The soft-drink giant is buying or has bought up to 49% stakes in 10 to 12 companies-many that have new marketing relationships with the company-according to longtime executives. Although none of the companies were disclosed, Coca-Cola is said to be particularly interested in those that are marketing- or beverage-related.
"They are investing in a variety of Internet and e-related ventures to make sure they learn [and are seen as learning] from the Internet," said an executive familiar with Coke's strategy. "Jeff Dunn [Coca-Cola senior VP-marketing North America] is certainly interested in all aspects of the Internet and e-commerce."
`LOCK PEPSI OUT'
Said another executive familiar with the plan, "The philosophy is that if you've got enough companies on board, you'll have a hit. They figure they'll [control] a portion of the economy and lock Pepsi out. If 10 flop, [they believe] so what, one will go gangbusters."
It's believed that Coca-Cola took a minority stake in Rocketcash Corp., a Mountain View, Calif., company that lets people shop online without credit cards. Coca-Cola did a promotion with its Sprite brand and Rocketcash earlier this year. Rocketcash, which was sold to NetZero in September, referred calls to Coca-Cola in Atlanta. Other possible partners contacted by Advertising Age did not return telephone calls or said they had no equity relationship with Coca-Cola.
OWNERSHIP STAKES POSSIBLE
Coca-Cola Co. did not return telephone calls seeking comment, but a spokeswoman for its North American unit, Coca-Cola USA, declined to comment and said no announcements had been made. She added, however, the company's fledgling e-ventures group is examining partnerships with new economy companies that represent technologies "that would provide a value to assets we don't already have," noting that taking an ownership stake in companies is not out of the question.
The world's largest soft-drink company in the spring started striking e-commerce marketing alliances. Partners include Innotrac Corp., which will be the exclusive e-commerce partner for Coca-Cola brand merchandise in North America; Upromise's loyalty program, as well as the Latino portal HispanB2B's online procurement service. In May, Coca-Cola inked its largest deal to date, a multi-year international alliance with America Online that allows both marketers to sell each other's products online and offline.
In addition to the Internet investments, Coca-Cola is thinking out of the box with the creation of new think tanks outside its Atlanta home base. The company already has said it would shift some marketing, investor relations, public relations and other jobs to New York, and one executive familiar with Coca-Cola's plan said more think tanks are in the works for cities such as Los Angeles and Chicago. "You've got to get closer to the consumer, and the consumer isn't always in Atlanta," he said. "There's a lot of insight about teens and urban teens and African American teens coming out of New York and other major metropolitan areas."
At least in New York, the division will employ about 20 top executives. It is staffing up now.
Sanford Bernstein beverage analyst Bill Pecoriello said the company must innovate if it hopes to attain the very difficult 5% annual growth it seeks. "Clearly, innovation is the thing that will be the key to Coca-Cola's growth," he said. He added that he had not heard about the strategy of investing in e-commerce companies but said that makes sense. "It's all reasonable in terms of a strategy of trying to pursue [innovative things]. They're looking for alternative distribution systems, alternative ways to innovate on brands, alternative ways to market, like with the [e-commerce deals]. All these things-they're trying to change the way they do business," he said. "They're embracing technology and embracing change, so it's all within the strategy that Doug Daft is trying to push the company in that direction."