On Feb. 20 and 21, Coke made two significant announcements, and
its stock fell -12.4% by week's end. To offer his own perspective, Coke chairman/CEO Doug Daft wrote memos to employees and senior executives. PepsiCo senior executives added their take, next day. Backdrop. On Feb. 20, Coke said it would spend $300 mil-$500 mil extra this year on "strategic one-time marketing activities" but did not divulge how money would be spent. On Feb. 21, Coke announced juice/chips venture with P&G (BD 2/21/00).
Daft to employees. An apparently frustrated Daft on Feb. 22, wrote "all
employees worldwide." Cited recent positive developments --Harry Potter movie tie-in and P&G deal -- but noted "our stock dropped." Analysts told Coke "that unless we would share with them specific details"about how $300 mil- $500 mil would be spent, "they would exercise caution in valuing our stock in the near-term." Adds, "we told them the simple truth -- divulging those details would put us at a competitive disadvantage." Declares: "Despite so much positive news, our discussion of long-term marketing investments has caused our stock to decline." Concludes: "Nothing will weaken our determination to do what is right for the long-term interest of our company." Daft to executives. In memo to top executives, Daft says
analysts "believe we will have to repeat" $300 mil- $500 mil investment. Declares: "They are wrong." Concludes: "Let's not allow this week's commotion to distract us ... Let me deal with the critics ... Stay focused."
PepsiCo. On Feb. 23, PepsiCo chairman/CEO Roger Enrico and president Steve Reinemund write "all PepsiCo associates." Consumers, they note, will ultimately determine if new Coke/P&G "venture will succeed or not." Add Coke and P&G
"have their work cut out for them." Brands in decline. Enrico/Reinemund declare Coke/P&G unit has "several large brands that are in steep decline, so they aren't starting off with a particularly strong position." Power
of One. PepsiCo "has known for a long time that snacks and beverages can make a very powerful combination ... The key is to bring together strong, exciting brands." But executives also urge "associates" not to get complacent. Say Coke and P&G can't be under-estimated. Declare: "Stay focused."
Rodkin. On March 2, Pepsi North America president/CEO Gary Rodkin writes to bottlers. Notes, "as P&G and Coke wrestle with the challenges of combining their brands, we have the tried-and-true 'Power of One' on our side." Adds: "We're creating ... a difficult act for Coke to follow (with or without P&G)." [parentheses Rodkin's]
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