Commentary by Rance Crain


Kellogg's Head Man Carlos Gutierrez

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My bet on the next CEO of Coca-Cola Co. is the head man at Kellogg Co., Mexican-born Carlos Gutierrez.

Coca-Cola has been struggling to recapture its glory days, so how can the tradition-bound board of directors pass up a guy who conjures up a Coca-Cola at the

Rance Crain, editor in chief, 'Advertising Age'

height of its influence and prosperity, led by Cuban-born Robert Goizueta. The similarity of names will only fuel the flames to rekindle Coke's storied history.

Both Messrs. Gutierrez and Goizueta took over companies that were losing ground and infused them with a more aggressive attitude. Mr. Goizueta, for his part, believed Coke had become too conservative. "It took us a little bit longer to change than it should have," he said in a 1986 interview. "The world was changing, and we were not changing with the world."

Protecting a legacy
Mr. Goizueta died in 1997, and Coca-Cola hasn't been the same since. Ironically, Coke's board of directors, trying to protect his legacy, has reverted to the company's conservative ways. It blocked the acquisition of Gatorade, allowing it to fall into the hands of hated rival PepsiCo. I get the impression that the board's major concern about Chief Operating Officer Steve Heyer is not that he's too brash but that he's a little too eager to try nontraditional marketing ideas.

Mr. Gutierrez, like Mr. Goizueta, is definitely not an advocate of the tried and true. "Clearly," he told the Economic Club of Chicago earlier this month, "there is no magic bullet for revitalization that works for everyone. But I believe that continually challenging assumptions of the status quo is what led to new thinking and new approaches" at Kellogg.

'Vicious cycle'
The company had gotten itself into a "vicious cycle," Mr. Gutierrez explained. "As sales slowed, gross profit margins declined. As gross margins declined, we cut marketing costs and increased price discounts -- which, of course, slowed sales more." And Kellogg found itself No. 2 in the cereal marketplace behind General Mills for the first time ever. Its stock price dropped 20% in the period of 1996 to 2000 in a booming marketplace.

Among remedies for Kellogg's sagging performance, Mr. Gutierrez challenged the assumption of going global. The company prioritized its resources for the countries and categories where it could generate the highest return on investment. "We chose to follow the dollars instead of the population. We chose to invest where we could win -- today."

Kellogg also stopped emphasizing tonnage over a more profitable mix of product sales. "The result of this strategic shift is more and better brand building and innovation," Mr. Gutierrez said.

Ad shops should take heed
Finally, here's a premise ad agencies should take to heart when they try to figure out how to integrate various marketing tools across disparate business units: Kellogg reorganized its operation into fully integrated units -- each of which had its own sales, R&D, marketing. "This creates better collaboration and -- because they all share the business unit's financial targets -- greater alignment."

It's not exactly orthodox thinking that redundant business units are more efficient. My only reservation about Mr. Gutierrez's chances at Coca-Cola Co. is whether the board really has the stomach for unorthodoxy -- and can ignore the mythic memories of Mr. Goizueta.

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