Under Steven J. Heyer, president-CEO of Coca-Cola's New Business Ventures unit, Coca-Cola is favoring local, grass-roots efforts over big-budget ad campaigns. It is also said to be considering a drastic cut in its 2002 advertising spending. Though plans are still under discussion and the outcome may not be draconian, one person with ties to the company said Coke is considering slashing some U.S. ad budgets by up to 75%. "Budgets are being ripped to shreds," the Coke insider said.
A Coca-Cola spokesman said no formal decisions had been made, but said alternative, new-media and trade promotion would be receiving a larger share of Coca-Cola's total marketing spending.
Coca-Cola spent $894.9 million on marketing last year, including $403 million in measured media.
Analysts and company insiders predict funding for mass-market campaigns and promotions will be pared in favor of targeted, localized efforts, including grass-roots programs, event sponsorships and point-of-sale marketing.
"He's definitely evaluating the entire media plan. Everything is on the table," said Marc Cohen, a beverage analyst at Deutsche Banc Alex. Brown, who met with Mr. Heyer last week.
As as one of the few top-level outsiders the 115-year-old company has hired, Mr. Heyer is unfettered by Big Red tradition. He could not be reached for comment at press time.
On the job since March, Mr. Heyer wants to eliminate $100 million in corporate and North American expenses and forge closer relationships with bottlers, said company watchers. "In his view, a healthy bottling system is a prerequisite for a healthy Coca-Cola Co.," analyst Andrew Conway of Credit Suisse First Boston wrote in a report last week. He added that Mr. Heyer wants to push R&D and hopes to hire more marketing executives despite last year's corporate layoffs of 5,200 workers-or 20% of global staff.
Mr. Cohen said it would be unwise for the beverage giant to drastically reduce budgets and suggested such talk is a negotiating ploy for media buying. "The perfect case for them is to spend less and get more, which is opposite of what's been happening for the last 10 years. If they can turn around the spend-more, get-less thing to getting more because the media market is weak, it's about time."
Coca-Cola is reallocating its accounts among WPP Group and Interpublic Group of Cos. agencies, but it has delayed announcing assignments of specific brands to shops within those holding companies. The delay could be related to the lawsuit filed by Interpublic against Omnicom Group over executives leaving Foote Cone & Belding Worldwide to join a separate agency to handle the Quaker/Gatorade business that left FCB for Omnicom.
Coca-Cola is expected to move Sprite from Interpublic's Lowe Lintas & Partners, New York, to WPP's Ogilvy & Mather, New York. Ogilvy is also slated to get Fanta. Lowe is said to be in line for Diet Coke, from Wieden & Kennedy, Portland, Ore., and Powerade is anticipated to go to FCB. WPP shops are also expected to gain some Coca-Cola business.
One thing is certain: Mr. Heyer, who one East Coast bottler said was not impressed with initial "Life Tastes Good" spots and who was on shoots for later executions, intends to make marketing more efficient. "He's on a mission from God," said the bottler.
Contributing: Kate MacArthur and Lisa Sanders