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COCA-COLA ISSUES 'MANIFESTO FOR CHANGE'

Unveils Plans to Boost Annual Marketing Efforts by $400 Million

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NEW YORK (AdAge.com) -- In a bid to buy time from investors as the Coca-Cola Co. looks to engineer a turnaround, executives at the beverage giant today slashed long-term volume
Chairman-CEO E. Neville Isdell said that 95% of the company's future business would come from outside the U.S.
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and earnings targets and laid out a sweeping "manifesto for change" to revitalize the company.

At the heart of the new strategy, Coke executives vowed to restore "world-class" marketing with a permanent boost of up to $400 million in annual marketing and innovation investments. Executives also aim to double the value of the Coca-Cola trademark within a decade by reviving the icon with advertising with a youthful point of view.

"Through innovation, leadership and execution, this company can be great again," Chairman-CEO E. Neville Isdell told 200 analysts and reporters today. "We're not talking radical change in strategy, we're talking about dramatic change in execution."

Operational review
In presenting a plan that stemmed from Mr. Isdell's 120-day operational review (Mr. Isdell took the top spot at Coke in June), Coca-Cola executives admitted the company underinvested in its brands and missed opportunities that have resulted in its poor sales, particularly in North America, Germany and the Philippines.

Calling 2005 a transition year, Coke executives tried to lower investor expectations for short-term results, noting the beginnings of a turnaround wouldn't be seen for at least 18 to 24 months. As a result, the company trimmed its long-term volume growth targets to 3% to 4%, operating income growth target to 6% to 8% and earnings-per-share growth in the high-single digits. Executives wouldn't provide specific annual or quarterly earnings-per-share guidance.

Still focused on soft drinks
To jumpstart the corrective moves, Coke set new priorities for growth, with carbonated soft drinks still the main revenue generator, but set plans to accelerate such "high-potential" categories the tea, fruit juice and fruit drinks, and sports drinks businesses. He also said the company would grow its margins in the purified-water space, make selective plays in ready-to-drink coffee, juice and mineral waters, de-emphasize bulk waters and powders, and take a different approach to energy drinks.

Mr. Isdell predicted that in the future, 95% of the company's business will come from outside of the U.S. "In North America, we will compete to win," he said.

Rebuild marketing
To rebuild the marketing operation, Coke will focus on its global mega-brands, such as Coca-Cola, Fanta and Minute Maid; boost collaboration between regions to balance the advantages of its scale, speed and efficiency efforts while maintaining local relevance; and scale good ideas rapidly, said Chuck Fruit, chief marketing officer.

"Candidly, our advertising has not been as consistently effective as it needs to be," he said, presenting a goal to drive less TV-dependent integrated marketing communications around one big idea.

Coke also will innovate its product pipeline that soon will include a launches of Sprite Ice, a line extension that includes a cooling agent; Fanta Citrell, a lightly carbonated version of the fruit soft drink; and Aqua Shot, a hybrid water, sports and fruit drink.

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