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Cola War Keeps on Bubbling

Call it beverage as entertainment. With celebrities like the Osbournes, Beyoncé Knowles, Courtney Cox and Penelope Cruz guzzling, dreaming, singing and even burping their way into America's living rooms, that's how media insiders see the escalating battle between the top brands in the soft-drink category, Coke and Pepsi.

Both are turning up the heat as they try to come up with innovative ways to grab the attention of consumers. Among those ways are integrated marketing plans that rely less and less on traditional TV strategies. Word on the street is, they are pouring additional hundreds of millions (perhaps $500 million) into new marketing efforts for 2003.

The perception on Madison Avenue is that Pepsi has been more aggressive in seeking out new and different marketing forms and also out-spending Coke on 30-second spots. "Coke really cut back on the big events for a while," says a top-level advertising executive, who notes that the company bailed out of the Grammys, a core soft-drink audience. Coke remains in the Olympics but at lower spending level, notes another source.

Pepsi, by contrast, was a charter sponsor of CBS's hit reality show Survivor
three years ago when the product-placement and sponsorship trends started to pick up steam.

And last year's ad expenditures show that Pepsi out-spent Coke in TV and radio by about 35%, according to Nielsen Media Research's Monitor-Plus. From January to November 2002, PepsiCo spent $281 million on its various soft-drink brands, while Coca-Cola Co. spent $208 million. Together, they accounted for about 77% of the spending in the soft-drink category, according to Monitor-Plus.

Pepsi has grabbed a lot of headlines lately for both spending big—surveys showed its Osbournes spot in the Super Bowl was one of the best-recalled of the game—and trying new forms of programming. Just last week, news broke that Pepsi, The WB and Diplomat Productions are working on a high-concept game-show special in which the winner could
—emphasis on the could
—win $1 billion. The idea is to have potential contestants be on the lookout for specially marked Pepsi products all summer long—the summer, of course, being the big soft-drink season. Consumers who get the winning bottles or cans get to participate in a live two-hour contest in September with a shot at the $1 billion. Pepsi is said to be seeking an insurer willing to cover it, in the event that a contestant actually wins.

Pepsi is also working with Diplomat and The WB on another reality show called Live From Tomorrow, described as a fully sponsored but commercial-free variety show. It too is still coming together, but Pepsi would sponsor the music segments.

And what about Coke? "They're trying to get back in the game in a big way," says one Madison Avenue source. Many credit the arrival of Steve Heyer, the former top ad sales executive at Turner Broadcasting, who was just promoted to chief operating officer at Coca-Cola.

Two weeks ago, Heyer engineered a switch in the agency of record for the Coke Classic brand, and reports surfaced last week that the company's top marketer was on the way out. Two weeks ago, Heyer gave a speech that left the ad industry buzzing. He called for the creation of true marketing partnerships between consumer-goods marketers and entertainment companies. "Our goal," he said, "is to become as critical to your marketing as you are to ours."

Coke got last summer's, and now this season's, ultimate product-placement prize through its sponsorship (valued at roughly $20 million) of Fox's huge hit American Idol.

And that's not all. In recent weeks, it has signed off on two major sponsorship deals with CBS, including a marketing tie-in with the network's National Collegiate Athletic Association programming that extends to 2011.

Coke has also taken over the soft-drink sponsorship for Survivor: Amazon. Having seen it work for Pepsi, Coke sought the rights in the event that Pepsi bailed, which it did after three installments. Coke had hoped to sponsor Survivor: Thailand
but couldn't come up with the dough, estimated at $12 million, given its other marketing commitments.

Coca-Cola Co. spokeswoman Susan McDermott also points out that the company has just launched a huge multi-brand, multimedia campaign called Coca-Cola Real, which will unveil a dozen spots with some tied to sponsorships.

The company has numerous ties to the entertainment field, including an arrangement with Creative Artists Agency (its lead agency for a while in the '90s) to develop innovative programs to expose its brands to the public. (Pepsi has a similar arrangement with the programming arm of OMD). Coke also has links (as does Pepsi) to the music industry. An arrangement with Universal gives Coke access to R&B artist Mya and hip-hop star Common. They appear in ads that feature newly composed music—not jingles.