ORLANDO — When Manolo Arroyo assumed the role of global chief marketing officer at Coca-Cola in early 2020, he encountered several significant hurdles. Over the previous twenty years, the iconic beverage brand had struggled to attract new consumers, lagged in digital marketing adoption, and operated with a fragmented approach involving around 2,000 different marketing initiatives and 6,000 agencies globally.
“It was time to pause and reassess the landscape of our market to envision the future,” Arroyo noted during an address at the Association of National Advertisers Masters of Marketing conference on October 21.
Strategic Changes and Agency Partnerships
Under Arroyo’s leadership, Coca-Cola has redefined its marketing strategy, resulting in robust growth. A recent announcement from the company confirmed the conclusion of its global marketing operating system review, establishing Omnicom as the media partner for North America.
Globally, WPP Open X will continue to manage media relations, with Dentsu overseeing the Japanese and South Korean markets. While Publicis Groupe had won Coca-Cola’s North American media account, it withdrew from the review process after securing PepsiCo’s global media responsibilities.
“Our review aimed to shape the future of our marketing organization,” Arroyo stated. “Successful marketing systems emerge from combining top talent with the right partnerships. We are confident that our new approach will integrate global scale with local knowledge, innovation, and teamwork.”
WPP Open X will remain Coca-Cola's global creative partner, sustaining its role in media and marketing. In North America, Omnicom will integrate media, data, CRM, and customer loyalty, creating a cohesive ecosystem. This updated structure is set to roll out in phases starting December 1.
From Brand Love to Consumer Engagement
In his keynote speech, Arroyo articulated the challenges Coca-Cola faced leading into its marketing transformation and the adjustments made to tackle them. Traditionally, the company's marketing teams prioritized 'brand love' as a success metric. However, increases in brand affection did not consistently translate to improved performance.
“We needed to pivot towards total consumer base, a metric driven by behavior that correlates directly with the growth of our profits,” Arroyo explained, emphasizing the importance of understanding which factors influence consumer behavior across different audiences.
Coca-Cola identified four strategic areas to focus on: streamlining its portfolio, embracing bold innovation, shifting towards more effective digital marketing, and restructuring its marketing operations.
Reducing its brand portfolio from over 400 to about 170 has simplified Coca-Cola’s operations and supply chain. Out of these, 32 brands now exceed a billion dollars in sales, ranging from popular drinks like Sprite and Fanta to healthy options like Smartwater and Bodyarmor.
Creating Lasting Consumer Memories
Arroyo noted that Coca-Cola's success hinges on creating 'memory structures' that trigger essential consumer behaviors. According to company data, approximately 50% of memory generation occurs during a consumer's first interaction with a brand, making retail experiences crucial. Coca-Cola is dedicated to enhancing engagement through live events in sports, music, and culture, as well as innovative product offerings.
Digital marketing has become integral to linking products with these engaging offline experiences. In 2019, 30% of Coca-Cola’s media budget went towards digital, but this figure is anticipated to reach 70% by the end of the year. To streamline its digital efforts, Coca-Cola developed Studio X, a globally interconnected network driving its creative media initiatives with shared data and technology.
“For a business historically reliant on television advertising, revamping our ecosystem and operational model was crucial,” Arroyo remarked.
By reevaluating its marketing metrics and embracing a digital-first strategy, Coca-Cola has entered a substantial growth phase. After years of stagnation, the company has successfully added 160 million new consumers. This turnaround has improved top-line growth, increased profit margins, and boosted returns on investments. Coca-Cola recently surpassed Wall Street’s expectations for earnings and revenue in Q2, with Q3 earnings set to be released on October 27.
“Not only have we initiated behavior change, but we’ve also enhanced brand equity,” Arroyo concluded. “While increasing brand love is important, it must follow consumer behavior, which has directly impacted our growth in sales and transactions.”
