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Coke slaps on a new tagline
'Welcome to the Coke side of life' to mark beverage giant's new aggressive marketing push in 2006
December 8, 2005: 12:41 PM EST
By Parija Bhatnagar, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) - Coca Cola, threatened with becoming second in market value to archrival PepsiCo for the first time, will debut an aggressive marketing push next year that begins with a new global slogan -- "Welcome to the Coke side of life" -- to replace its current "Real" tagline.

The Atlanta-based world's largest soft-drink maker announced the plan at an investor conference in New York Wednesday during which CEO Neville Isdell updated investors on Coke's progress during what he termed as a "transitional year" for the company.

"Real" applies to the challenge facing Coke, whose current market share of about $100 billion is barely above Pepsi's $98.2 billion.

Sounding counterintuitive, Isdell said the beverage giant's turnaround effort was progressing "faster by going slower."

Attendees were also shown the company's new TV ad campaign that will hit the air next year.

Mary Minnick, president of Coke (Research)'s global marketing, innovation and strategy said the company's core marketing push going forward was to not only sell the value of Coke, the product, but also Coke, the brand.

In order to do this "traditional media is not enough," she said. TV advertising has grown from 800 to 8,000 ads daily and the increasing clutter makes the medium a less effective tool to advertise the company's core brands, she said.

John Sicher, editor of trade publication Beverage Digest, said this shift in marketing strategy for Coke is vital for the company at a time when both Coke and rival Pepsi see declining sales trends in their key domestic markets.

According to Beverage Digest, U.S. sales volume of Coke fell 6.2 percent in the first nine months of this year, while Pepsi sales declined a slightly larger 6.9 percent.

Sicher said his main takeaway from the management presentations was Coke's realization that it has to do something to stem the decline, particularly as consumption patterns show continued shift away from non-carbonated drinks to juices, energy drink, water and flavored water.

"Their plan on innovation and marketing is impressive . Now they have to show that they can execute," he said.

Minnick said the company's strategy next year is to use "multiple media" to reach "multiple consumers." These will include 30 second ads for adults, alternative ads using digital media that will target teen consumers, and "experiential" marketing to sell energy drinks.

During her presentation, Minnick also provided a peek at new drinks and line extensions in the pipeline such as a new cola coffee drink called "Blak" that will launch first in France next month. She said Blak is meant for an older consumer, 35 years of age or older.

Coke's current portfolio consists of 80 brands sold in 200 countries.

Other beverage innovations hitting the market next year are "Vault," which is a citrus energy drink and a diet version called "Vault Zero," new green tea drinks, an "extreme makeover" for its Nestea brand, and a premium coffee for the U.S. market.

Morale bubbly again?

Isdell, who succeeded former CEO Doug Daft in June 2004, initiated a number of executive changes that included an operational overhaul of all of the company's global operations.

Industry watchers said the changes were necessary for Coke in a period of declining volume growth in its key U.S. market.

"Through innovation, through leadership and through execution, this company could be great again," Isdell said during the meeting which was monitored via Web cast in New York. "I believe we have made very strong progress in the past 18 months and we've built a strong foundation."

"When I came back to lead the company last year there was a very strong base that I inherited but we had to start changing the way we led the company," Isdell said. "Frankly, I think we've made good progress. But we have to be razor sharp with what we want to do brand by brand and innovate with absolutely everything we want to do."

Isdell has maintained that the shakeup was necessary to revitalize the company, generate new ideas and affect a turnaround in Coke's sales and profits.

Coke posted a third-quarter profit in October that beat Wall Street estimates, based on strong sales in a few of its overseas markets.

In his progress report to investors, Isdell said the management changes were an "absolutely crucial piece in moving a big ship like the Coca-Cola company around. He added that employee morale had also improved in "this transitional year."

"We have more accountability in the organization," Isdell said, adding that 50 percent of Coke's top leadership are in new roles and 40 percent of those are new hires.

But Coke investors aren't convinced that the company is out of the woods yet. Coke's stock is down over 17 percent since Isdell took over, lagging a more than 12 percent gain in rival Pepsi (Research)'s stock over the same period.

The biggest challenge facing both Coke and Pepsi is slowing sales in North America -- as measured by unit case volume growth -- for the $65 billion carbonated soft drinks industry.

Doing well overseas is important for Coke since 80 percent of its operating income comes from its international markets. By comparison, only 6 percent of Pepsi's beverage operating income comes from outside of the U.S. And unlike Coke, Pepsi's better-performing snack foods division provides the company with a buffer against a challenging beverages market.

Isdell said weakness in the European economy was partly responsible for ongoing volume declines in Germany. He said Coke would continue to improve its market position in both the Philippines and in India, two other markets where the company has struggled to grow soft drink volume.

Coke reaffirms 2006 targets

Coke's chief financial officer Gary Fayard reiterated the company's long-term annual earnings forecast of 6 percent to 8 percent growth.

Unit case volume was expected to increase between 3 to 4 percent, he said during the meeting. Fayard said a stronger dollar was expected to act as a drag on results.

Fayard said Coke would spend about $1.3 billion on capital expenditure next year and between $2 to $2.5 billion on share buybacks.

With more than $5 billion in cash, Coke can certainly afford to go shopping for a few new brands. Isdell didn't offer any specifics about acquisitions other than to say the company would evaluate deals on a country by country basis.

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Click here to read more about Coke's new coffee cola.

Click here to read more about efforts to ban soft drinks in schools.  Top of page

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