Coca-Cola’s brand cull
Coca-Cola is to cut up to 200 brands as it looks to streamline innovation in the wake of poor results.
The soft drinks company’s second quarter sales fell 28% year on year, its steepest quarterly sales drop in 25 years. That pushed net income down a third from the same period last year to $1.76bn.
Coke was hit by coronavirus and the subsequent lockdowns but is using this as a chance to spring clean its brands.
CEO James Quincey noted that there are many brands that are simply not making profit with no room to scale. The majority are regional brands that have either not being doing well or are less successful than another Coke-owned counterpart in the same market.
Quincey promised that this wasn’t just about SKU’s but “zombie brands” that aren’t adding to the business and are instead taking away vital resources.
It would be easy to assume this is a knee-jerk reaction from Coke as it looks to bounce back from coronavirus but instead this is a much-needed move that fits with its overall strategy. Quincey has prioritised fail-fast innovation but it appears the company forgot the crucial step of killing the brands that are failing.
Time to rectify that.
Unilever to ramp up marketing investment as lockdowns ease
Unilever may have cut ad spend by one percentage point in the first half of 2020, but the plan is to “invest heavily” in brand and marketing during Q2 to weather the forthcoming global recession.
The FMCG giant, which typically spends 3.5% of its turnover on marketing, admitted that the one percentage point cut masked “a dynamic adaption and reallocation” of spend due to Covid-19.
For example, Unilever cut brand and marketing investment (BMI) by 40% in food service and by 30% in ice cream, but increased spend behind its skin cleansing and hygiene categories. On a geographic basis, it cut spend by 15% in China in the first quarter, but then upped it by 16% in the second quarter.
Unilever has also changed “almost all” its advertising to ensure it remains relevant, switching to messaging such as ‘stay inspired’ or ‘summer staycation’, and focusing on purposeful messaging around hygiene brands such as Lifebuoy and Domestos.
According to CFO Graeme Pitkethly, Unilever is “in no way BMI constrained” and has even kept some of its “powder dry” as it readies itself to ramp up investment in Q2. He expects “significant investment to support brand campaigns and product innovations” tailored to the post-Covid environment.
Going forward ecommerce will be a big area of focus. Unilever’s online sales are up 49% year on year and now account for 8% of total sales. The launch of the ‘Ice cream now’ home delivery service, for example, helped its food and refreshment direct-to-consumer business grow by 139%. The hope is going direct to consumers could be Unilever’s route out of recession gloom.
Grocery sales hit record high
The nationwide lockdown of recent months has had a profound impact on the UK grocery sector. In the three months to 12 July, sales of groceries rose by 16.9% year on year, the fastest rate since records began, according to market research firm Kantar.
Online growth was staggering, with sales up 92% in the four weeks to 12 July. That is equal to 13% of the total grocery market, up from 7% pre-lockdown. Convenience stores also benefitted from the trend for shopping closer to home, with sales at independent stores up 59.5%.
So far Morrisons is the big winner, growing sales by 17.4% during the period and gaining market share for the first time since 2015. It is followed by Lidl, where sales rose by 17.3%, Tesco (15.1%), Sainsbury’s (13.5%), Aldi (13%), Asda (11%) and Waitrose (10.9%).
Demand for branded goods also appears to be holding up. The Kantar data shows the number one brands in each category are typically winning share, while premium lines are growing fastest as consumers find ways to treat themselves.
The stats also suggest that despite the easing of lockdown restrictions, the UK grocery sector is a long way off any return to normality. It will now be up to brands like Morrisons to capitalise on the gains made during the pandemic and navigate the next few months as we leave lockdown and enter recession, when a focus on value will be key.
Junk food ad ban closer than ever
For a few years now there has been talk of a junk food ad ban, with products with high fat, salt and sugar (HFSS) blamed for the rise in obesity in the UK.
However, the food and ad industries have so far managed to argue that such restrictions would be shortsighted and don’t acknowledge that the UK already has some of the strictest measures on junk food advertising, including restrictions on TV, outdoor, cinema and online to ensure they do not target children.
Banning ads also does little to tackle the causes of obesity – lack of food education, little physical exercise and poverty. Previous research by the government has actually shown that restricting placement of HFSS food in stores would cut calorie intake by just nine calories a day in boys and eight in girls
However, this seems unlikely to stop prime minister Boris Johnson, who is reported to be preparing to unveil “sweeping” curbs on how unhealthy food is sold in Britain. Reports suggest the plans include a ban on the online advertising of unhealthy foods, a pre-9pm watershed on TV ads and cutdowns on in-store promotion.
There is no doubting obesity needs to be tackled in this country, especially given the data suggests it has a negative impact on people’s reaction to coronavirus. Banning ads is an easy and seemingly obvious win. But the impact this could have on the economy, as well as broadcaster revenues, should not be underestimated.
Johnson might say he is serious about reducing obesity but banning ads won’t do that. No surprise the ad industry is urging the government to think again.
IOC starts Olympics countdown with ‘#StrongerTogether’ campaign
In one year’s time, pandemic permitting, we’ll be in the early throes of Olympic obsession, with the postponed Tokyo games, still flying under the 2020 banner, due to start on 23 July 2021.
As International Olympic Committee (IOC) president Thomas Bach admitted earlier this week, there’s still the possibility that we could see some, if not all, of the games played behind closed doors.
Given the recent return of sports like football, with games contested in front of empty stands, a crowd-less Olympics isn’t unthinkable, but it would be a huge pity.
Next summer’s games promise to be a great global group-hug, a celebration of unity and diversity.
That’s the underlying message of the IOC’s ‘#StrongerTogether’ campaign, launched this week and spearheading a new digital-led approach to marketing and engagement with athletes as the main focal point.
As IOC digital engagement and marketing director Christopher Carroll says, “We’re a human brand.”