Coca-Cola kicks off massive agency review to 'fundamentally transform' its marketing

2020/12/14 Innoverview Read

Dive Brief:

  • Coca-Cola has launched a full review of its media and creative planning and buying practices, including its agency appointments around the world, according to comments a company spokesperson emailed to Marketing Dive. News of the agency review was first reported by Ad Age.

  • The beverage giant is seeking to improve effectiveness and efficiency across a range of investments, including media, creative, production management, shopper and experiential marketing, as it works to "align the strategic, operational, and commercial needs" of its digital transformation, per the statement.

  • Coca-Cola is one of the world's largest ad spenders, with a global spend of more than $4 billion in 2019. The process, which is expected to complete by the end of 2021, is a further disruption of the agency space, where optimization initiatives like the one Coca-Cola is embarking on have contributed to more in-housing by brand marketers.

Dive Insight:

Coke's announcement of a global review of its media and creative accounts will likely have significant effects throughout the advertising world. The beverage giant works with leading agencies Wieden+Kennedy, Anomaly, McCann and Interpublic's UM, which has held the company's North American media account since 2015, along with roughly 4,000 other agency partners, per Ad Age.

As Coca-Cola seeks efficiencies throughout its massive marketing apparatus, many of these partners can expect to have their scope of work changed or eliminated. Along with agency partners, Coca-Cola employs a hybrid model and an in-house creative agency, KO:OP, which could play a bigger role in its "new, networked organization." The move toward in-housing could have been accelerated by the belt-tightening effects of the pandemic that make cost and efficiency even more crucial. However, Coke noted that the review is not just about cutting costs.

"We believe we can unlock considerable value through a redesign of our model and consolidation of third-party agencies, and while this effort is expected to generate cost savings, this is not the sole objective of this exercise," Coca-Cola global CMO Manuel Arroyo stated in an internal memo shared with Ad Age.

The potential shift to greater in-housing comes as the trend increases under the pandemic alongside the higher demand for digital content. As Coke restarted its marketing efforts after a pandemic-related pause, it put a focus on real-time content production and streaming, per a previous WARC report. Coke will likely need to keep these priorities in place as consumer behaviors altered by the pandemic calcify.

Cutting agency partners and moving more marketing work in-house is a strategy that has been adopted by other major marketers. Procter & Gamble for several years reduced the number of agencies it works with, giving its brands greater control and flexibility in how they manage their growth, and reinvesting the savings into its marketing.

Coke in October reported a 9% decline in revenue as the pandemic continued to depress demand for its beverages at sporting events, movie theaters, offices, restaurants and other out-of-home markets. In the previous quarter, it announced plans to eliminate "zombie brands" worldwide, as more than half of its 400 master brands have "little or no scale" because they're only sold in one country. The continued effects of the pandemic and its trimming of its portfolio likely informed the decision for a review.

(Source: Mobile Marketer )