By Leslie Gevirtz
BOSTON, May 3 (Reuters) - The head of Coca-Cola Co (NYSE:KO - news), said Wednesday's announcement of a multiyear pact with America Online Inc (NYSE:AOL - news) to develop online and offline marketing programmes was just the beverage giant's first Internet marketing initiative.
"Obviously, this is a major one," Douglas Daft, Coke's newly named chief executive, told reporters of the marketing alliance that a knowledgeable source said was valued at about $64 million. "We will obviously go through this with many other alliances on specific projects."
"The whole key to this is just to learn how to build brands on the Internet. Sorry, not learn, build brands," Daft said after speaking to the Chief Executives Club of Boston. "I would put the analogy as moving from radio to television in the '50s. Sure, everybody who was advertising on radio said you could never advertise on TV. 'Hey, you've got to have singing voices.'
"I think we're in that same position. How do we build brands on the Internet? And for AOL, how can they use a global brand like Coke to build their own brand and also extend their own brand," Daft said. "We're in over 200 countries, AOL has their sights on other countries."
Daft said he called AOL's Steve Case several months ago because had always admired the company and the man. Other Coke officials said Coke's deal with AOL was not at all related to or pressured by PepsiCo Inc's (NYSE:PEP - news) promotion deal with Internet portal Yahoo (NasdaqNM:YHOO - news).
The alliance, between Coca-Cola and AOL, the largest U.S. Internet service provider, will focus on several key marketing themes, including music, movies, sports, holidays and community, Coca-Cola said in a statement.
Coke is trying to retain and attract its core market of 12-24-year-olds and, sources close to the deal expect to see some Coke branding on AOL during the summer.
Coca-Cola will make America Online's interactive services and products available to consumers through its distribution channels worldwide, including advertising, merchandising, packaging and in-store promotions. America Online will market Coca-Cola brands online across its interactive brands such as AOL, CompuServe and Netscape.
Many Internet companies have been trying to align themselves with traditional offline names, and Dulles, Va.-based America Online is no different. In March the company, which is set to merge with media giant Time Warner Inc. this year, formed a marketing alliance with U.S. retailer Sears, Roebuck and Co. It has also formed similar agreements with Wal-Mart Stores Inc. and General Motors Corp.
Separately, Daft said the company's earlier announced layoff of 5,200 workers was completed at the end of April. The company has been struggling to improve profits after a string of setback during the last 18 months including a severe economic downturn in Asia and costly product recalls in Belgium and France.
On Tuesday, Daft spoke to the company's remaining workers at its Atlanta headquarters and assured them there would not be another round of job cuts. He also said there would be a new holiday for workers on May 8, the anniversary of John Pemberton's creating the Coca-Cola formula in 1866.
In addition, he promised a full review of compensation policy aimed at improving retention and recruitment as well as instituting summer works that included closing at lunchtime on Friday.
Coke remains in mediation to settle a racial discrimination lawsuit, Daft said and noted he remained committed to a diverse workforce. Management compensation packages were now tied to diversity, he added.