by : Business, May 2017

Coca-Cola and Music: A Case Study

Coca-Cola and Music: A Case Study

Coca-Cola is taking giant steps in developing countries to harness the loyalty of teenagers to its brand. The company, which has a long history of integrating popular music into its product lifestyle, is now making music the tool of choice (sic) “to refresh the world” and “inspire moments of optimism and happiness”. These two statements, which define Coke’s 2020 Vision, could of course equally apply to music making.1 Indeed, if Coke is to double its revenue, as it hopes, it will have to focus more squarely on consumers and become a more transparent and emotionally relatable brand with younger generations. Music can do the trick. (Editor’s Note: In our Dec. 2016 issue we noted the growing involvement of mass consumer brands with music; see Karin Harvey’s “Sponsorship Lift Off”.)

In 2015, Coca-Cola spent approximately $6.8 billion marketing dollars, about 15% of its annual revenue worldwide.2 This number, coincidentally, approximates the annual value of recorded music sales in the United States, so the sum is of the first order.  Although the particular proportion paid to  musicians is unknown, if only one in every twenty dollars were disbursed on that count, a conservative estimate, the tally would be close to four hundred million dollars worldwide. Artist endorsements are thus not neutral to the business, and are profitable for those lucky enough to get them. And this is true even if wearing some de rigeur red is a must and any blue is expressly forbidden — for the latter would remind consumers of its rival, Pepsi.

The Value of Music

Understanding lifestyle choices is key to Coke sales and music is the canary in the coalmine. The average American listens to more than four hours of music each day.3 With consumption ranging from terrestrial radio to online streaming, and anything in between,  advertising opportunities are endless. Consumer brands like Coca-Cola also need a more direct approach to the masses, and that is where multi million dollar deals with artists come in handy. An artist’s bond with a fan base can both be exploited to make a stronger imprint on clients and yield clues about future behavioral trends, keeping the company current with the attitudes and habits of modern consumers.

This marketing strategy is not new. Coca-Cola’s use of music in the United States dates back to its launch in the late XIXth century, when iconic and popular music hall singer and actress Hilda Clark helped establish the brand through printed ads. Ray Charles, Aretha Franklin, Elvis Presley, Taylor Swift, and Maroon 5, among others, have since taken on the baton for Coke, who is still outspends other soda brands.

Because the population pyramid looks so different in emerging economies than it does in matures ones — where the bulge is typically among age groups of thirty and above instead of children and teens — for Coke to survive, especially in the periphery, it has to refresh its image with a younger audience.

According to Coca-Cola’s own 2020 Vision, India, Indonesia, Nigeria, Pakistan, China, and the U.S. will contain half of the teen population by the new decade. That is where the company is focused in its quest to double its receipts,4 i.e. among the approximately 1.8 billion people between the ages of 10-24 that account for the largest youth population in history.  A self-proclaimed global lifestyle brand, Coke must tap music to reach its goal.

A new strategy was devised in the United States in July 2011, when the company launched a partnership with music licensing agency Music Dealers.

Music Dealers, founded in 2008, built catalogs of indie talent for companies to use in marketing campaigns and thrived on seeking artists who owned the rights to their own music. They also allowed artists to license their material beyond the Music Dealer catalog and split placement fees and publishing royalties  equally. The relationship benefitted both the musician and Music Dealer’s client companies. As far as Music Dealers was concerned, they landed mega brand customers like Coke and about $5 million in financing in the next three years.5 If Coca-Cola was not going to develop talent itself, this was the next best thing.

The relationship, though, was volatile. Finding the right crossover international talent for Coke was never going to be easy, despite some early successes with a couple of unknown Swedish bands that were signed by Music Dealers in America. Coca Cola dissolved the affiliation in 2015, and Music Dealers, which had invested in global offices following Coke’s early interest, went into bankruptcy.

  In the meantime, Coca-Cola found a cheaper way to influence consumer culture and help emerging talent in countries with developing markets.

