A confident Coca-Cola has pledged to take marketing spend back to pre-pandemic levels off the back of strong growth during the second quarter of 2021, the result of global markets reopening.
The beverage giant cautiously stated in Q2 2020 its intention to eventually ramp up marketing spend, but only when global markets showed signs of recovery from the current health crisis and following successful vaccination programmes.
Speaking on Coca-Cola’s Q2 2021 results call this afternoon (21 July) CEO James Quincey said “disciplined innovation” and “efficient marketing” had enabled the brand to grow across most of its major markets.
“Value share today is higher than 2019 levels, confirming that effective brand building and innovation, along without advanced revenue growth management and market execution capabilities, are working,” said Quincey.
Chief financial officer John Murphy explained that following a “big rebound” during the second quarter, the company now plans to double its spend in consumer-facing activities.
“We have a very robust investment agenda that will see us getting back to 2019 levels,” Murphy confirmed.
He also explained the company had “improved the quality” of its marketing spend, with the objective of “generating more with the same” budget, even in new areas of marketing such as digital.
Coca-Cola signals intent to push marketing spend back to pre-Covid levelsCoca-Cola had pulled back “significantly” on marketing spend last year, but has now doubled its marketing dollars year-over-year, Murphy added.
The brand has, however, “dialled back” on its marketing around the Olympics due to the uncertainty of the event going ahead and the restrictions being imposed as Japan struggles to cope with Covid-19.
“Clearly in Japan, given the restrictions, we dialled back on all physical activations and are supporting appropriately by keeping a supply of beverages to the athletes. But the physical activations are essentially not going to happen,” said Murphy.
“People in Tokyo said: ‘Who knows what’s going to happen and whether it [the Olympic Games] will actually start?’ We’re very much taking the approach of taking away the physical activations, taking away any fixed costs that can only be used in the event of the Olympics and using any rights we have for the general marketing of our brands.”
Cracking the hard seltzer market
Murphy played down any ambitions around Coca-Cola expanding further into the flavoured alcohol space, despite its Topo Chico hard seltzer range seeing success. The brand is currently in 17 markets, including the UK, with plans to roll Topo Chico out to 28 markets by the end of the year.
“We’re still very much in the learning phase. It’s not a category we’re familiar with. Particularly with alcohol, the market has a number of important characteristics to learn,” said Murphy.
“We have not got to the stage of concluding anything more strategic, or coming to the point of view that there is a bigger vision for us out there in the flavoured alcoholic beverage space. We want to learn, understand more before we decide anything one direction or the other.”
The CFO also said the brand anticipated the hard seltzer market would slow down as the US relaxes restrictions on the back of its mass vaccination programme. Hard seltzer is more of a home occasion drink and not so much aimed at bar and restaurants, said Murphy.
“As people have gone back out, clearly some of those occasions have moved from at-home, to away from home,” he added.
“So, it’s not too surprising that some of the strong tailwinds the category got in the lockdown have left lessons, but we still think it’s got some long-term potential in the US. It’s very on-trend for a lot of consumers. And so, we continue to look at that and push on that, and invest to see where we can go.”
Coca-Cola’s net revenues grew 42% year-on-year to $10.1bn (£7.4bn) during the second quarter of 2021. The huge growth was credited to the ongoing recovery in global markets affected by Covid-19, along with the impact of the massive decline seen last year when revenues fell 22% to $7.2bn (£5.3bn).
“We realised there’s a range of possible outcomes when it comes to the pandemic in the second half of the year, given the asynchronous recovery. We over-delivered relative to our expectations in the first half and have raised guidance in 2021,” said Murphy.
“We are biased towards the growth mentality and will invest behind this momentum going into the rest of the year. Our networked organisation is beginning to help us move faster to capture opportunities and create value for our stakeholders. As a system, we are increasingly equipped to win and we’re excited about the future.”