Coke marketers to face tougher cost control measures in expanded efficiency drive

Coca-Cola marketers will be asked to adopt “zero-based budgeting” meaning they will have will to justify spending on all new brand activity rather than budgets being based on the previous year’s spend.

Coke’s marketers will face tougher cost-control measures as part of wider efficiency drive across the business.
Coke’s marketers will face tougher cost-control measures as part of wider efficiency drive across the business.

The move is in response to Coke’s media investments in the second quarter, which chairman and chief executive Muhtar Kent admitted “underperformed compared to the [available] opportunities” such as the World Cup. He said it would implement the zero-based budgeting initiative to marketing as well as across the rest of the business at the start of 2015 and added it would take time for the marketing investments “to flow back into benefits”.

It is part of series of operational changes being prepped for next year to cut $3bn in annual expenses by 2019 after attempts to drive growth this year stalled. Changes include streamlining it operational model and launching more targeted brand investments alongside an “aggressive expansion of the company’s productivity model and clearer roles for each market.

Kent said: “[The changes] will bring complete clarity to the roles and responsibilities on a geographical basis. We’re not going to be throwing volume out the door. It will be a more balanced approach toward how we generate revenue and how it flows into bottom line”, said Kent.

“There’s a clear line of sight in terms of how we invest and how we get returns from investment. It’s a transparent line of sight in terms of how we look at the segmented approach.”

The approach will work toward maximising value sales through innovation in mature markets such as Great Britain and the US, while prioritising value sales through deeper segmentation in developed countries. Meanwhile, emerging markets including China and Indonesia will focus on growth through volumes.

As part of the segmented approach, Kent said the company would scale global investments faster through a networked marketing model. The approach is currently being put in practice in the company’s search for a successor to the “Share a Coke” campaign. It is understood the business had grouped together some of its big agencies earlier this year to try and come up with a successor to the personalisation promotion.

The raft of changes builds on Coke’s initial cost-cutting plan, which it outlined earlier this year around a five-point marketing-led plan.

The plan will remain unaffected in light of the announcements, said Kent, but its execution in various markets could be improved, notably Europe.

Coke hopes the upcoming overhaul will relieve pressure after it was forced to revise financial targets for the rest of the year. The company’s sales have failed to pop in recent quarters as consumes shun big fizzy drinks brands in favour of healthier alternatives. Sales fell to 11.98bn in the three months to September from $12bn a year earlier, while volumes climbed just 1%.

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