Coca-Cola demands its brands ‘earn the right’ to raise prices
Coke believes its brands should prove they are worth their price, as the beverage giant promises to “improve” the quality of its marketing investment by taking a more targeted approach.
Amid precarious global supply chains and cost pressures, Coca-Cola chief executive James Quincey says the company’s brands need to “earn the right to adjust their prices”.
Speaking on an investor call today (27 October), Quincey said: “There’s [price] inflation every year, but we approach it from the point of view of our brands need to earn the right to adjust their prices each year, whether that be because of the marketing, innovation, execution on investment, or even pressure on labour.”
Prices rise across its global footprint have been “rational” when compared to rivals, said the Coca-Cola CEO.
Joining Quincey on the third quarter results call, chief financial officer James Murphy claimed that despite some “pressure points” in the supply chain, Coke is “successfully pulling the levers” at its disposal to mitigate the impact.
“We continue to invest as many markets reopened during the quarter and we significantly stepped up our marketing dollars versus the prior year,” he said. Murphy pointed to the launch last month of Coke’s multi-year platform ‘Real Magic’ as a sign of the company’s faith in marketing.
“The ‘Real Magic’ platform takes a digital-first approach for our execution, featuring a range of experiences that are tailored to Gen Z and leverages passion points like gaming and music to track the new generation of drinkers,” he said.
The new brand platform is the first in five years for the brand and features a new design identity for Coca-Cola, including a ‘Hug’ logo.
Coca-Cola to shift focus from broadcast to experiences under new brand platform
As part of the ‘Real Magic’ platform Coke is moving away from relying on broadcast messaging to align itself to new consumer trends. Under this new platform the business launched the ‘One Coke Away From Each Other’ campaign in September.
During the third quarter, the beverage giant saw net revenues grow 16% to $10bn (£7.2bn), ahead of revenues seen in 2019. The revenue increase included an 8% boost to concentrate sales, particularly in markets where “coronavirus-related uncertainty is abating”.
Looking to the fourth quarter, Murphy said the brand will “increase consumer-facing marketing spend” to a level similar as 2019, while “improving the quality of the [marketing] spend” by engaging in more targeted digital activity.
Encouraging signs in hard seltzer
Coke that is is “lifting and shifting” several regional brands to other key markets such as Japan and China, including its Costa ready-to-drink products.
The company highlights Costa, which Coke acquired in 2018, as a strong brand in its portfolio, which survived the cull last year to weed out “zombie brands”.
The business also experienced increased demand for its no sugar drinks, with the new Coca-Cola Zero Sugar recipe resonating strongly and the range contributing to approximately 25% of Coke’s third quarter growth.
As for its hard seltzer brand Topo Chico, Quincey said insights point to “encouraging” demand for the range. A launch of the brand into Canada in partnership with brewer Molson Coors is in the works.
“We are seeing encouraging performance where the flavoured alcoholic beverage category is growing rapidly and we have an on-shelf presence,” added Murphy.
“Molson Coors recently announced a national rollout of Topo Chico hard seltzer in the US with new margarita flavours and we recently announced expansion our relationship with Molson Coors to bring the brand into Canada.”
