According to CEO James Quincey, Coca-Cola sees marketing spending as a “motor to drive the topline and bottom line” today (October 24).
Coca-Cola
The drinks giant said in its fourth quarter 2023 results, which ended on September 30, that it had increased the amount of money it spent on marketing during that time. The company said that even though organic sales went up in the quarter, the effect on the operating margin was “partially offset” by more money spent on marketing.
This morning on the call with investors, an analyst asked Quincey what the company’s plans were for its level of marketing spending, since it had been a “drag” on operating profit.
Quincey answered, “I’m not sure I would call extra marketing a drag on results. More like a motor to drive the top line and the bottom line.”
He said that since Covid, the company’s plan has been to “lean in” to places where it can spend money on marketing to grow. That approach is something the company plans to “continue to push” for as long as it can.
He agreed with the statement that the company has a “bias to continue to reinvest behind [its] brands.” They both said, though, that “flexibility” in how much the company spent was very important.
What Quincey said was that 2024 was likely to bring more shocks. He said that the company needed to be flexible with its marketing spend to deal with these changes.
He said that Coca-Cola sees a lot of growth possibilities overall and is “galvanizing” to take full advantage of these chances. He talked about how the company’s new marketing strategy had made its brands more important to customers.
As part of this change, more digital channels are being used to reach Gen Z customers in particular. Coca-Cola spent less than 30% of all the money it made on media in 2019 on digital outlets. The business now puts more than 60% of its money into digital outlets.
Quincey said that the company is getting a better return on its investment through these digital avenues.
Generative AI is becoming more important in both consumer- and non-consumer-facing tasks. As an example, the company released a new flavor of Coca-Cola last month that was partly made by AI. Quincey said that generative AI is being used inside the company for things like market study and insight.
Net sales went up by 8% in the third quarter, and the company made about $12bn (£9.82bn) during that time. The company will be raising its full-year forecast because of the “solid” performance for the quarter, but it wouldn’t say by how much at this point.
Despite raising prices, Coca-Cola saw a 2% rise in total sales across all of its products. It said that the range of prices went up by 9%. You can change the prices of goods and the kinds of goods and packages that are offered. This is called price mix.
But in the EMEA region, sales went down by 1% while price mixes went up by 19%. Coca-Cola said this was partly because some of the markets in that region were experiencing hyperinflation.
Coca-Cola’s sales growth over the past few years has been driven in large part by its price mix. However, Quincey was optimistic that the company could still expand its product line despite inflation.
He was sure that the company had a lot of chances “to leverage greater pack diversity,” which could mean different types of premium packaging or packaging that works for different times of usage.
