Coca-Cola Cuts Costs, Reinvests in Marketing
Just 48 hours before PepsiCo is expected to announce millions in additional marketing investment, Coca-Cola beat it to the punch.
In announcing its fourth-quarter results, Coca-Cola said it plans to cut $550 million to $650 million in annual costs by the end of 2015. That money will be reinvested in marketing and brand building, as well as used to address rising commodity costs. The company also said it exceeded its goal of cutting $500 million in costs during the past four years.
On Thursday, PepsiCo is widely expected to announce it will pour an additional $400 million to $500 million into marketing its brands this year. Analysts, pointing out that ad spending on beverages has trailed Coca-Cola, have called for increased investment, particularly in the company's North American beverage brands.
"This program will further enable our efforts to strengthen our brands and reinvest our resources to drive long term profitable growth," said Coca-Cola CEO Muhtar Kent during a conference call with analysts. "We remain relentless in our efforts to become more efficient, leaner and adaptive to changing market conditions, while at the same time building a continuous improvement in cost management culture in keeping with our 2020 vision."
Mr. Kent repeatedly emphasized that Coca-Cola places brands first, calling brand Coca-Cola "the very oxygen of our business." In contrast, PepsiCo has been under fire for neglecting its brands, specifically its flagship cola.
"The key component of how we strengthen our global brand portfolio is through innovative consumer engagement," Mr. Kent said, highlighting the company's Super Bowl effort, as well as its selection as Advertising Age's Marketer of the Year.
Total sales in the quarter rose 5.2% to $11 billion. Fourth-quarter sales volume in North America gained 1%. The Pacific region unit, which includes China and Japan, boosted sales volume 5%. In the company's Eurasia and Africa group, volume climbed 4% while sales volume in India rose 20%.
"Coke's fourth-quarter results benefited from continued strength from its international beverage portfolio," said Ann Gurkin, an analyst for Davenport & Co. "We also found the continued strong performance by the Coca-Cola and Coke Zero franchises as a standout for the North American segment."
-- Bloomberg News contributed to this report