What you need to know:

• Coca Cola has recalibrated its vast advertising spend to with digital now accounting for 60 per cent of budget versus 30 per cent in 2019.
• Going digital first, said CEO James Quincy, is essential to capture the next generation of drinkers. 
• He said Coca-Cola's Studio X, a hybrid unit put together by WPP and underpinned by Hogarth, is powering that digital push. It "brings it all together," per Quincey. It seems to be working. Coke posted 6 per cent growth for 2023. Comparable Currency Neutral Operating Income (Non-GAAP) Grew 20 per cent for the Quarter and 16 per cent for the full year
• The firm is matching digital with physical, spending big on major experiential events, music and promotions that simultaneously press the flesh, put product in hands and act as a major source of first party data.
• Plus it Quincey said the firm is now using AI to drive innovation – including product formulation.
• Meanwhile, CFO John Murphy said the words all marketers want to hear: Marking is not cost, but an investment.

To recruit the next generation of drinkers, Coca Cola has shifted from a TV-centric view model to digital-first, matching the media with huge experiential investment. The trick is to balance local intimacy,with scale and flexibility, according to CEO James Quincy. CFO John Murphy said the drinks giant's marketing and broader digital overhaul is unlocking that flexibility – with major productivity gains as a result. The two are bullish on marketing as an investment – and all the indications are that its in-house Studio X, put together by WPP after picking up the $4bn account in 2021, is powering.

Speaking to investment analysts after the business reported its global FY 2023 results, which saw it grow revenues 6.39 per cent for the year (despite significant currency headwinds), Quincy said, "Across our business, we continue to prioritise agility and focus on improving every aspect of how we operate. An important part of this is our marketing transformation. "

"Our digital mix has gone from less than 30 per cent in 2019 to approximately 60 per cent of our total media spend, " he said.

Integrated Studio

Quincey specifically called out the positive impact of the company's Studio X "digital ecosystem" which he said, "brings it all together." The unit brings together creative, media, production, data, technology and social across most of Coca-Cola's global markets. WPP chief Mark Read described the win to staff as "the biggest in its history" when pipping rivals IPG and Publicis to win the account in 2021.

That engine is now firing, per Quincey.

"We created physical hubs in each of our operating units to integrate disciplines, standardised data, and technology and step change our capabilities. Creative, media, social, and production capabilities are now operating at scale connected by our global network structure.

Whereas previously, it would take several months to create a TV advertisement, Quincey said, "Now, we're producing thousands of pieces of digital content that are contextually relevant and measuring these results in real-time. Studio X is driving tangible results." Which means production unit Hogarth is being kept busy.

Across the piste, global giant is now much more able to operate as an integrated whole, suggested Quincey, using the example of 'Coke Studio' which taps into the consumer's passion for music – and serves as a first party data gatherer. It originated in Pakistan, but has now been scaled up to the brand's top 40 markets.

"The campaign uses packaging as digital portals to access real magic experiences, which have generated more than 1.2 billion YouTube views and a 100 million music streams this year, resulting in strong recruitment of Gen Z drinkers. We're engaging differently with consumers and delivering results." By 'digital portals', he means QR codes.

The strategy appears to be working – as well as strong revenue growth the firm's brand value is powering.

"In 2023, according to Kantar, Coca-Cola brand value increased $8 billion. Coke is now the 10th most valuable brand in the world, up seven spots from the prior year. In the US, Sprite was named by Morning Consult as the number one beverage brand for Gen Z drinkers," said Quincey. "We were also named one of the top 10 innovative companies in augmented and virtual reality by Fast Company."

He told investors, "Our innovation agenda is increasing our competitive advantage across our products, packaging, and equipment."

In its investor pack Coca-Cola called out multiple examples from Q4 2023 of how it used its marketing transformation to build globally scaled marketing platforms that were tailored to local consumers – underlining how it's going hard on digital, loading up its first party data hopper and then backing it all up with big experiential investment:

• “The World Needs More Santas” campaign was executed across 80 markets, continuing the company’s long history of celebrating the holidays. 
• The company leveraged its first AI-based platform, “Create Real Magic”, by inviting consumers to create sharable, digital greeting cards featuring brand assets – like Santa Claus (helping Coke own Christmas since 1931) and the Coke polar bear.
• It also rolled out the Coca-Cola Caravan Truck Tour, with the wagon trail traversing circa 60 countries around the world – making over a thousand stops and meeting over 16 million consumers to "share in the magic" ... and drink the product.

