- Coca-Cola said its profit and revenue fell in the fourth quarter as the pandemic took a heavier toll than it had expected, though the beverage company foresees a stronger recovery in the second half of this year as vaccines become more widely available. Earnings fell 28% from the prior year to $1.46 billion in Q4 as revenue declined 5% to $8.61 billion, per a quarterly report.
- The company is looking to drive "greater efficiency across the marketing spend portfolio," CFO John Murphy said in a conference call to discuss results. He said the company is working on targeted experiential campaigns "that are data-driven and occasion-based and always-on," a new marketing model that generated Sprite's first-ever global campaign, called "Let's be Clear."
- Coke's forecast for a sales recovery comes as the company undertakes a full review of its advertising and media agencies worldwide, with a greater focus on its digital marketing efforts. That review is expected to be completed by the end of 2021.
Coca-Cola's declining sales reflect its formerly strong position in out-of-home settings like restaurants, bars and sports stadiums, many of which operated at limited capacity as coronavirus cases surged during the winter months. At-home sales were steady, and the company said it gained market share overall, but Coke doesn't expect to see sales recover until vaccines are more widely available in developed markets like North America and Europe.
When asked during the earnings call about company plans for advertising spending this year, CFO John Murphy cautioned against comparisons to 2019, when Coke increased spend 3.2% to $4.25 billion, making it one of the world's biggest advertisers. The company will disclose the 2020 figure in its annual report, which typically is filed in later February.
"We believe that there is a tremendous opportunity for us to drive a greater efficiency across the marketing spend portfolio," Murphy said, while also pointing out the need to be flexible among its various markets worldwide. "We will continue to focus on what our markets need, both in total investment terms as well as in the mix of spend that’s appropriate for each of these markets."
Along with driving efficiency, Coca-Cola will enhance its marketing with data-driven, occasion-based experiential campaigns, an approach that generated Sprite's forthcoming "Let's be Clear" campaign that "invites drinkers to reset and refresh," according to James Quincey, chairman and CEO of Coca-Cola. Quincey also provided a brief update on its agency review, and the development of new products and brand extensions. The media review, which was launched in December, seeks to "improve processes, eliminate duplication and drive efficiency to fuel reinvestment in our brands."
Coke works with agencies Wieden+Kennedy, Anomaly, McCann and Interpublic's UM, which has held the company's North American media account since 2015, along with about 4,000 other agency partners. Coca-Cola has a hybrid model of agency partners and in-house creative agency KO:OP. Its in-house agency may have a bigger role its marketing operations, consistent with a broader trend that became more pronounced during pandemic, alongside greater demand for digital content. When Coke restarted marketing efforts after a pandemic-related pause, it focused on real-time content production and streaming to reach younger consumers.
Coke's declining revenue contrasted with the gains of archrival PepsiCo, whose Frito-Lay snacks group has seen rising sales among homebound consumers. PepsiCo's profit rose 4.5% from a year earlier to $1.85 billion in Q4, as revenue climbed 8.8% to $22.46 billion. The company cut spending on advertising and marketing for beverages and Quaker Foods in North America, helping to boost operating profits as much as 19% for those divisions, per its quarterly report.