Why Coca Cola Still Spends Billions On Ads

For over a century, Coca-Cola has been selling the most successful product in the history of humankind. Since its humble beginnings in 1886, when John Pemberton first brewed a mixture of cocoa leaves and cola nuts, Coca-Cola has undergone a remarkable transformation, becoming the biggest and most familiar brand in the world. But how is it that a company selling bottled soda managed to stand the test of time and infiltrate the lives of billions of people worldwide? More importantly, what is the secret behind their tremendously expensive marketing campaigns?

Well, we did the research for you, so why not grab a bottle of Coke and discover the fascinating answers to these questions by watching this video?

Welcome to A Lux! There are very few people walking the Earth right now who've never tasted the all too familiar and nostalgic taste of Coca-Cola. In fact, it's not shocking at all when you learn that over 2 billion bottles or cans of Coke are being sold globally every single day. All of this sounds like a monopoly, and well, that's because it kind of is. Coca-Cola is a global leader in the non-alcoholic drinks industry. The company is the largest beverage company in the world, owning and licensing more than 500 diverse soft drinks, fruit juices, sports drinks, and other beverages in over 200 countries.

You'll probably know the company from its most well-known brands like Coke, Diet Coke, Fanta, Sprite, Powerade, and Dasani. Now, on top of that, over the years, the company has partnered with thousands of modelers, distributors, retailers, and wholesalers to help bring the company's products to consumers. It's safe to say that since this genius product was created 139 years ago, the brand has evolved a lot; that's an understatement.

But the thing that raises a brow for a lot of people is how Coca-Cola was able to stand the test of time and remain relevant until today. Although the answer is a bit complex and could never fit in a single video, the general answer is this: intelligent and data-driven marketing campaigns. The beverage industry is a ruthless and competitive market, especially in a globalized context. Because of this, global brands like Coca-Cola must spend millions of dollars on multi-channel marketing campaigns to stay ahead of the curve. This means if Coca-Cola does not advertise consistently, it will lose that global share to other competitors like Pepsi.

This has become increasingly more important as consumers turn away from sugary drinks due to health concerns, leaving soft drink brands to amplify their creativity to stay in front of consumers. In fact, global juggernauts in the soda industry spend billions every year on advertising campaigns in order to stay relevant and competitive. And make no mistake—this is a huge percentage of their profits. Coca-Cola spent around 4.7 billion dollars on advertising last year, which amounts to roughly nine percent of its total 43 billion dollars in profits. And that's a lot.

But this large budget and implementation of a global marketing strategy allows Coca-Cola to gain a competitive advantage through targeted marketing. That's why new products are able to enter the global marketplace and increase brand awareness and equity among consumers worldwide. The advantage lies in data, technology, and analytics from targeted countries so that messages resonate with markets, regardless of where they are.

All right, let's dissect the "Share a Coke" campaign to better put this into perspective. So, the Share a Coke marketing campaign began in Australia in 2011 and eventually rolled out in over 80 countries. The campaign involved printing common first names, as well as other words and phrases, on the side of Coca-Cola cans and bottles, encouraging consumers to share a Coke with someone whose name was on the packaging.

This campaign was highly effective because it tapped into people's emotional connections to their names and provided a fun and engaging way for consumers to share their product with others. You'll see this is a recurring theme in Coca-Cola history. The personalized packaging made the product feel more special and unique, creating a sense of excitement and novelty around the brand.

The campaign was initially launched as a national strategy in Australia after the Coca-Cola marketing team noticed a decline in sales among younger consumers. They recognized that these consumers were looking for more personalized and engaging experiences with brands and sought to create a campaign that would resonate with this audience. The success of the campaign in Australia prompted Coca-Cola to scale that strategy globally, using data and insights from the Australian launch to inform their approach in other markets.

They used local research to identify common names and cultural nuances and adapted the messaging and packaging to suit each market. For example, in the Middle East, where the use of the first name is less common, the campaign used nicknames and terms of endearment instead. Coca-Cola's advertising is successful because the company leadership understands one vital thing: the importance of designing experiences that include its product—experiences that echo consumers' lives and show how a product improves them.

But this is just one piece of the puzzle. According to Brand Finance, Coca-Cola has the strongest brand in the world with an AAA Plus rating, second only to China's WeChat globally. It's also the most prestigious soft drink brand in the world because name brands evoke a level of quality and consistency. Consumers tend to repeatedly return to them, and that drives sales, which in turn drives profits. Profits are what catch the eye of institutional investors, and this is a very important reason why Coca-Cola is able to conduct these insanely expensive marketing campaigns.

