Coke likely to retrench post-Heyer

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As departing President-Chief Operating Officer Steve Heyer packs up his boxes, observers expect Coca-Cola Co. to begin dismantling his marketing initiatives.

Many anticipate the re-emergence of Interpublic Group of Cos.' McCann Worldwide, longtime agency on the flagship Coca-Cola Classic brand, among other changes.

Coca-Cola's new CEO, Neville Isdell, announced last week that Mr. Heyer would leave to pursue new opportunities. He departs Coca-Cola with a $25 million severance package and is expected to end up with a CEO post at another company, possibly in the media or marketing space. He is also said to be a candidate for the open top slot at Starwood Resorts and Hotels Worldwide.

"Coke has a real hard time with innovation," said one former employee with close, active ties to the company. "They think of innovation as new products, not cultural systemic change in the organization. I would expect a retrenchment, a dismantling, a pulling back." The executive said he expected former president and powerful board member Don Keough to "go back to his bag of tricks [from] when he was in leadership." Mr. Keough did not return calls asking for his comments.

Changes could affect Coke's ad agencies and other marketing partners, media outlets dependent on the soft-drink seller's dollars and the jobs and responsibilities of marketing executives put in place during his watch.

"The broom will sweep pretty clean" one executive said.

Speculation focuses on McCann as it tries to win back a role with Coke, possibly at the expense of its lead U.S. agency Berlin Cameron & Partners/Red Cell, New York, part of WPP Group. Diet Coke is handled by Interpublic's Foote Cone & Belding, New York; Publicis Groupe's Starcom MediaVest Group handles media.

ties that bind

Despite producing creative that has helped reverse share declines, Berlin Cameron's fate-and that of Sprite shop Ogilvy & Mather, New York-could rest largely on ties that WPP Chief Executive Martin Sorrell has with Coke board members, said another executive close to the marketer. Coca-Cola declined to comment.

The future of Studio Red, the design company that created the CC Cruiser and Red Lounge teen hangouts, is also being questioned, since those were pet projects of Mr. Heyer's. Even Creative Artists Agency is being scrutinized despite a long relationship with the brand , because of its connection to Mr. Heyer's initiatives.

"Don Keough is the Coke brand manager again, and I don't think Isdell can follow Heyer's plan," said the former employee. "The board is not used to the kind of communication you have to use to get through to teens today, because it's not the warm and fuzzy Coke of 30 years ago. That's the danger right now. When you see executive mandates overrule consumer insight, you're on a collision course for disaster."

Internally there is speculation about several executives brought in by Mr. Heyer, particularly Esther Lee, chief creative officer, and Dan Palumbo, global chief marketing officer. "If Steve leaves, Esther leaves," said one executive close to the team. "She'll be right behind him and her operation will probably dissolve."

Resisting change

In recent months Mr. Palumbo has distanced himself from advertising created by Berlin Cameron and FCB. Spokespeople for Mr. Palumbo and Ms. Lee declined to comment.

Some Coke veterans are said to be relieved to see the change agent Mr. Heyer go; others worry that without transformation Coke could fizzle.

"You're hearing a sigh of relief now that Heyer is gone because life will get simpler, but I don't think the brand is going to get any easier," said the ex-employee. "Change is stressful, but that doesn't mean it's wrong. A lot of people at the company think that Don Keough and the board have gone too far. It sends a very dangerous signal that Coke is resistant to change of any kind."

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