Walking down the street, with the sun over your head. You are losing the grip of your body, and your throat is dry. At times like these, you stop near any shop you see and ask for something to drink. If not a fruit drink, we usually opt for soft drinks. Here, let’s know How much does Coco-Cola Spend on Advertising?
Soft drinks are non-alcoholic beverages, that meet your body’s fluid requirement, along with water. These soft drinks usually contain artificial flavoring and sweeteners. The market is filled with so many options when it comes to soft drinks. However, one name that stands out the most in the soft drinks industry is coca-cola.
WHAT IS COCA-COLA?
Coca-cola, or coke, in short, is a soft drink, manufactured by the coca-cola company. It was formed in the late 19th century and only with the help of the businessman, namely Asa Griggs Candler, did it come into the market. It was only in the next century that it dominated the market.
Coca-cola has many variants under the name “cola drinks” such as diet coke, caffeine-free coca-cola, coca-cola zero sugar, and so on.
At first, the company only sold 7-9 glasses a day. However, the company has come very far since as of 2021, coca-cola has become one of the world’s largest, if not the largest, beverage companies with over 1.9 billion drinks served every single day!
COCA-COLA IN THE MARKET
As of 2021, coca-cola holds the rank 93 in Fortune 500, making itself on the list of the top 100s. The “fortune 500” is the ranking of the top 500 corporations worldwide, measured by the revenue every year. This in itself speaks for coca cola’s brand reputation in the market.
The brand has a value of over $71 billion globally. As per its report of the second quarter of 2021, the company’s net revenue grew 42% to %10.1 billion. In addition, their organic revenues grew 37%.
Adding to these values is the marketing strategy by coca-cola. These include the advertisement.
Coca-cola has always prioritized the marketing of the product through various advertisements. In fact, the company has a long history in the field of advertisement. It is even known to be creative and innovative with every advertisement it brings into the market.
Around 1892, when coca-cola was introduced in almost every state in the US, the coca-cola ads could be seen everywhere, be it clocks, posters, or even food trays.
With coca-cola campaigns, it has managed to reach a much larger audience all over the world.
HOW MUCH DOES COCA-COLA SPEND ON ADVERTISEMENT?
With advertisement as its priority, according to a CNBC report, in 1911 the advertising budget of the company touched a million dollars, equal to approximately $27 million in today’s time.
On average, the company spent $3.96 billion on advertising in 2017. Increasing the same by 3.6%, it spent a total of $4.11 billion in the year that followed.
In 2019, the annual report of coca cola’s spending on advertisement rose to $4.25bn, from which 20%, approximately $816 million, was spent in the United States alone. Moreover, the annual revenue of the company in the same year was $37.266 bn. Hence, the advertisement budget made only 11% of the annual revenue of the company.
DOWNFALL DURING THE PANDEMIC
In early 2020 the world was hit by the pandemic, covid-19. Owing to the pandemic, many corporations were severely impacted. Coca-cola was no exception. All the public spaces such as the restaurants, bars, and cinemas that make up a significant proportion of the company’s sales were shut down.
On average, coca-cola used to spend approximately $4bn every year, worldwide, on advertising alone. However, in March 2020, coca-cola informed all the advertisers that they are putting all the commercial advertisements on hold, be it for coca-cola or other brands. Consequently, according to a report, in the year 2020, with the advent of covid-19, the ad budget of coca-cola decreased and hit $2.77bn.
The advertising expense of the company dropped by almost 35% in a single year. Its revenues dropped significantly to around $33bn.
However, Coca-cola CEO, James Quince reveals, in the first quarter of 2021, the revenue of coca-cola was up by 5% to $9 billion.
WHY DOES THE COMPANY SPEND SO MUCH ON ADVERTISEMENT?
You might be wondering why one of the biggest soft drink manufacturers spends so much on advertisements. Here we might wish to quote Peter Drucker, an influential thinker on management who, while talking about marketing, once mentioned in a Forbes article, “because the purpose of business is to create a customer, the business enterprise has two-and only two-basic functions: marketing and innovation”.
Carrying on with that, the possible reasons for spending money on advertisement could be:
- BRAND NAME
The market is filled with many soft drink manufacturers. With so many options in front of the customers, it is very easy to forget a brand. Eventually, if not soon. Hence, the advertisement can help the brand keep its name in the market as well as in the mind of the customers.
In addition, the company aims to connect the image of their brand and their product with a sense of a good feeling. So every time you feel good, you crave a bottle of coca-cola. Thus, It is important for the company to keep its brand name in the market in order to keep itself alive.
- MARKET PRESENCE
Continuing from the earlier point, even though the customers know your brand, they might still not prefer you. Here marketing has always been an important factor for the company. With the help of catchy slogans, famous pop celebrities, it has aimed to attract a good section of the population, ranging from all age groups.
Even with its brand name, if it fails to attract people, the company will face much loss very soon. Hence, it is important for a company to keep in constant communication with the customers, to keep its presence in the minds of these very customers.
- ANNUAL REVENUE
One thing we might point out is that the company does not even spend more than 15% of its annual revenue. Thus, from an overall perspective, they spend a minimum amount, and if that minimum amount is bringing them an increase in the revenues, then it is only proved profitable for the company.
Moreover, if the company is not willing to spend a penny on advertising, the sales would rather start to decline. Thus it is still better to spend a little share on advertisements, than face loss.
Coca-cola does spend very much on advertising, but if we go from the initial years to the recent, the amount spent on marketing makes only up to 15% of the annual revenue that the company earns. With this much investment, it protects its brand name, makes a market presence for itself, and also adds profit to its revenue. Hence, it is a win-win situation for the company.