COKE CLASSIC STEERS IN-HOUSE, VIA OVITZ

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Clear away the fizz, and Coca-Cola Co.'s decision last week to create an advertising company is little more than a way of staying close to Michael Ovitz.

Shelly Hochron, Len Fink and Jack Harrower, who have been handling Coca-Cola Classic creative duties as contractors of Beverly Hills, Calif.-based Creative Artists Agency for the past three years, will be the principals of the new, as-yet unnamed company that will be majority-owned by Coca-Cola. The three principals and Walt Disney Co. have minority stakes. The three will open an office somewhere in the Los Angeles area and continue developing ads for Coke Classic, said Sergio Zyman, chief marketing officer for Coca-Cola.

So why the switch? That's where Mr. Ovitz comes in. As CAA chairman, he brought Coca-Cola and the creative team together. Now that he's president of Disney, both Coca-Cola and the team want to keep their ties to him.

"He godfathered our group," Ms. Hochron said. "He has a certain comfort level with us...he likes to be able to call us and use us as a resource ...now we'll still be there."

The creative team stressed they will only be working on Coke Classic's global "Always Coca-Cola" campaign. There have been no discussions about doing work for outside clients or Disney.

Mr. Zyman said discussions about forming the new company began seven or eight months ago, when rumors that Mr. Ovitz might leave CAA first surfaced.

Disney appears to have nothing much to gain from its stake in the new company, except keeping Mr. Ovitz's business relationships with Messrs. Zyman, Fink and Harrower and Ms. Hochron alive. Neither Disney nor any of the three principals is making a financial investment in the new company; nor will any of them realize any profits from it. Disney executives couldn't be reached.

Mr. Zyman said Coca-Cola will cover overhead and operating expenses and

pay salaries and bonuses, based on increases in consumer purchase intent,

to the team.

Observers, including executives at other Coca-Cola agencies, said the

soft-drink giant essentially is creating an in-house ad agency. "When you

bring advertising in-house, it stifles creativity," said Jeff Mordos,

exec VP-senior director on BBDO Worldwide's Pepsi account.

Mr. Zyman said he and fellow Coca-Cola executives "felt it was important

for us to have control" of the entity responsible for Coca-Cola

advertising. But he went on to say: "We are not in the advertising

business. We're in the soft-drink business. We don't want to have an

in-house agency. Our objective is to keep the [current] team in place."

Another objective is to give the creative team easier access to Disney

resources for commercial production, Mr. Zyman said.

CAA and Coca-Cola no longer have a contract, though Mr. Zyman said the

"relationship" won't go away. So if the new company wants to use CAA

talent or resources in shooting a commercial, it will have good access.

The giant talent agency was hired by Coca-Cola as a "worldwide media

and communications consultant" in 1991 and wrested creative control of

the $65 million Coke Classic business from McCann-Erickson Worldwide in

1993.

Coca-Cola said the deal won't affect other agency relationships or

existing co-marketing contracts with Disney. Nor will Disney's pending

merger with Capital Cities/ABC affect Coca-Cola's network-buying

decisions, Mr. Zyman said. McCann keeps Coke Classic media buying,

although its buying responsibilities outside the U.S. have been eroding.

Coca-Cola works with more than 20 agencies including Lowe &

Partners/SMS, New York; Leo Burnett Co., Chicago; Wieden & Kennedy,

Po

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