Coke still has a strong music influence globally through its prospering Coke Studio, a television series commenced in Brazil in 2007 that broadcast live recording sessions of up and coming local artists. Coke Studio was brought to Pakistan in 2008 and became an instant hit there, engaging nine out of ten TV-owning Pakistanis.6

The campaign worked so well in Pakistan that it became the exemplar for Coke’s international marketing. Coke Studios were started in Africa, airing in Uganda, Tanzania, Kenya, Nigeria and Mozambique. Asia followed, in India and the Middle East.7 Naturally, as Coke Studio expands, it promotes music in lesser-known cultures, which in turn creates special bonds of affection with local Coke drinkers. It also offers a great opportunity for artists to gain exposure as well as work with sponsored producers and a world-class production team.

The Value of Coca-Cola

The mission of Coke Studio in Pakistan and elsewhere has always been to cultivate a younger generation through the empowerment and transparency afforded by musical expressions of any sort. The goal is to transcend the boundaries of race, language, and religion and unite people through the “universal language of music”. This is the roadmap with which the Coke brand builds loyalty over time.

Compared to foreign megastar endorsements, tapping the support of numerous local artists diversifies the intended consumer base and makes the product more authentic. Because of this, Coke Studio continues to expand in developing countries. In the current juncture, this is good for talent. Moreover, if record labels begin to come into their own again and start to appraise the risk of signing artists more leniently, the work that Coke Studios is doing, especially in developing nations, will help artists of all sort make a livelihood in music. This is because the object of Coca-Cola can hardly be the long-term production of talent. As an incubator, though, it may play an important role.

  There are other noteworthy ventures with music. Recently, live streaming has gained momentum, and Coke, ignited by Cody Simpson’s spontaneous live show at Copacabana Beach during Rio’s 2016 Summer Olympics, has taken to sponsor live stream events for smaller artists around the globe.8 The company also launched a music campaign in Canada during the summer, again directed towards youth. Its motto was “Play a Coke”. It personalized logos on more than 60 million bottles with “shareable” moments such as “First Kiss,” and “Class of 2016”, and in each instance it produced a playlist consumers could access by scanning their bottle with the free “Play a Coke” app. Success is expected to breed more success, and Coke will repeat the offering in Canada this  summer.9

Most significantly, Coca-Cola has bought an equity stake in Spotify in Nov. 2012. It has since made the streaming service an official global partner. This, of course, is all because the brand needs rejuvenation periodically among teenagers and young adults. For the first time ever, a mass consumer brand is playing the music market at the recording and distribution end. Only the major labels are in that category, for they are also invested in Spotify stock.

Coke is in the end demonstrating that today’s music’s patrons are no longer found from the ranks of players determined by sales of recorded product, concert ticket grosses, or music royalties. Today, the slogan ‘Coca-Cola refreshes you best’ should be playing well with musicians of all creeds.

 

By Ashley Cook

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Endnotes:

1. Coca-Cola, 2020 Vision, public PDF.

2. Jurevicius, Ovidijus. “Coca Cola SWOT Analysis 2017.” Strategic Management Insight. Strategic Management Insight, 08 Jan. 2017. Web. 05 Mar. 2017.

3. Stutz, Colin. “The Average American Listens to Four Hours of Music Each Day.” Spin. Spin, 31 Mar. 2015. Web. 05 Mar. 2017.

4. Gottlieb, Aaron, and Zosia Boczanowski. “Music’s Fizzy Logic.” Music Business Journal Berklee College of Music RSS. Berklee College of Music, Mar. 2012. Web. 05 Mar. 2017.

5. Gwee, Karen. “The Collapse of Music Dealers and Music Licensing’s “Race to the Bottom.” Consequence of Sound. Consequence of Sound, 04 Aug. 2016. Web. 05 Mar. 2017.

6. Journey Pakistan. “Coke Studio: How the Groundbreaking Campaign Started…” The Coca-Cola Company. The Coca-Cola Company, 21 Dec. 2014. Web. 05 Mar. 2017.

7. In-house Kenya. “Coke Studio Africa Premieres in Various Countries.” Music In Africa. Music In Africa, 13 Oct. 2015. Web. 05 Mar. 2017.

8. Olson, Cathy Applefeld. “Coke Music TV: How a Spontaneous Olympics Live Stream Led to the Brand’s New Music Initiative.” Billboard. Billboard, 30 Jan. 2017. Web. 05 Mar. 2017.

9. Powell, Chris. “Coca-Cola Tunes into Teens.” Canadian Grocer. Canadian Grocer, 12 May 2016. Web. 05 Mar. 2017.

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