A Look at Coca-Cola's Advertising Expenses

Coca-Cola (KO) is a global leader in the nonalcoholic drinks industry. The company is the largest beverage company in the world. It offers hundreds of soft drinks, fruit juices, sports drinks, and other beverages. You'll probably know the company from its most-known brands like Coke, Diet Coke, Fanta, Sprite, Powerade, and Dasani.

Given its status, it's no surprise that the company is a major powerhouse in the global economy and is one of the corporations on the S&P 500. So it's only natural that the amount of ad dollars Coca-Cola spends is high—a vital strategy if it wants to keep its stellar reputation. This article highlights Coca-Cola's history and commitment to advertising. Keep reading to learn more.

Key Takeaways

  • Coca-Cola is a globally recognized brand and household name.
  • The company still competes against other beverage makers and brands.
  • Coca-Cola spends more on global advertising and marketing than any other soft drink producer.
  • The company averaged about $4 billion yearly on advertising between 2017 and 2021.

Coca-Cola: A Brief History

Coca-Cola was founded in 1886 in Atlanta, Georgia, by pharmacist John Pemberton. The company's initial success came with the soft drink that made it a household name—a combination of cocoa, the kola nut, and carbonated water to make a soda fountain drink. Even then, branding was at the forefront of Pemberton's mind. His bookkeeper and partner, Frank Robinson, perceived that two Cs would be better for branding, leading to the birth of the Coca-Cola name.

The company owns and licenses more than 500 different brands of nonalcoholic beverages, which are sold in more than 200 countries. In addition, it partners with bottlers, distributors, retailers, and wholesalers who help bring the company's products to consumers.

The company's stock trades on the New York Stock Exchange (NYSE) and had a market capitalization of $265.7 billion as of Jan. 14, 2023. Coca-Cola reported revenue of $38.7 billion for the 2021 fiscal year, an increase from $33 billion in 2020.

Because of the highly competitive nature of the beverage industry, large brands like Coca-Cola must spend on multi-channel marketing campaigns. This means that if Coca-Cola does not advertise consistently, it will lose market share to other large competitors like PepsiCo (PEP)—it is even more important as consumers turn away from sugary drinks due to health concerns, leaving soft drink brands to amplify their creativity to stay in front of consumers.

Large brands like Coca-Cola must spend on multi-channel marketing campaigns to boost sales and result in shareholder value.

Coca-Cola's Commitment to Advertising

Coca-Cola makes large annual commitments to ad spends. Its dedication to advertising was fairly consistent between 2017 and 2021, spending about $4 billion yearly to market its drinks to consumers worldwide, except for 2020, when the budget dipped below $2.8 billion. The company spent roughly $4.24 billion on global advertising in the 2019 fiscal year—a big chunk of which went to strengthen its brands, such as Coke.

In 2021, Coca-Cola named WPP its global marketing partner, which created Open X, an agency dedicated to Coca-Cola product advertising. The appointment of a new marketing partner was part of an overall restructuring at Coca-Cola, in which WPP was named the primary marketing partner, and others were selected to provide a global perspective on advertising. Some of the complementary and other approved agencies are:

  • Dentsu
  • Publicis Groupe
  • IPG

This large budget and implementation of a global marketing strategy allow Coca-Cola to gain a competitive advantage through targeted marketing. Its spending and strategy help it successfully introduce new products into the global marketplace and increase brand awareness and equity among consumers worldwide. The advantage lies in data, technology and analytics from the targeted countries so that messages resonate with markets regardless of where they are.

Comparison With Competitors

Coca-Cola's market share, at least in the U.S., is more than $265.6 billion by market cap. This is due largely in part to the company's advertising activities and budget. But how does the competition stack up?

Let's look at Pepsi, the company's primary rival, which had a market cap of $241.4 billion as of Jan. 14, 2022. Pepsi has spent a bit less than Coca-Cola on advertising since 2019—between $3.5 and $3.0 billion each year. But keep in mind that Pepsi is much more diversified and owns several different food brands, including Doritos, Fritos, Sabra, and Ruffles.

Advertising in Alcohol Companies

Leading alcoholic beverage companies also found a direct correlation between advertising spend and market share, namely breweries such as Anheuser-Busch. In 2020, Anheuser-Busch spent $1.1 billion on global ads and $1.7 billion in 2021—the most recent figures available. Although ad spending has a correlation to market share, it actually doesn't increase the size of the overall market.

For example, if a consumer already decides to purchase beer, their brand preference can be influenced by advertising. Ad spending in the alcohol industry does not induce consumers to buy a beer if they had not already wanted to purchase one.

This supports the importance of ad spending in the beverage industry, where brands need to outspend competitors' brands so that consumers looking for a soda are induced to purchase a Coke over a Pepsi. Ad spending in both the alcohol and beverage industries does not influence the purchasing decisions of consumers who aren't already participants in those industries.

How Does Coca-Cola Do Advertising?

Coca-Cola is an aggressive marketer, spending over $4 billion annually to maintain its brand and popularity. The company hires global marketing companies to ensure its products are advertised so that the people it is trying to reach receive a message they understand and identify with.

Why Is Coca-Cola So Successful in Advertising?

Coca-Cola's advertising is successful because company leadership understands the importance of designing experiences that include its products—experiences that echo consumers' lives and show how a product improves them.

Is Coca-Cola Advertising Effective?

Effectiveness may go up and down over time, but overall, Coca-Cola's advertising has boosted its popularity and sales. For instance, in 2021, it reported a 17% revenue gain from 2020 and an 8% unit case volume growth over pre-pandemic levels.

The Bottom Line

Coca-Cola spends billions of dollars on advertising every year. You find its ads on billboards, webpages, television, streams, and anywhere else consumers might be looking. So it's no surprise that the company has lasted as long as it has with its dedication to building and maintaining global brand awareness.

Article Sources
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