Douglas Daft, the new CEO of Coca-Cola chooses his words the way he chooses his business alliances: very carefully. The business of Coke, he observes, is not about beverages, but about "the idea of Coke, the magic of the brand." To traditional bottlers who count their blessings in syrup sales, this is heresy. They've always sold 'refreshment', not magic.

On closer inspection, this is not such a big departure. For over a hundred years, the Atlanta company has revisited this business philosophy, that what they sell is more than a secret formula that quenches thirst. In 1911, its tag line called it ‘a glass of liquid laughter’. In 1953 it was ‘Midsummer Magic’. But these are also tough times for the Atlanta company, and it would love to have a bit of the magic spill over onto strategy. To work toward this magic formula, it phased out the company that created the 'always' campaign (with its fragmented commercials) and instated McCann-Erickson. Is there a message here? Let's not read too much into this about going back to its roots. McCann is a very different kind of integrated marketing communications company than what it was when it created the syrupy commercial about wanting to buy the world a Coke.

Coke’s search for the lost magic is really not about re-instating the sizzle over substance. It has been determined by certain market factors all lining up. Think of it as a company finding itself in the cross-hairs of a very hostile market, suddenly needing to build its own missile programme.

The Reality: A broadening of the beverage segment.
Competition is tough, with non-cola beverages (iced tea, fruit juices, coffee and bottled water) making inroads into what the beverage industry calls the ‘share of stomach’. There are new weapons --and new territories at stake -- in the Cola Wars. PepsiCo is seen to be on the offensive after it bought a new age non-carbonated brand called SoBe last year. It then made the push to be the leader in this segment by acquiring Quaker Oats last year. This gave it access to a powerful name of sports drinks, Gatorade. Besides this, Quaker Oats has many of the snack foods that appear to market well alongside Colas, as PepsiCo, and its sister company Frito-Lay already knows. Pepsi now has a long line of salted snacks. Coca-Cola is lagging behind, but the tit-for-tat acquisition and alliance spree is gathering momentum. Soon after Pepsi joined forces with megabrand coffee company Starbucks, Coke acquired a small but well-known coffee brand, Planet Java. It will go head to head with the Starbucks -Pepsi product, ‘Frappucino’. Another non-cola competitor, Nestle’s Nesquick, will also be attacked with five new milk based drinks. In March last year, Pepsi partnered with Yahoo! promising integrated online marketing. Not to be outdone, Coke teamed up with an equally established online brand, AOL, giving it enormous reach.

So can this momentum continue? More importantly how useful is it from a strategic point of view? The market is changing so rapidly, and the channels of communicating its message are so fragmented, that even a behemoth corporation like Coke risks spreading itself too thin. Which is probably why the company has decided to enlist help from those with macho marketing muscle. Ad agencies? Think again. The risky new strategy is to partner with your competitors.

The Response: extend ‘refreshment’.
The seeds of this lie in Coke’s long-standing alliance with Nestle since 1991. Even though Nestle has beverage products, it partnered with it and set up the Coca-Cola Nestle Refreshments Company. It teamed the strong Nestle trademarks with Coke’s distribution power; Nestle’s R&D with Coke’s well-established infrastructure in many countries. This grew into a more aggressive company, ‘Beverage Partners Worldwide’. Today this practice is gaining popularity. (Chrysler, GM and Ford, once fierce competitors formed an alliance in 1992 called USCAR, and more recently, formed a B2B exchange called Covisint). In February Coke took a bold step announcing a strategic alliance with Proctor and Gamble, owners of Sunny Delight. Coca-Cola will take advantage of the packaged goods behemoth's branding experience. From Coke’s perspective, it no longer wants to dominate the fizzy red drink category.

The net is being cast wider. It wants to become "the global leader in innovative snacks and nutritional beverages." Meaning Coke is no longer a 'beverage company'. It no longer wants to buy the world a Coke, but everything that goes with it.

On paper it is a great symbiotic relationship. P&G have been shedding numerous non-core brands and could leverage Coke’s vast distribution system. Think of the scale. Coca-Cola owns 230 products in some 200 countries. P&G overshadow this with 300 brands in 140 countries!

The carbonated beverage segment is hardly growing, but despite needing to maintain the lead on Pepsi, it cannot allow PepsiCo to get ahead in the snack food category that it has been in for decades.

This was soon followed by a global partnership with Disney, giving it access to a line up of yet another world-famous, and eternally relevant brand properties: Mickey, Winnie and rest of the gang. To be sure, Disney is not a ‘competitor’ in the traditional sense. But it does compete for attention in a market that is essentially youth, and fighting for first place at entertainment venues. So creating a Disney line of soft drinks, and making that an inroad into children’s lives, would get both brands the best real estate in anything from lunch boxes and screen savers to clothing, music and movie tie-ins.

Ah! Those tie-ins. Coca-Cola’s next alliance was a coup d’ gras when it chose Warner Brothers, the ramifications of which can only be described as 'magical'. Why? Warner Brothers won the rights for the movie version of Harry Potter, and Coke has a shot to play in this coveted (movie-book) league. Then there is the AOL-TimeWarner alliance itself that is almost as pervasive as Coke’s distribution network. Millions of people log on to this vast empire everyday to quench their thirst for information and entertainment. If Coke does it right, if it continues to connect to a new breed of customers across all these new channels, it might just re-invent the ‘magic’ it so dearly needs. Harry Potter and Mickey Mouse provide more than what beverage people call 'mouth-feel'. It's magic. It's intangible. If only it can be bottled!.

Lessons Learned:
Consumers want "open brands" that help them self-invent says Saatchi and Saatchi thinker Myra Stark. For years, Coca-Cola was a closed brand, strictly defined by the marketing wizards in Atlanta. But brands that only fill needs tend to remain static. They assume the customers’ basic need (in Coke’s case, refreshment) never change. Coke’s new alliances challenge that. Its new brands will fill environments, not needs. The lesson for marketers is that in order to take branding from 'needs' to 'experience' you've got to rethink who your allies are. Sometimes you've got to break the mould in order 'pry open' the brand. Observes Stark, "how can our brands help consumers change? We know that brands must be grounded in a core of meaning...However, the brand must be open and flexible enough to be relevant for consumers in a changing world." It’s not about ‘teaching’ consumers. It’s about learning from them.

From a different perspective, it’s interesting to see what another global megabrand in the online world is doing to make it robust, yet relevant experience. Yahoo! has 24 portals in 12 languages. The Wall Street Journal reported that the day-to-day running of Yahoo! portals for Hong Kong, India, Singapore and Taiwan are in the hands of the local managers, reflecting each culture. In Taiwan, the music-news section is important. In Singapore it’s Web-casting, and in India, cricket takes prominence. It's as if the old-line company Coke learned an important lesson in global strategy, long before the e-commerce rolled in. It's allowing customers (rather than the copywriters) to define what a brand stands for. No longer will any agency be able to sell a client on ‘teaching the world to sing’, or teaching the world to drink one brand and one brand only. ‘One-sight, One-sound, One sell’, the old Coke mantra, has been dispatched to the attic. The customer rules --with all his/her diversity, idiosyncrasy and ethnic diversity. Synergy will have a state funeral. The genie is out of the bottle. Maybe that’s the real meaning of ‘magic’.