Analysis: Shifting market forces Coke's hand

Coca-Cola has taken the unusual step of shifting its UK president to oversee PR and public affairs across Europe. As the iconic company loses ground to its rivals, Hannah Marriott analyses the rationale of the move

Coca-Cola's decision to switch GB president Charlotte Oades into the newly created role of 'director, corporate identity, public affairs and communications' for the EU (PRWeek, 3 February) is a curious one.

Opinion is divided over the significance of the switch. It is rare for a company president – with overall responsibility for sales and profits – to move into marketing, PR or public affairs. The loss of the 'president' title suggests a relinquishing of authority. Oades' new job does, though, take responsibility for a much greater geographical area.

According to Coke, Oades' move is anything but a demotion. An internal memo that announces her move states: 'We must ensure that who we are, what we stand for and what we do is proudly and proactively communicated.' Coke refused to be drawn any further into the the reasons for the switch.

Some observers, though, are surprised at the news, given Oades' particular strengths. 'She's a very effective businesswoman,'  says a former company adviser, 'but she does not like public speaking, so this is a bizarre move.'

One business journalist who has followed the company closely for years, is even more sceptical: 'Coke is not doing well in the UK, and two years is about the usual tolerance level before someone is asked to move on.'

Change of the guard
In December, Wall Street for the first time rated its arch-rival PepsiCo ($98.4bn) higher than Coca-Cola ($97.9bn). As recently as 2000, Coke's market capitalisation was $128bn, compared with PepsiCo's $44bn.

In the UK, ACNielsen data shows that in 2005 Coca-Cola's take-home sales were down one per cent. Britvic and GlaxoSmithKline were up four per cent, while Danone surged by 14 per cent. On the increasingly coveted barometer of 'brand value', ACNielsen suggests Coca-Cola was up two per cent for the year, but Pepsi's brand stock rose five per cent. Coke has been accused of being slow to react to the changing climate, unlike PepsiCo, which counts market leader Tropicana and PJ Smoothies among its health brands.

So are these the reasons for Oades's move? A soft drink industry lobbyist thinks not, arguing that public affairs is becoming more integrated with management decisions at senior levels, particularly as the obesity debate escalates. 'This is a positive move for the company, and for the industry,' he says. 'Placing a heavyweight in charge of PA shows an appreciation of its importance.'

And CIPR director-general Colin Farrington says: 'This goes to show how communications management has moved up the corporate agenda and is increasingly considered to be as vital to business success as other key strategic management functions.'

Coke, and its rivals, are faced with a changing consumer landscape. In recent years the public have begun to care more about healthy eating, and are more concerned about ethical issues behind brands. Consolidated Communications director of PA Ian Hagg, whose clients include Coca-Cola Africa, says: 'Coke has a very good record working with communities and with health and children's groups. Perhaps it needs to up the ante on how it communicates this, and engage more with consumers.'

The company is on a global mission to put more emphasis on marketing. Since CEO Neville Isdell took up the reins in May 2004, he has promised to pump an extra $400m (£228m) into marketing and innovation per year and has shifted other company leaders into such roles. Indeed, Mary Minnick, Coca-Cola Asia's chief, became head of global marketing in March 2005.

Donald Knauss, head of Coke's North American operations, said in March 2005 that Diet Coke represented a 'tremendous opportunity to meet consumer trends on health and wellness'. Yet that product has shown its limitations. It is still widely perceived as a woman's drink thanks to its famous ad featuring a hunk on a construction site.

Negative perceptions
When Oades assumes her new role on 20 February, she will certainly have a challenge on her hands. 'Like McDonald's and Nike, Coke is a symbol of globalisation and is bound to be a magnet for criticism,' says FT Atlanta correspondent Andrew Ward. It has suffered its share of PR fiascos, such as the notorious Dasani bottled water recall.

Oades will need to liaise with consumer groups, health officials, food
industry regulators, the vocal EU diet and health lobby and UK politicians to ensure that all stakeholders understand Coke's commitments in the area.

Another prime target will be the European Commission, which in July 2005 decreed that Coke could be fined if it did not stop offering rebates for suppliers who take more of its brands. It also ruled that retailers can use 20 per cent of Coke chiller-space for other brands.
Coke is planning to acquire more healthy brands. Last year its Minute Maid orange juice launched in the UK. It also owns 'functional' energy drinks such as Powerade. Apart from offering these options, it has sought to underscore its health credentials with clear nutritional information, pledging responsible sales and marketing, as well as funding for sports at grassroots level.

Indeed, says Ward, negative perceptions of Coke are really 'a hangover of past disasters and management upheaval – the company is getting better, but perceptions haven't caught up'.

The Oades memo outlines Coke's ambition 'to be the most respected company in the world'. Improving its corporate reputation, it seems, is Coke's chosen route to arrest recent sales decline.

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