The initiatives ticked off the digital metrics – but also moved the sales needle. Per the financial report: "The holiday campaign experiences garnered approximately 9 billion impressions on social media. By combining the company’s global scale with local relevancy, the holiday activation contributed to Coca-Cola volume and value share gains as well as unit case volume and transaction growth for both the quarter and for the full year."

Starts with product

The company is likewise going heavy on digital for its product formulations.

"To drive superiority across our total beverage portfolio, we're continuing to build capabilities to tap into unique insights in taste and aroma sciences," per Quincey. "We're applying digital tools, ingredient processing technology, and AI to create bolder and more successful innovations."

Coke knows all too well the challenge with product reformulations – New Coke in 1985 was described by then CEO Roberto Goizueta as "the surest move ever made". It latest 79 days. No such worries these days. Quincey said its Coca-Cola Zero Sugar volume grew 5 per cent in 2023, driving volume and value share gains. Likewise with other key brands, said Quincey:

"We are applying learnings from this multiyear success and driving taste superiority elsewhere in our sparkling portfolio. In 2023, we launched Sprite and Fanta reformulations in 25 markets, delivering mid-single-digit volume growth in those markets and driving overall sparkling flavours value share gains.

CFO becomes marketing pin-up

Coca Cola CFO and President John Murphy said the words every marketer wants to hear: Marketing is not a cost centre, but a growth driver. He also said its marketing engine overhaul is leading to much greater agility – in turn boosting productivity. 

"We've got three big buckets of costs. We've got our supply chain costs, we've got our marketing, whether you call them costs or I would prefer to call them investments. And then, we've got our operating costs of running a company. And the approach to our marketing and operating agenda has really been to talk about transformation," said Murphy.

"It rolls off our lips a little bit as something that everybody understands exactly what's embedded in there. One of the key drivers of the marketing transformation that is now delivering the kind of fruit on the effectiveness side [is] that we wanted was to bring greater efficiency into that world. And when I talk about having the flexibility to manage surprises coming at us, you can marry the word 'productivity' with flexibility because it doesn't come out of thin air, as you all well know, it has to come from somewhere."

According to Murphy, "A big part of what we have been able to unlock is a substantial productivity agenda in our marketing investment base that heretofore we knew was there, but we did not have the ability to do so."

Baby and bathwater

Speaking to the Consumer Analyst Group NY conference a few days days later, Quincey doubled down the the brand-experience duality.

"The cola category has been growing for the last number of years and is foreseen to continue growing. And of course, it's a category where we have clear quality leadership, not just that we continue to gain share within the category."

He attributed Coke's success to two things: "...focusing on the unwavering and the unchanging part of the Coke brand, the iconography of it, something that truly hasn't changed in a 138 years, yet making it relevant and authentic to each new generation of consumers."

That means striking a careful balance between innovation and brand heritage – while keeping the supply chain machine running at optimal efficiency and matching it all up with retail planning, media and execution (or risk "terrible experiences" as those innovative experiences fall flat at the business end, per Coca-Cola South Pacific ecom chief Mick Drew).

"You can innovate in the expressions around the core central Coke Original, whether it be some of the Coke creations or some of the other things we've done bringing out Coke Spiced. But this is a way of dualising between the unchanging and the need for innovation. And then backing that up with an everyday ability to put it within the arm's reach of desire, being able to find the right packaging solution, the right container solution at the right price point to bring everyone into the franchise," said Quincey.

Plus marketing's other big P – price – has to be right.

"There's always got to be an affordable option and there's lots of ways of delivering premiumised packaging options. And then backing that up with experiential activities, whether that be in the physical world and now increasingly in the digital or the augmented and in the AI world. And so, really driving brand Coca-Cola forward and continuing to build that out along with Coke Zero Sugar."

While brand builders question the ability of digital media to drive long-term growth – Coca-Cola has gone digitally far deeper – and the P&L suggests that it's working.