Last week Tuesday Coke reported the largest decline in quarterly revenue in 25 years.
4 out of 5 best selling sodas out there belong to Coke but it was PepsiCo that beat analyst’s expectations for the same period.
The slump was to be expected since over 50% of Coke’s revenue comes from bars, restaurants and theatres. All off-limits during COVID.
Coke had already gone bearish in early 2020 and in Q2 they slammed the breaks on marketing altogether.
Things haven’t been rosy for PepsiCo either.
But during Q2 they beat expectations as well as had their snacks brands reporting organic revenue growth.
Coke attributes their fall to being bogged down by a bunch of ‘Zombie brands’.
Imagine my excitement when this quarterly earnings report turned into a lesson in brand management.
Let’s dig in!
Since last year, Coke has been following a 3-tier brand strategy:
- Major brands, those staples that endure from one decade to the next.
- Explorer brands to disrupt, scale quickly and gain loyal consumers
- Challenger brands designed to gain large market shares and transform into market leaders.
As you’d expect, they also have specific performance objectives for each category.
So far so good, but it seems they haven’t been doing their due diligence.
Even Coke’s CEO said that they haven’t been assertive enough in weeding out the brands that haven’t worked and redirecting resources onto explorers and challengers that have the most opportunity.
What’s the lesson for us? Because we’re not walking away without one.
- Set specific and measurable strategic objectives for each of your brands. Experimenting with new brands and products is how CPG brands thrive and you don’t want to waste time on what doesn’t work.
- Once you’ve set your objectives you’ve gotta stick to them. Otherwise, you won’t be able to tell the difference between what’s really working and what’s barely alive.
- Setting brand objectives means setting constraints. Learning how to maximise value within those constraints is how you find new opportunities for innovation.
If you don’t take managing your brands seriously it can really bog down your business.
Coke will recover but let this be a lesson in how poor management will make it hurt – even when you are a recession-proof and Buffet-approved global brand.