Recently named Coca-Cola’s new chief marketing officer, Daniel P. Palumbo faces some tough challenges both in North America and international markets. Ben Cooper looks at how his appointment fits in with the strategy for the group being mapped out by recently appointed chief operating officer, Steven Heyer.
The appointment of Daniel P. Palumbo as chief marketing officer at Coca-Cola earlier this month ended a three-month search for a replacement Steve Jones who left the position in March. With Coca-Cola in the midst of a major overhaul of its global strategy which some have gone so far as to call re-invention, it is a significant appointment.
In the first place, Palumbo’s arrival has happened at the specific behest of Steven Heyer, the group’s chief operating officer and the prime mover behind the redefining of Coca-Cola’s strategy. Whether Steve Jones’ departure was by mutual consent, as the official line suggested, or not, there seems little doubt that Heyer now has his own man in what he views as a crucially important role in the company.
The recent news that the “honeymoon period” for Vanilla Coke, which looked to be a highly successful launch, was much shorter than expected, and the importance Coca-Cola attaches to regaining some momentum – not to mention growth – in the CSD sector in North America will place onerous responsibilities on Palumbo’s shoulders.
The former advertising executive, Heyer, is known to be “hands-on” when it comes to marketing strategy at Coca-Cola and in Palumbo he has found a marketer with a highly respectable pedigree. Before holding a number of senior positions at the photographic company, Eastman Kodak, he had worked for Procter & Gamble on brands including Folgers, Pantene, Vidal Sassoon and Oil of Olay. And it is likely that Coca-Cola will need all that marketing expertise to be brought to bear.
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By GlobalDataCoca-Cola’s executive selection strategy of late has been to look outside for high-level appointments while there has been a well publicised cull within the organisation. Heyer clearly feels that new thinking and the “outside-in” perspective is required and the replacement of Jones, a 16-year Coca-Cola veteran, by Palumbo illustrates this perfectly.
As Heyer put it: “Dan brings to Coca-Cola enormous experience in managing some of the world’s largest and most familiar brands. His expertise will enable us to move forward with greater intensity and focus to drive profitable growth through innovative and integrated marketing.”
Part of Palumbo’s role will be to co-ordinate the more regionally devolved marketing strategy which Coca-Cola has been operating for some time for which having the ear of Heyer and arguably the authority of the COO behind him will be critical.
Another key area where Palumbo will be expected to make a positive impact on Coca-Cola’s business will be in new product development and specifically in line extensions. In May, it was revealed that Vanilla Coke, the company’s biggest launch for some years, had suffered a sales decline after its successful introduction last year. US soft drinks industry analysts, Beverage Digest, reported that Vanilla Coke’s market share declined by 30% in convenience stores between October and March.
The Coca-Cola response to this news was understandably positive. Jeff Herbert, senior vice president for Coca-Cola trademark brands, said the sales were in fact ahead of its expectations. “After the initial trial period, our repeat rates are much higher than we would expect,” he said.
Even if the company was alarmed at the brevity of Vanilla Coke’s honeymoon period, it may not necessarily be due to anything that Coca-Cola has done wrong. It is interesting to note that Pepsi’s Mountain Dew Code Red, another recently launched line extension, also suffered a dip in sales at the same time.
To all intents and purposes, both were successful launches. However, the pace of new product development in the soft drinks industry has been stepped up in recent years, with Coca-Cola itself accepting that creative and relatively frequent new product development has to play an increasingly important role in the company’s strategy.
It follows that as the pace of development increases, the growth curves of these brands also alter. That is not say that Vanilla Coke is a “here today, gone tomorrow” brand but in today’s CSD market, it is unlikely to have the same growth curve as some of the earlier line extensions such as Diet Coke.
There are signs that Coca-Cola is beginning to understand how the dynamics of new product launches are changing. Until now the received wisdom was that new launches were first introduced in the cold channel and then moved into large formats on a more gradual basis. However, with the recent launch of Sprite Remix, Coca-Cola clearly sped up the roll-out into large format channels so the entire launch process was condensed. Some analysts have suggested that this condensation of the launch process shows that companies are acknowledging that the growth curves – and in some cases possibly the shelf life – of new products are shorter than once they were.
But Palumbo’s attention will not be solely focused on new product launches. While much has been made of Coca-Cola’s moves into non-carbs such as waters, energy and fruit drinks, the company knows that it needs to find more growth from the CSD market, and not only from emerging and developing markets where share can be gained from local brands, but in the zero-sum markets of North America where it is head-to-head with Pepsi.
While Palumbo will be expected to find successful marketing solutions for maximising share growth for the core Coca-Cola brand, new product development and line extensions are likely to play an increasingly important role and his experience in this field may also prove invaluable. And to that end, the appointment of Danny Strickland to the newly created position of chief innovation, research and development officer in April was also significant. Strickland will be responsible for developing new products, technologies and packages.
However, getting the balance right between giving due focus and attention to the prime brand whilst maximising line extension possibilities will be critical. Once again, marketing savvy will be at a premium. But that is Heyer’s and Palumbo’s domain. In spite of the iconic status of the Coke brand globally, the evolution of the Coca-Cola Company has been as much about management of distribution – most notably an unsurpassed understanding of how to manage a global bottler network – as it has been about marketing innovation and new product development.
However, it would appear that in looking to meet the challenges it now faces both in North America and developing markets, Coca-Cola may have to look primarily for marketing solutions rather than organisational or structural ones.
