of it: ’garbage in – garbage out’. The principle of all great marketing is that the brief has to be strong. The brief for that bottle was essentially ’a drink brand you could recognise in the dark or if the bottle was smashed up on the ground’. They met that brief.”
The global trends that changed Coca-Cola
Coca-Cola chairman and chief executive Muhtar Kent and his have team built a corporate vision that prepares the company to double its revenue by 2020. In building that strategy they organised their operations around six global trends that they saw were re-shaping the world. Kent explains:
A growing middle class
“Between 800m and a billion people will enter the middle class between 2010 and 2020 – the greatest economic shift in history. More than 60% of this new wealth will come from emerging nations.”
“The world is moving off the farms and into the cities. Think of it this way – for the next several years, an urban population the size of New York will be created every 90 to 100 days.”
“We see the world defined not by one or two economic superpowers but by a massive rebalancing of economic might, partly a result of the growing middle class. Yes Brazil, China, India, Russia are gaining traction but so are others such as Indonesia, Turkey, Morocco, Vietnam, Chile and Mexico.”
The new generation
“This will show the rise of the most sophisticated and engaged youth generation, empowered by incredible new communications, alongside growth in the over-40 generation.”
“With more people and more wealth, we see a constant scarcity of resources, leading to the volatility that we are all experiencing in commodity and energy prices. Not an aberration but a readjustment.”
“There has been a fundamental consumer reset in terms of their priorities, their values and their expectations. This has led to a new focus on the meaning of the word value.”
The origins of marketing – the Coca-Cola way
Coca-Cola was at least partially responsible for inventing many of marketing’s most enduring techniques. Only a few short years after founder John Pemberton served up the first glass of Coca-Cola at Jacobs’ Pharmacy in Atlanta in 1886, Coca-Cola’s second owner Asa Candler used coupons and sampling to get people to try it with the aim of building an audience. The coupons read: ’This card entitles you to one glass of free Coca-Cola at the fountain dispenser of genuine Coca-Cola.’
He mailed these coupons to households across America as Coca-Cola grew. According to Coca-Cola’s chief archivist Phil Mooney, 1 in 10 Americans redeemed a coupon for a free glass of Coca-Cola in the 1890s.
Candler, a pharmacist by trade but instinctively a brilliant marketer, printed Coca-Cola calendars to try to get the brand into people’s homes. To get the drink into other pharmacies, he created serving trays and posters and gave away branded apothecary scales and other equipment used by pharmacists that might convince them to stock the drink.
“The pharmacy was like the Facebook of the late 19th century,” says Coca-Cola chief marketing and commercial officer Joe Tripodi, “it was where people would go to meet and share news.”
Candler gave away branded wallets to men and hand mirrors to women. Candler opened the door to what would eventually become a global branded merchandising business. Later, he would transform the brand through the discipline of design. By 1915 Coca-Cola had become very successful and had spawned a number of imitators so Candler needed to restore Coca-Cola’s status as a unique product.
At the time all soft drinks were packaged in straight bottles. When they were refrigerated the label would often come away from the cold, glass bottle, leaving no brand distinction. Candler held a competition in 1915, briefing Coke’s bottlers to come up with a solution. Their brief was to “ensure customers would recognise a Coca-Cola bottle even if they picked it up in the dark”. Enter the famous contoured bottle, a design that changed the game. That bottle, the script brand logo (which was created by Candler’s bookmaker Frank Robinson) and the secret formula of Coca-Cola all remain intact today.
If only Coke could bottle optimism
When I journeyed to Coca-Cola HQ in Atlanta, Georgia, to meet the people charged with growing the world’s most famous brand (see cover story), I expected three days of self-congratulating fanfare, celebrations and bunting. It was, after all, the eve of Coca-Cola’s 125th birthday. I also expected to have to negotiate my way through a slick media operation with heavy-handed PRs ensuring genuine journalist access was kept to a minimum.
The reality was very different. Executives from all levels within every department were keen to talk. There is a very clear sense of positivity and optimism at Coke, which is just as well as it aims to double its revenue to $200bn by 2020. That optimism is present in the latest gizmo to be developed by the company, the Freestyle machine (we’ve called it Coke’s answer to the iPad). It’s there in the bottle Coca-Cola is working on that will be 100% made from recycled plant material. And it is there for all to see in our mini-profile of Wendy Clark, senior vice-president for integrated marketing. She describes her focus on getting shareable content not just to Coca-Cola’s 26 million Facebook fans but to the 585 million other people on Facebook that Coke’s Facebook fans are connected to. Optimism indeed.
But twinned with that positivity, everywhere I looked, was a healthy humility a paranoia running throughout the command centre of the Coca-Cola Company. It comes from a determination never to forget the things that made Coke the icon it is. In every exchange I had with executives from every level and across multiple departments, I could feel a sense of caution and fear/ the fear that the company’s culture could revert back to an arrogance that, according to CEO and chairman Muhtar Kent, nearly brought Coca-Cola to its knees in recent times.
Senior vice-president for public affairs Clyde Tuggle for example, asserts that “Coke’s success was built on great PR moments”. But he also remembers a story (he visibly cringes when he tells it to me) of former Coke CEO Douglas Ivester looking to design a vending machine to operate in hot countries that would charge more as temperatures increased.
Nobody from Coca-Cola hid during my stay in Atlanta. No executive refused to answer a question. I’ve covered Coke for years and this wasn’t always the company’s way. Mistakes have been made and the scars are still visible. But Coca-Cola now feels aligned from the inside and though its growth targets are outlandishly ambitious, this is one company you would bet on succeeding.
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