Coca-Cola Co President Steven Heyer, a former advertising executive, pledged when he joined the world's largest soft-drink maker in March 2001 to turn around sales by using what he knows best: marketing.
Heyer has revamped Coca-Cola's advertising -- traveling to Los Angeles for the filming of commercials, helping review the scripts and even picking out the actors' wardrobes. End result: the current "Real" campaign, with ads featuring celebrities such as David and Courtney Cox Arquette and Penelope Cruz.
Heyer is taking a prominent role because CEO Douglas Daft's strategy of creating new flavors for traditional drinks like Diet Coke and buying smaller beverage companies hasn't helped boost sales. The stock is trading at a seven-year low, making it one of the biggest decliners on the Dow Jones Industrial Average.
"This is not a young company with an exciting growth product," said Joan Lappin, president of Gramercy Capital Management, which is shorting Coca-Cola shares. "Coca-Cola is no longer a premium company. It's a has-been with a fabulous brand name."
Lappin declined to say how much in assets Gramercy manages. A short sale is one in which a seller hopes to profit by repurchasing shares later at a lower price.
Coca-Cola spent about US$213.7 million last year through September on advertising in the US, while rival PepsiCo Inc, maker of Pepsi cola and Frito-Lay snacks, spent US$366.1 million on its beverages, according to CMR/TNS Media Intelligence.
Past ad campaigns, such as "Life Tastes Good," failed to lift US sales of Coke Classic, Coca-Cola's biggest brand, because they didn't resonate with consumers, Tom Pirko, president of the industry group BevMark LLC, said.
"Can you remember a recent advertising campaign?" Pirko said. "Coke's real function is to think of the icon, market the brand and find ways to keep it hot."
Since joining Coca-Cola as an executive vice president, Heyer has shifted ad accounts for more than 24 brands, with billings estimated at as much as US$600 million. In addition to helping create the "Real" campaign, he's been a driving force behind new drinks such as Vanilla Coke, which boosted fourth-quarter results, investors said.
"I didn't understand how Daft was running the company from Atlanta by himself," said analyst Neal Goldner of State Street Global Advisors, which manages about US$770 billion. State Street's parent is Coca-Cola's fifth-biggest shareholder, with more than 66 million shares. The firm added 3.2 million shares last quarter.
Daft, CEO since February 2000, had been without a top lieutenant since Jack Stahl resigned almost two years ago. The promotion of Heyer, 50, puts him in line to succeed Daft, who turns 60 next month, under the company's succession plan.
Daft, a 33-year Coca-Cola veteran, cut 5,300 jobs his first year in charge and moved executives away from headquarters and into local markets. He also increased the marketing budget by US$300 million in 2001, struck a deal to sell Evian and Dannon waters in the US, and made about nine acquisitions in the past year.
Boosting sales is a challenge mainly because growth in the US, Coca-Cola's largest market, is almost unchanged. The US$62 billion soda market increased 0.6 percent in 2001, according to the consulting firm Beverage Marketing Corp. Americans are drinking more noncarbonated drinks, especially water.
New York-based PepsiCo, with its cherry-flavor Mountain Dew Code Red and lemon-lime soda Sierra Mist, has been faster than Coca-Cola in introducing products.
"There are a lot of visible examples of Pepsi's innovation," said Simon Burton of Banc of America Capital Markets, which manages US$260 billion in assets and whose parent owns about 29.4 million PepsiCo shares.
Heyer is the first outsider in two decades to join Coca-Cola's management. He was president and chief operating officer of AOL Time Warner Inc's Turner Broadcasting System. He helped introduce 14 television networks.
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