3 priorities for Coca-Cola as marketing comes back in focus with revenue momentum

The Coca-Cola Company has reported strong second-quarter 2021 results and year-to-date performance. Net revenues for the company grew 42% to US$10.1 billion, and organic revenues grew 37%. Revenue growth was driven by the ongoing recovery in markets where coronavirus-related uncertainty is abating. According to the company, both developed and developing and emerging markets led the recovery, growing double digits in the quarter.

Markets such as China, Brazil and Nigeria grew volume ahead of 2019 levels while other markets, including India, continued to be under pressure versus 2019, driven by the continued impact of the coronavirus pandemic. James Quincey, Chairman and CEO of The Coca-Cola Company said the results in the second quarter indicate faster rebound and overall economic recovery, led by the brand's accelerated transformation. He added that the company started 2021 with promising results as mobility and business levels improved in the first quarter, and this trend continued in the second.

While consumer mobility increased in markets where vaccination rates are reaching meaningful levels, the recovery remains asynchronous given several parts of the world have dealt with further waves of infections. For the company, India and Southeast Asia were the only areas that did not see sequential volume acceleration on a two-year basis this quarter. In Asia Pacific, China saw continued momentum across categories driven by both volume and improved mix with Trademark Coca-Cola. “We continue to make progress with our consumer-facing digital propositions. Internally, we were building out our platform services organisation to support the enterprise as we have a sizable opportunity to become as a holistic digital leader. Digital is of the utmost importance, and we're also building an integrated ecosystem of platforms that create value across the digital and physical worlds,” said Quincey.

Marketing dollars to go back up

When it comes to marketing, CFO and executive vice president John Murphy said, the company has three priorities:

-Increase consumer-facing marketing spend toward levels similar to 2019;

-Improve the quality of that spend and;

-Allocate the spend in a more targeted manner.

“With our network organisation up and running, we're on a path to operate more efficiently and effectively and to unlock the enormous potential we have in our brands and across our markets,” he said. 

Murphy also shared during the call that in 2020, the company had to scale back on operating costs and marketing investments. From 2022 onwards, the company is looking to drive business from the top line through a much stronger marketing and innovation agenda to support the streamlined portfolio of brands that it is now are focused on.

“We've talked about innovation as being a continued driver of growth in the future,” he added. Murphy added that the company is doubling its consumer-facing activities spend as it looks to deliver for the rest of the year, as well as prepare for 2022.

“We have a very, very robust investment agenda that will see us getting back to 2019 levels,” he said. One of the biggest changes the company has embarked on, he added, was to improve the quality of spending to generate more with the same. “We're pleased with the progress that we're making in that space, particularly as you think about some of the newer areas, digital media, etc,” he said.

Breakdown of growth and driving digitalisation

For the company, sparkling soft drinks grew 14%, led by strong growth in the United States, India and Brazil. Trademark Coca-Cola grew 12%, resulting in volume ahead of the 2019 level, led by Europe, Middle East & Africa and Latin America. Sparkling flavours grew 18%, led by solid growth in both Trademark Sprite and Trademark Fanta.

Meanwhile nutrition, juice, dairy and plant-based beverages grew 25% due to solid performance by Minute Maid and fairlife in North America, Minute Maid Pulpy in China and Maaza in India.

Hydration, sports, coffee and tea grew 25%. Hydration grew 21%, with double-digit growth across all geographic operating segments. Sports drinks grew 35%, resulting in volume ahead of the 2019 level, primarily driven by Powerade in North America. Tea grew 18%, led by growth in the United States, Japan and Brazil. Coffee grew 78%, primarily driven by the reopening of Costa retail stores in the United Kingdom as coronavirus-related uncertainty continued to abate.

The company is also now leveraging the strength of the Coca-Cola system to drive value for stakeholders.

The Wabi ecosystem, which leverages the system’s distribution network and connects businesses to businesses to consumers, continues to accelerate, and is now present in 14 countries, with gross merchandising value growing significantly. The company’s footprint in eCommerce also continues to expand. Wabi is a set of features in a digital ecosystem that allow the company to both do direct-to-consumer and B2B business. Predominantly, where the company is using Wabi in partnership with bottlers, which is more in the B2B space.

However, in Latin America, where there is a very high density of mom-and-pop stores, consumers can also use the Wabi app to place an order. The order goes into the app, and the app then shops the order to the mom-and-pops that are nearest to the consumer and they can accept that order, much like a ride-hailing service.

Meanwhile, the company’s direct-to-consumer Coke ON app in Japan, which connects consumers to the system’s vending machines, reached more than 28 million downloads with significant gains in consumer awareness versus the prior year.

Related articles
Coca-Cola to hold marketing spend for regions slow to recover
Coca-Cola Hong Kong to retire classic contour bottles, launch new design in 2022