With over three dozen stocks in Berkshire Hathaway's portfolio, there's only one company that Warren Buffett clearly has an ongoing love affair with. He's owned it for over 30 years and he's determined to never sell it. That's obviously Coca-Cola. Over time, Warren Buffett acquired 400 million Coca-Cola shares worth 23.7 billion dollars—that's 6.92 of their entire equity portfolio. The fifth largest holding, Berkshire Hathaway owns a staggering 9.19 of the outstanding Coca-Cola stock. The first Coca-Cola trade was made in Q4 1998. Since then, Warren Buffett bought shares 10 more times and sold shares on eight occasions. The stake cost the hedge fund 13.2 billion dollars, netting the investor a gain of 80%.

And that's considering the current market conditions, which curiously haven't seemed to have harmed Coca-Cola as much as other companies. And make no mistake, that's not by accident. Coca-Cola has paid a dividend every quarter since 1920 and has raised the payout every year since 1963. That 59-year history of dividend increases puts the beverage company into an elite group of stocks known as "dividend kings," or companies that have hiked their payout annually for 50 years or more.

Actually, there are few companies with as long of a track record as Coca-Cola. But it's not all about the money; the cola brand is much more than that. It's an experience. Over the numerous decades it has thrived in the market, Coca-Cola has managed to train our brains to associate the brand with a feeling of nostalgia and happiness. Rather than attempting to sell a drink, Coca-Cola focuses on selling abstract concepts such as happiness, family, connection, and sharing.

It's a masterfully crafted identity. The brand's iconic red and white logo, the sound of a bottle being opened, and the sound of bubbles fizzing—it reminds us of the heritage, history, and success of the brand. From its iconic Christmas ads featuring Jolly Old Saint Nick to its feel-good summer campaigns, Coca-Cola's advertising sells one powerful thing: nostalgia.

The brand understands the power of deep emotional connection—a power that can transport us back in time to happy memories associated with the winter holidays, family gatherings, and childhood memories. With every sip, we're reminded of the happy times that we shared with our loved ones, making Coca-Cola a part of our lives and our memories. Its flawless product, the bottled Coke, is a big part of this story.

But what has ultimately kept Coca-Cola a global juggernaut is its place in our collective memory. This attachment in time has created a sense of loyalty among customers, making them more willing to pay for the product and more inclined to make repeat purchases. Coca-Cola is such an integral part of people's lives that the option of buying a Coke when making a beverage choice will live on for generations to come.

And let's not underestimate the impact of the brand's values. Now, in the era of woke capitalism, as some people like to call it, values matter as much or even more than the product itself. Inclusivity, diversity, and social responsibility are but some of the pillars Coca-Cola is building in its ad campaigns around the world.

So, to wrap all of this up, here are the most important things you need to take away from this video: Coca-Cola is a household name that has a profound mark on our collective memory for more than one century, and its advertising campaigns beautifully leverage this tradition in order to keep it an integral part of our lives.

This financial juggernaut is backed by billions of dollars of institutional money from the biggest hedge funds in the world because of its dividend program and stock returns, and in some cases outperforming the S&P 500 several years in a row. The values and principles Coca-Cola is building in its advertising campaigns around the world ensure its brand fits the narratives and social movements in order to remain relevant and competitive.

The global marketing teams work together to direct data-driven campaigns regionally before scaling them globally, creating social media trends and movements. And last but not least, Coca-Cola owns the trademark of the most successful product of capitalism: the bottled Coke soda, which is consumed by billions of people every single day.

All of these cog wheels are beautifully working together, creating a powerhouse consumer-focused machine that will probably still be here in hundreds of years in one shape or another.

And that's a wrap for today, Alexa! We have to admit this video was a ton of fun to make, and we're looking forward to making more of these in the future. But until then, we're curious to hear your thoughts on this topic. What do you think has made Coca-Cola such a powerful brand? And while you're at it, why not share with us if you feel those nostalgic vibes watching those Christmas Coca-Cola advertisements? Because we certainly do!

And as always, if this video helped you to learn something new, why not return the favor by tipping us with a like? As always, thanks for watching A Luxor! We'll see you back here again tomorrow. [Music]