1. PROJECT ON
―The Coca Cola Company‖
SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF DEGREE OF MASTERS OF COMMERCE
(M.COM) FROM THE UNIVERSITY OF MUMBAI
M.COM PART-I (SEM-I)
ROLL NO 36
UNDER THE GUIDANCE OF
PROF. SAGAR ASRANI
LORD UNIVERSAL COLLEGE,
TOPIWALA MARG, OFF STATION ROAD, GOREGAON (WEST),
I MR SHREERAJ HARIHARAN student of LORD UNIVERSAL
COLLEGE, M.com Part-I (SEM I) hereby declare that I have completed project
on “THE COCO COLA COMPANY”, in the academic year 2013-2014.This
information is true &original to best of my knowledge
signature of student
This is to certify that this project entitled COCO COLA COMPANY for
subject STRATEGIC MANAGEMENT is done by SHREERAJ
HARIHARAN seat number 36 of M.com Part I Semester I in the academic
year 2013-2014 and being submitted to University of Mumbai through LORD
UNIVERSAL COLLEGE, Goregaon (west)
INTERNAL EXAMINER SIGNATURE
EXTERNAL EXAMINER SIGNATURE
(DR RUKI MIRCHANDANI)
With deep satisfaction and immense pleasure I am presenting this project report
on “THE COCO COLA COMPANY” in partial requirements for the M.COM
I would like to extend my sincere gratitude and appreciation to my project guide
Prof. SAGAR ASRANI who assisted me into this project. It has indeed been a
great experience working under her guidance during the course of the project. I
would like to thank her for his valuable advice and support throughout this
And last but not the least I would like to thank all the Faculty Members, staff of
the institute for their help in making my project an unforgettable and great
signature of student
GLOBAL MARKETING STRATEGY.......................................................................15
STRATEGIC APPROACH AND COMPETITIVE ADVANTAGES……………….……17
PORTER’S FIVE FORCE ANALYSIS…………………………………………….30
Coca-Cola, the product that has given the world its best-known
taste was born in Atlanta, Georgia, on May 8, 1886. Coca-Cola
Company is the world‘s leading manufacturer, marketer and
distributor of non-alcoholic beverage concentrates and syrups,
used to produce nearly 400 beverage brands. It sells beverage
concentrates and syrups to bottling and canning operators,
distributors, fountain retailers and fountain wholesalers. The
Company‘s beverage products comprises of bottled and
canned soft drinks as well as concentrates, syrups and notready-to-drink powder products. In addition to this, it also
produces and markets sports drinks, tea and coffee. The CocaCola Company began building its global network in the 1920s.
Now operating in more than 200 countries and producing nearly
400 brands, the Coca-Cola system has successfully applied a
simple formula on a global scale: ―Provide a moment of
refreshment for a small amount of money- a billion times a
The Coca-Cola Company and its network of bottlers comprise
the most sophisticated and pervasive production and
distribution system in the world. More than anything, that
system is dedicated to people working long and hard to sell the
products manufactured by the Company. This unique
worldwide system has made The Coca-Cola Company the
world‘s premier soft-drink enterprise. From Boston to Beijing,
7. from Montreal to Moscow, Coca-Cola, more than any other
consumer product, has brought pleasure to thirsty consumers
around the globe. For more than 115 years, Coca-Cola has
created a special moment of pleasure for hundreds of millions
of people every day.
The Company aims at increasing shareowner value over time.
It accomplishes this by working with its business partners to
deliver satisfaction and value to consumers through a
worldwide system of superior brands and services, thus
increasing brand equity on a global basis. They aim at
managing their business well with people who are strongly
committed to the Company values and culture and providing an
appropriately controlled environment, to meet business goals
and objectives. The associates of this Company jointly take
responsibility to ensure compliance with the framework of
policies and protect the Company‘s assets and resources whilst
limiting business risks.
The prototype Coca-Cola recipe was formulated at the Eagle
Drug and Chemical Company, a drugstore in Columbus,
Georgia by John Pemberton, originally as a coca wine called
Pemberton's French Wine Coca. He may have been inspired by
the formidable success of Vin Mariani, a European cocawine.
In 1886, when Atlanta and Fulton County passed prohibition
legislation, Pemberton responded by developing Coca-Cola,
essentially a non-alcoholic version of French Wine Coca. The
first sales were at Jacob's Pharmacy in Atlanta, Georgia, on
May 8, 1886. It was initially sold as a patent medicine for five
cents a glass at soda fountains, which were popular in the
United States at the time due to the belief that carbonated
8. water was good for the health. Pemberton claimed Coca-Cola
cured many diseases, including morphine addiction, dyspepsia,
neurasthenia, headache, and impotence. Pemberton ran the
first advertisement for the beverage on May 29 of the same
year in the Atlanta Journal.
By 1888, three versions of Coca-Cola — sold by three separate
businesses — were on the market. Asa Griggs Candler
acquired a stake in Pemberton's company in 1887 and
incorporated it as the Coca Cola Company in 1888. The same
year, while suffering from an ongoing addiction to morphine,
Pemberton sold the rights a second time to four more
businessmen: J.C. Mayfield, A.O. Murphey, C.O. Mullahy and
E.H. Bloodworth. Meanwhile, Pemberton's alcoholic son
Charley Pemberton began selling his own version of the
John Pemberton declared that the name "Coca-Cola" belonged
to Charley, but the other two manufacturers could continue to
use the formula. So, in the summer of 1888, Candler sold his
beverage under the names Yum Yum and Coke. After both
failed to catch on, Candler set out to establish a legal claim to
Coca-Cola in late 1888, in order to force his two competitors
out of the business. Candler purchased exclusive rights to the
formula from John Pemberton, Margaret Dozier and Woolfolk
Walker. However, in 1914, Dozier came forward to claim her
signature on the bill of sale had been forged, and subsequent
analysis has indicated John Pemberton's signature was most
likely a forgery as well.
