Behind Coca-Cola’s new agency and marketing approach

Coca-Cola reported worldwide ad spending of $2.78 billion in 2020, down sharply from pre-pandemic spending of $4.25 billion in 2019. But the company disclosed a big rebound this year, with worldwide ad spending jumping to $2.04 billion in the first half of 2021 from $1.27 billion in the first half of 2020. Coca-Cola ranks as the world’s 17th-largest global advertiser, according to Ad Age Datacenter.  

While the victor will walk away with one of the biggest account grabs of the year, it won’t be winner-take-all. Coca- Cola Co. expects to separately create a roster of preferred agencies that will include shops not owned by the winning holding company. This group will be broken up into six to eight specialty categories—such as experiential,  digital marketing, shopper marketing and design—with about 10 to 20 agencies in each group that can pitch or be assigned work across Coke’s entire geographic footprint. 

“We are very clear that ideas not only can, but they should, come from anywhere around the world,” Arroyo says, noting this group could include boutique shops or even individual freelancers. Wieden+Kennedy, which has handled high-profile Coke campaigns over the years, is in contention to be part of this group, as is Stagwell-owned Anomaly, which is currently the lead agency for brand Coke in the U.S., he confirmed. 

Other incumbents include UM, the Interpublic Group of Cos.-owned agency that has held Coke’s North American media account since 2015. WPP’s MediaCom, Publicis Groupe’s Starcom and Dentsu’s Carat also handle various portions of the company’s media accounts around the world. IPG’s McCann has also handled significant global creative in recent years.

As for why Coke cut Accenture, Arroyo indicated it was because the consultancy did not have the global scale Coca-Cola is seeking. “I think they are a fantastic, phenomenal agency from a capability standpoint,” he says. “Our challenge was more one of geographical reach. Their level of capabilities are very different depending on the geography around the world.”

He estimates the winning holding company will get about two-thirds of Coke’s marketing work, with the remaining third divided among the preferred roster agencies, which Arroyo referred to as an “open source” model. He declined to elaborate on the payment model, including if the roster shops will be paid retainers. 

The company will also name what he describes as a “complementary” media agency to fill in geographic holes that the lead holding company cannot handle.

The process shows that despite attempts by holding companies to portray themselves as one-stop global solutions, companies such as Coca-Cola—which operates in nearly every corner of the globe—still feel the need to spread their bets.

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Even so, Coca-Cola’s review represents a major agency consolidation that is expected to result in significant agency fee savings. When the company began the review nearly ten months ago, it worked with roughly 4,000 agencies globally, including those that handle creative, production, shopper marketing and experiential. The search consultants on the pitch remain Mediasense for media and PricewaterhouseCoopers for creative.

Cutting brands

The review comes amid significant internal changes at Coca-Cola, which in the past year has streamlined its brand lineup, cutting products such as Odwalla juice and Zico coconut water to focus on offerings it believes it can scale around the world. It once sold 400 brands; now it has about 200. 

As it slims its products, Coke has tried to make marketing more efficient, using a so-called “network model” in which creative briefs are led globally with input from individual market leaders who adjust the work where appropriate to ensure it is functional on a country-by-country basis. It’s a significant strategy shift for a company that had used a more siloed approach in which executives in countries such as the U.S. often release their own campaigns without much global input.

Arroyo says he wants his marketers on multiple continents to “co-create together through collaboration.”

“It’s not anymore about the U.S. or Europe or China doing their own, or two people in Atlanta deciding all the creativity,” he says. Arroyo, who goes by “Manolo,” took the CMO role in late 2019 and was previously president of the Asia Pacific operating group. He is stationed in Singapore—which marks a departure from recent CMOs who worked from the company’s global headquarters in Atlanta.

‘Real Magic’

One of the first big tests of the new approach will come with a new campaign platform for brand Coke called “Real Magic.” The effort, which is expected to be rolled out next week, will target Gen Z consumers with a heavy emphasis on gaming, music and sports, while promoting Coke consumption during meals and breaks. The concept was developed internally, but Coke is using a range of agencies to bring it to life. Havas-owned BETC is behind one ad that is expected to debut soon, while WPP’s MediaCom handled media buying, a Coke representative confirmed. Also involved are Wieden+Kennedy London and Known Unkown, a design company run by James Sommerville, Coca-Cola Co.’s former global VP of design.

The goal is to expand the soda’s user base amid an environment where young consumers are gravitating to a range of alternatives, including small brands. 

“In the last 20 years we really have done a phenomenal job maintaining and increasing our business in the current consumer base, but we haven’t been able to recruit as much as we like more drinkers into the brand,” Arroyo says.

https://adage.com/article/marketing-news-strategy/behind-coca-colas-new-agency-and-marketing-approach/2367646

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