Coca-Cola management in the US has revealed it will “pause sizable marketing campaigns” and defer product development in a Q2 “shutdown” to cushion the blow from CV-19.
Although sales of soft drinks have boomed in grocery aisles, sales of Coke have been savaged following the almost universal closure of cafes, bars and restaurants around the globe. The company has reported a 25 per cent drop in sales from January to March.
Coke bosses saying ad spends would be reduced in every territory and go “off-air” entirely in some markets in the second quarter of 2020. It said the marketing freeze is one-part to save money, but it’s also sceptical it would drive sales anyway given the current lockdowns.
However, given the demand from supermarkets, it has said POS marketing would actually increase. The company hopes this will result in “increased share of displays of stock on the floor”, aided by a “ruthless” prioritisation of core products and key brands to “help customers simplify their supply chains”.
Coke’s decision is at odds with P&G, who earlier this week said it would be increasing ad spends on the back of booming sales that had increased by as much as 10 per cent.
B&T has contacted Coca-Cola in Australia for comment, however, had not received a reply by the time of publication.
Coke spends around $20 million a year on advertising locally and its media is handled by IPG’s UM who declined B&T’s request for any further comment.
James Quincey, Coca-Cola’s chairman and chief executive said: “We’re being … mindful about the right level of brand marketing and new product launches given the consumer mindset across market.
“We’ve developed and determined that in this initial phase there is limited effectiveness to broad-based brand marketing.
“With this in mind, we’ve reduced our direct consumer communication we’ll pause sizable marketing campaigns through the early stages of the crisis and reengage when the timing is right. These plans will vary from market to market with our earliest reengagement focusing on the recovery in China.”
He added: “Staying close to our consumers in a relevant way is a key guiding principle, and staying disciplined to demand an appropriate ROI is a close second.”
John Murphy, the company’s chief financial officer, added that the company would ramp up spends in the latter half of 2020 if market conditions improved.
“We have had a number of communications announcing that we will take a pause for now while we focus our efforts on our communities and on other priorities and that we’ll be back later in the year,” Murphy said.
Quincey adding: “We’re also taking this opportunity to reshape our innovation pipeline to eliminate a longer tail of smaller projects and allocate resources to fewer, larger, more scalable and more relevant solutions for this environment.”