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just On Call - FIFA effect fizzles out for Coca-Cola Amatil

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Coca-Cola Amatil (CCA) has admitted that its FIFA World Cup marketing failed to deliver expected sales boosts as consumers in Australia suffer “promotion fatigue”.

CCA hoped to benefit from Coca-Colas World Cup sponsorship

CCA hoped to benefit from Coca-Cola's World Cup sponsorship

The group's CFO, Nessa O’Sullivan, told an analysts call following disappointing H1 results yesterday that CCA is no longer seeing the “same results for the same level of investment” in its domestic market. She blamed high levels of promotional activity in the soft drinks grocery channels and a post-Budget fall in consumer confidence for the fatigue.

The Coca-Cola Co was an official sponsor of this year's FIFA World Cup in Brazil in June and July and launched a number of global marketing campaigns that were leveraged by local bottlers, such as CCA. But, O’Sullivan said: “As we went into the second quarter (of 2014) there was an expectation that FIFA promotions would deliver much better outcomes than they did.”

CCA's Australian business has been squeezed in recent quarters because of declines in its soft drinks performance in grocery. Twelve months ago, the company blamed “aggressive competitor pricing” in Australian supermarkets for falls in profits and sales.

Depsite the pressures, new CCA chief executive Alison Watkins today said the company will continue to use promotions in the Australian grocery channel.

“There is a strong mutual interest in having an effective promotion programme because it is a strong driver of traffic (for the supermarkets),” Watkins said. “What has happened will lead us to adjust our programmes, but I’ve got no doubt promotions will continue to be a very important value and volume driver for us and our partners.”

Meanwhile, Watkins, who replaced former head Terry Davis in March, told analysts that some of her predecessor's strategies “weren’t the smart decisions”.

Her comments were in reply to Merrill Lynch's David Errington, who accused CCA of cutting sales staff and promotional activity in the second half of last year to meet short-term earnings targets. Errington claimed the moves “compromised the business” and “smacks to the culture of Coca-Cola”.

Watkins defended the actions, saying: “Sometimes, when you're making short-term decisions, it's not always apparent what the consequences will be. We're committed to getting the right balance.”

Errington has a history of asking Australian executives difficult questions. In April, he suggested Treasury Wine Estates' board held on to its underperforming US business for “trips overseas”.


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