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Marketing drives growth for Coke

News, 24 July 2015

ATLANTA, GA: US drinks giant Coca-Cola is improving its performance largely because of its increased investment in high quality marketing, the company's CEO has said.

Speaking at a conference call with analysts to announce Coke's second quarter results, Muhtar Kent said revenue growth in North America would not have been achieved without improved marketing, ABC News reported.

Revenue in North America rose 3.5% to $5.92bn following a marketing drive and the introduction of smaller mini-cans that cost more on a per-ounce basis. Meanwhile, total revenue fell 3.3% to $12.16bn, but net income rose 20% to $3.11bn.

Coca-Cola saw a double-digit increase in its advertising spend during the quarter and Kent explained that the increased spend, coupled with stricter cost-controls over budgets, are helping to turn the company around.

Marketing investment in North America, in particular, was a "clear contributing factor" to its strong performance over the quarter, he added.

"It takes some time, anywhere from 12 months to 18 months, to realise the full value in terms of a return on investments. We've found that disciplined and quality marketing investments drive growth better than any other strategy or action," Kent said.

Coca-Cola has been following through a five-point strategy, which it announced earlier this year, to make an extra $1bn in productivity savings by 2016.

The plan involves accelerating growth of its sparkling portfolio, strategically expanding the profitable "still" portfolio, increasing media investments by maximising systems optimisation, making improvements to point of sale and investing in the next generation of leaders.

The company appears to have met these objectives over the quarter, having increased global volumes by 2%, including 5% growth for its still beverages, such as tea and water, but Diet Coke continued to disappoint after declining 7% in volume.

Kent said: "We are executing against our strategic initiatives and remain focused on driving efficiencies through productivity and making disciplined investment decisions to accelerate growth."

Data sourced from ABC News, Seeking Alpha, Marketing Week; additional content by Warc staff