What you need to know:

• Coke has already borne the backlash from AI advertising.
• CEO James Quincey says the cost and scale efficiencies are boundless, as is personalisation.
• But that comes with a caveat and a warning: Creating endless ads for cents optimised by bots until until people click yes risks a dystopia that will only fuel ad blockers.
• In that scenario, Quincey thinks live events may be the last marketing pillar standing. Coke’s hedging its bets and going bigger early. They’ll become “the only thing you can’t avoid”.
• Meanwhile, he unpacks why he culled 200 brands, why localism rules in a global behemoth – and where the firm heads next.

Jumping on the gen AI train early was a must for a company like The Coca-Cola Company that “tends to be big and slow”, chairman and CEO, James Quincey said. “If we’re not at the beginning, us getting to scale often comes too late,” he told attendees at this year’s Adobe Summit.

It’s this mentality that led Coca-Cola last year to controversially create one of the first brand campaigns using generative AI for the Christmas holiday season. Up until that point, AI had been behind the scenes from an analytical, process perspective, to help personalise emails and texts, and to assist the FMCG giant better provide more customisable point-of-sale materials in local markets, Quincey said.

The gen AI ad was a remake of Coke’s 1995 commercial, ‘Holidays are coming’,  and was initially well received: System1 tests showing an ‘overwhelmingly positive consumer response, and perfect 5.9 scores in both the UK and US. That was until people found the ad creative was all AI. Industry commentary quickly turned sour, and the FMCG giant was accused of sucking the emotional life and warmth from its advertising.

Whether consumer views of AI making creative shift as the tech improves and becomes a dominant part of production remains an open-ended question. From Quincey’s perspective, Gen AI meant cheaper and quicker ad creation than historically for Coca-Cola’s holiday campaign, signifying a huge productivity opportunity. The limitation is it cannot produce resolution on people’s faces that people will buy into – yet. And as a company with people and customers in its advertising, having humans that look like humans remains critical, he said.

“The boundary for AI is still inanimate, or animal scale resolution. We genuinely want to make ads with people in them. What’s super interesting is you can make a video with music, voice, and customise that endlessly… but AI is not yet at a stage where we can make all our ads, as we want people in them,” Quincey said. “It will get better – who knows how long that will take. But when it breaks through, marrying that with the unit cost of making it, will trigger a huge wave of marketing revolution and creativity.”

As Quincey pointed out, no one can see over the horizon. But he did believe the marketing business is quickly heading towards a struggle: Content production cost efficiencies and unprecedented personalisation versus seriously pissed off consumers.  

“As technology develops and especially as humans become resolved to gen AI programs, the question will become in part, what is the cost every time I make it,” Quincey said. “On one end of spectrum is this: The cheaper it gets to make gen AI, the easier it is for me to put you in the ad on your phone, then someone else in the ad on their phone.

“The next stage is saying you looked at the product on your phone, but you didn’t buy the product. And I can tell you don’t buy it… In the future, the AI can do that. You didn’t click yes, but it’s so cheap to redo the ad, I’ll do an A/B test and reshow the ad to see if you click. Then I’ll keep changing that ad until you click yes. It’s about the lower cost of the ad, and the more I can set up Gen AI plus some intelligent engine to chase you until you click yes.”

At the other end of spectrum, however, “will be a whole load of annoyed consumers”, Quincey warned. “They’ll be thinking, this is something from Minority Report, something weird, and I want to buy ads that block everything.”

The answer as to where marketers then spend more of their money? Live experiences, according to Quincey. He said brands like Coke will up spend on live experiences as they’ll become “the only thing you can’t avoid”.

“This interplay between creativity, the cost of the creativity, people’s level of annoyance between being flooded and live experience – in the centre will be the quality of creativity,” Quincey said. “As consumers, I’ll be willing to let in the best of them. Because as consumers, we don’t want to be spammed with rubbish.

“This interplay will put a premium on core creativity.”

Building brands = killing brands

In a 30-minute, on-stage conversation with Adobe CEO, Shantanu Narayen, Quincey also spoke of the bold bets he’s been pushing through The Coca-Cola Company throughout his career, and since becoming CEO in 2017. In recent years, the big one has been killing off half of Coca-Cola Company’s branded product lines, from 400 to 200.

“Growth is what drives the machine forward, so in each general management job, there came a moment where this a super bold and big decision needed to be made to achieve it,” he said.

As CEO, Quincey described his role as much a “chief agitator for innovation” as “chief zombie killer”. Both approaches are critical for the beverage giant to continue meeting unmet needs of new generations of consumers, he said. Of Coca-Cola Company’s current 200 brands, 30 are more than US$1bn businesses in their own right.

A desire to move with the times was set early by Quincey when he first took up the reins as CEO after first joining The Coca-Cola Company in 1996.

“We were very formal, hierarchical culture, stuck in our ways,” Quincey said. “The culture had to change. The second thing was product. We were trapped strategically in this idea of being a total beverage company, but everything we looked at had to be Coke first, and we all had to love Coke first. You need to be able to choose. If you don’t allow that you trap everyone in a brand strategy that doesn’t let the people choose; trying to sell what you make rather than make what sells.”

Quincey outlined a diverse innovation and iteration strategy at the company today, from niche, limited-edition products put into the market to grab attention and bring people back to the core franchises, such as the Coke and Oreo flavour combination, to creating new permanent lines, rethinking packaging, marketing, and ways to do marketing.

“When we are talking about our core product, it’s really about trying to serve unmet needs and expanding the universe,” Quincey said. “We’re always looking for the fill ins as well as the big ideas. The problem at Coke is we have more ideas than will ever work. So I have one role – chief agitator to do something, whether it’s to continue to make our core brands relevant for next 10 years, or do something new. I’m also… the chief zombie killer.

“Every brand manager turns up, and they see a product struggling or hasn’t worked for  last three years and goes, I can fix it, it just needs one more campaign. We can do it, one more reprogramming. No, the time has come when it needs to be put to bed.  

“So I’ll agitate but also, if it doesn’t work, it’s got to go.”

This also goes for knowing what the company is good at, and what’s better undertaken by an ecosystem of partners.

“We focus on brands, marketing, innovation, strategy and orchestration. Then we have several hundred bottling partners who receive our secret concentrate, get water, fizz, sugar, put in bottles, trucks, then distribute to 33 million physical outlets we deliver to each week – we are selling 2.2bn, 8-ounce serving of our products every day. It’s a massive physical ecosystem,” Quincey said.

“We cannot be good at everything. We owned 40 per cent of the bottling system when I started. At best, we were mediocre at being good bottlers. We are really good at one set of things. Find another set of people good at bottling – asset heavy, more people, margins are less. “

Today, 750,000 people work in the Coca-Cola Company ecosystem, but fewer than 50,000 work for the company directly.

“When a franchise system works, it’s unbeatable. Yet each bottler is local to the place they are in – there are 60 bottlers in the US, all different and love the bit of the world they’re in,” Quincey said.  

Local versus global brand strategy

While distribution and bottlers may be highly local, Coca Cola’s brand strategy is very much to prioritise brands that can be global.

“I don’t want a portfolio relevant to just one city at a time, but that’s relevant around the world,” Quincey said. That doesn’t mean localisation is a dead concept, however.

“Some things are true across humanity across the world, but how that is brought to life in each country has to be profoundly local. So we have a global framework and global corridor in which all brands must operate, but that’s brought to life differently in every country.

“Sharing a Coke at a meal is a universal idea, but the meal, the location of meal, the couple of people or whole family coming together for that meal – that’s very local. Food is profoundly local versus beverages.”