Coca Cola pulls back on marketing, pushes on D2C and B2B2Home

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The Coca-Cola Company will be pulling back on its marketing spend as the beverage giant observes the COVID-19 impact on business. In an earnings call to investors, James Quincey, chairman and CEO of The Coca-Cola Company said there is limited effectiveness to broad-based brand marketing, as such the company has reduced its direct consumer communications. This will also include a pause on sizeable marketing campaigns through the early stages of the crisis, which will be reengaged when the timing is right. According to Quincey, the company is mindful about the right level of brand marketing and new product launches, given the consumer mindset across markets.

As stay-home and social distancing practices are increasing rapidly across several parts of the world, the beverage giant too has faced pressure on its business. The biggest impact, Quincey said is the sharp decline in the away-from-home portion of the business, which includes eating and drinking channels, as well as its on-the-go orientated channels such as convenience retail.

For The Coca-Cola Company, while its exposure varies across markets, away-from-home broadly represents about half of its business. In some markets, such as the US, drive-thru operations and carryout has helped offset some of the pressure, but most restaurants are operating on limited hours and are seeing overall trips decline sharply. Due to the slowdown in its away-from-home business, the company’s April month to-date trends are down globally approximately 25%.

Digital push

However, in the midst of these declines, the company recorded a significant increase in eCommerce channels, and has been accelerating its presence versus the pre-crisis.

The Coca-Cola company is investing in digital capabilities to strengthen consumer connections and further piloting several different digital-enabled initiatives using fulfillment methods, such as B2B2Home or D2C platforms to capture online demand for at-home consumption in the future.

“With shoppers spending less time browsing, it is crucial that we work to minimise out-of-stocks and maximise share of visible inventory. In markets around the world, we've redeployed on-the-ground sales reps, especially those orientated toward the on-premise trade and refocused them on merchandising, resulting in increased share of displays and stock on the floor,” Quincey added.

In addition, revenue growth management will play a key role in the company’s current strategy as Coca Cola shifts towards package sizes that are fit-for-purpose online sales and as it reallocates consumer and trade promotions to digital. For grocery e-delivery companies, the company has also increased in-app visibility with a focus on multipacks. “It is simply too soon to estimate exactly what might lay ahead. That's why we're taking swift action now to adapt in the near-term, while best positioning ourselves for success later. Our global workforce is a critical asset, and protecting people and roles is a high priority,” Quincey said.

This comes following Coca Cola Philippines' move to halt all commercial advertising of Coca Cola and all its other brands and commit its advertising space and budgets towards supporting COVID-19 relief and response efforts for the most affected communities. Last month, Coca Cola Philippines said in a Facebook post it will be re-channeling PhP150 million (SG$4.2 million) to provision of protective equipment, and beverage for health workers, delivery of food packs to the most vulnerable families, and support for affected small retailers.

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