COKE GOES IN FOR THE KILL

Europe is the number one global trouble spot for Coke. And despite its unassailable lead over arch rival Pepsi, there is more work to be done. David Wheldon has been handed the job.

David Wheldon could be forgiven for looking a little smug. The former head of Coca-Cola’s worldwide advertising has just been promoted to director of marketing, greater Europe (only Coke could make Europe sound like a medium-sized business unit). Wheldon can claim a reasonable share of the credit for Coke’s pre-eminent position in the world’s soft drinks market and some see the change of job as his reward.

In his new role Wheldon will become a “guiding resource”, as described in less than enlightening “Cokespeak”, to oversee the marketing of the brand across Europe. He is also charged with giving the region more prominence within the Coke corporation. He will continue to have a role in co-ordinating the matrix of ad agencies Coke has constructed since McCann-Erickson lost the creative account last year.

Marketing directors in each country will continue to report to their country managers while Wheldon reports to Coke’s worldwide marketing boss Sergio Zyman.

It’s an exceptionally unusual move. Switching from advertising to marketing at such a level is almost unknown – especially for Coke, which demands a strong hands-on knowledge of a sector from its appointees. Wheldon’s predecessor in the role, Pat Garner, who is now president of the Philippines division, was well-regarded in the Coke hierarchy, though he was also known as a strong character who polarised opinions.

“This move has come as an enormous surprise,” says one Coke source. “Even people close to him (Wheldon) in Atlanta knew nothing about it. The position has been empty for six months and so there was no desperate urge to fill it.”

But Coke’s third-quarter results, revealed last week, give a clue to why extra urgency was injected – greater Europe has become the chief global trouble spot for the corporation. The region experienced volume gains of only one per cent against the same period last year and in the UK volume fell an astonishing 17 per cent, while in Germany the fall was an equally damaging ten per cent. Coke blames the weather for the shortfall, noting that compared with the long hot summer of 1995 this year’s summer was non-existent.

Its lesser spend and the state of the market were used by Pepsi to explain a 13 per cent fall in its own volume sales during the same period (Nielsen). Pepsi says Coke outspent its own 7m marketing budget in the UK by five times.

But the sales falls come in what should have been an exceptional year for Coke with its 15m sponsorship of the Euro 96 football tournament. Plus its estimated $700m (448m) sponsorship of the Atlanta Olympic Games. In both instances Coke claims it was money well spent that achieved higher brand awareness than fellow sponsors.

“This move could be read in one of two ways,” says one source. “It could be seen as Coca-Cola, following all the ad agency changes, starting to treat Europe as a separate region rather than an extension of Atlanta. It could also be argued that this is not a promotion for Wheldon.

“Europe faces a number of threats and problems. Coke is not having it all its own way. It could be said Wheldon’s remit is to make Europe pre-eminent because he would not have accepted the job if there was not a big role to play. He could walk into a top job in most of the big agency networks in the world so he must have been offered something special to stay.”

Zyman appreciates how difficult it is holding the matrix of more than 30 advertising agencies now working on the Coke account together and believes without Wheldon’s personal involvement the whole delicate structure could break down. In his new role, Wheldon will be close enough to the advertising side at Coke’s headquarters, to play a role if needed.

But even without a faltering performance in Europe, the task ahead for Wheldon – to make Coke the pre-eminent drink in a market where it sees everything from mineral water to coffee as a rival – is massive. But Coke’s supremacy over its main rival, Pepsi, has become seemingly unassailable – some reports even suggest that the cola war which has been raging between the two for almost 100 years has ended with Coke victorious.

In the US, where Coke and Pepsi have traditionally been close in market share terms, Coke now takes 42 per cent of the total carbonated soft drinks market to Pepsi’s 31 per cent (Maxwell Consumer Reports). Internationally Coke’s market share is estimated to have increased to 49.2 per cent last year, while Pepsi is flat at 15.7 per cent.

Coke has inflicted some especially hurtful blows on its rivals around the world. In Russia, where Pepsi outsold Coke by ten to one at its height, Coke has just become number one in the soft drinks market. In Venezuela, which was one of Pepsi’s top ten global markets, Pepsi’s bottler defected to Coke overnight, selling a 50 per cent stake in his company to Coke for $300m (192m) and wiping out Pepsi’s 40 per cent market share at a stroke.

Other parts of Latin America proved almost as painful for Pepsi. In Buenos Aires Pepsi’s bottler is effectively bankrupt, and the company has admitted it has “invested too much, too fast”. Brazil, in particular, has proved a chastening experience and Pepsi chief executive Roger Enrico has told analysts: “Coke’s very deeply entrenched in that country. I think it clearly was true that we underestimated Coke’s strength in Brazil.”

Such has been the cumulative damage to Pepsi that parent company PepsiCo incurred a $390m (250m) write-down charge on its international beverage business and has announced plans to cut annual costs by $100m (64m) in order to concentrate on its international soft drinks strategy.

This humiliation comes in the same year that Pepsi announced it was putting $500m (320m) into Project Blue – the name for its attempt to “capture” the colour blue in the cola market by dropping the red from all its packaging and promotional material. Since July, PepsiCo’s share price has fallen by 18 per cent and its beverages division is awaiting news of an imminent restructure.

Wheldon can claim a considerable share of the credit for reinforcing Coke’s market leadership. It was he and Zyman who turned their backs on the prevailing trend among multinational advertisers of consolidating their advertising in one agency (most notably IBM and its 320m move into Ogilvy & Mather in 1994). Instead they divided Coke’s worldwide advertising between a roster of over 30 agencies, creating a situation where more than one agency worked on one brand at a time.

The result is advertising which, while sometimes missing the mark, has revitalised Coke’s image. It has moved away from the squeaky-clean “Teach the world to sing” blandness which had been a hallmark of the brand from the time Zyman himself worked at McCann-Erickson the advertising agency which created it and had been sole custodian of the account for decades.

But McCann’s hold over the creative account has been broken even if Universal McCann has retained the media account. The roster now includes Bartle Bogle Hegarty, Wieden & Kennedy, Edge Creative (CAA), and its main UK agency Publicis.

Coke – and Wheldon – have a fight on their hands in greater Europe. Though, ironically, it is a fight against its own performance in other markets rather than necessarily against Pepsi.

Coke’s challenge in Europe is to do what it has done in other regions, like the world’s second biggest soft drink market – Mexico – where Coke has three times Pepsi’s market share. In some European markets, for instance Germany where it holds 56 per cent of the market, Coke has a solid foundation to build on. But Atlanta is looking for considerable improvement elsewhere in Europe and Wheldon will have to deliver. In the cola wars it seems final victory can never be won.

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