Coca-Cola sees ‘lag’ as increased marketing spend fails to translate to revenue rise

Coca-Cola says its new strategy to boost sales through a focus on ‘incremental and better’ marketing, creating a more streamlined company and focusing on its core business is working despite a fall in revenues in the third quarter.

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In Europe, Coca-Cola’s revenues were down 7% to $1.3bn while operating loss widened by 4% to $722m in the three months to the end of September. That result was mirrored in its global business, where sales and profits also dropped.

Speaking on a conference call following the results announcement, CEO Muhtar Kent admitted that Coca-Cola is experiencing a “lag” between its investment in marketing and results. The aim over the past 12 months has been to get the business to mid single digit growth but he said over the past three quarters Coca-Cola’s results have been “at the bottom end of that range”.

“The past year has been one of significant streamlining and change. We are encouraged by our progress but know we need to do more,” he added.

Kent pointed to a significant increase in media investments this year following the appointment of its new CMO Marcus de Quinto that has helped boost sales of its flagship products. This focus on “incremental and better marketing” is, he said delivering top line growth.

“We are targeting disciplined brand and growth investments,” explained Kent. “We are improving the quality of our advertising while rewiring our organisation around consumer clusters to drive speed, efficiency and effectiveness.”

In Europe, sales of sparkling beverages were up by 2% while still beverages increased 12% in the quarter.

That included 9% volume growth for Coke Zero and 6% for Fanta, although this was partially offset by a 6% decline at Diet Coke. In still drinks, water, sports drinks and the Innocent brand also saw double-digit increases.

James Quincy, Coca-Cola’s newly appointed COO, said while the company benefitted from favourable weather in Europe there are also signs of a longer term trend of volume growth in the year to date along with a better price mix. Coca-Cola currently has a higher pricing point in Europe than the US but is being hit by the deflationary nature of the European market where local economics including the rise of discount stores is having an impact on price.

  • Coca-Cola Enterprise’s VP of digital sales and marketing is speaking at this year’s Festival of Marketing. Taking place on 11 and 12 November there will be 12 stages and hundreds of speakers. Click here for information and to book tickets.