In 1892 Candler incorporated a second company, The CocaCola Company (the current corporation), and in 1910 Candler
had the earliest records of the company burned, further
obscuring its legal origins. By the time of its 50th anniversary,
the drink had reached the status of a national icon in the USA.
In 1935, it was certified kosher by Rabbi Tobias Geffen, after
9. the company made minor changes in the sourcing of some
Coca-Cola was sold in bottles for the first time on March 12,
1894. The first outdoor wall advertisement was painted in the
same year as well in Cartersville, Georgia. Cans of Coke first
appeared in 1955. The first bottling of Coca-Cola occurred in
Vicksburg, Mississippi, at the Biedenharn Candy Company in
1891. Its proprietor was Joseph A. Biedenharn. The original
bottles were Biedenharn bottles, very different from the much
later hobble-skirt design that is now so familiar. Asa Candler
was tentative about bottling the drink, but two entrepreneurs
from Chattanooga, Tennessee, Benjamin F. Thomas and
Joseph B. Whitehead, proposed the idea and were so
persuasive that Candler signed a contract giving them control
of the procedure for only one dollar. Candler never collected his
dollar, but in 1899 Chattanooga became the site of the first
Coca-Cola bottling company. The loosely termed contract
proved to be problematic for the company for decades to come.
Legal matters were not helped by the decision of the bottlers to
subcontract to other companies, effectively becoming parent
bottlers. Coke concentrate, or Coke syrup, was and is sold
separately at pharmacies in small quantities, as an over-thecounter remedy for nausea or mildly upset stomach.
On April 23, 1985, Coca-Cola, amid much publicity, attempted
to change the formula of the drink with "New Coke". Follow-up
taste tests revealed that most consumers preferred the taste of
New Coke to both Coke and Pepsi, but Coca-Cola
management was unprepared for the public's nostalgia for the
old drink, leading to a backlash. The company gave in to
protests and returned to a variation of the old formula, under
the name Coca-Cola Classic on July 10, 1985.
On February 7, 2005, the Coca-Cola Company announced that
in the second quarter of 2005 they planned to launch a Diet
10. Coke product sweetened with the artificial sweetener sucralose,
the same sweetener currently used in Pepsi One. On March 21,
2005, it announced another diet product, Coca-Cola Zero,
sweetened partly with a blend of aspartame and acesulfame
potassium. In 2007, Coca-Cola began to sell a new "healthy
soda": Diet Coke with vitamins B6, B12, magnesium, niacin, and
zinc, marketed as "Diet Coke Plus‖. On July 5, 2005, it was
revealed that Coca-Cola would resume operations in Iraq for
the first time since the Arab League boycotted the company in
In April 2007, in Canada, the name "Coca-Cola Classic" was
changed back to "Coca-Cola." The word "Classic" was
truncated because "New Coke" was no longer in production,
eliminating the need to differentiate between the two. The
formula remained unchanged.
In January 2009, Coca-Cola stopped printing the word "Classic"
on the labels of 16-ounce bottles sold in parts of the
southeastern United States. The change is part of a larger
strategy to rejuvenate the product's image. In November 2009,
due to a dispute over wholesale prices of Coca-Cola products,
Costco stopped restocking its shelves with Coke and Diet
GLOBAL MARKET SHARE OF COCA-COLA
In 2009, the company generated revenues of $31 billion with
$6.8 billion net income. An increased consumer preference for
healthier drinks has resulted in slowing growth rates for sales of
carbonated soft drinks (abbreviated as CSD), which constitutes
78% of KO‘s sales. KO‘s profits are also vulnerable to the
volatile costs for the raw materials used to make drinks - such
as the corn syrup used as a sweetener, the aluminium used in
cans, and the plastic used in bottles. Furthermore, slowing
consumer spending in Coke's large North American market
compounds the challenge of increasing costs and a weak
economic environment. Finally, Coca-Cola earns approximately
11. 75% of revenue from international sales, exposing it to currency
fluctuations, which are particularly adverse with a stronger U.S.
Despite these challenges, Coca-Cola has remained profitable.
Though the non-CSD market is growing quickly, the traditional
CSD market is still large in terms of both revenues and volume
and highly lucrative. The size and variety of KO‘s offerings in
the CSD category, coupled with the unparalleled brand equity
of the Coca-Cola trademark, has allowed KO to maintain its
share of this important market. KO has also responded to
consumers‘ changing tastes with new, non-CSD product
launches and acquisitions such as that of Glaceau in 2007.
Strong international growth has also more than offset a weak
On February 25, Coca-Cola Company announced its plan to
buy Coca-Cola Enterprises (CCE) for $12.3 million. Since
spinning of Coca-Cola Enterprises (CCE) 24 years ago, the soft
drink market has changed dramatically with consumers buying
fewer soft drinks and more non-carbonated beverages, such as
Powerade and Dasani water. Under the new deal, Coca-Cola
Company will take control of the bottler's North America
operations, giving the company control over 90% of the total
North America volume. In return, Coca-Cola Enterprises will
take over Coke's bottling operations in Norway and Sweden,
becoming a European-focused producer and distributor.
In March 2010, Coca-Cola Company entered into discussions
to buy the Russian juice company, OAO Nidan Juices. The
company is 75% owned by a private equity firm in London and
25% by its Russian founders and controls 14.5% of the Russian
juice market. If successful, the purchase would add to CocaCola's 20.5% market share, passing Pepsi's 30% market share.
The Russian juice market is estimated to be $3.2 billion dollars,
and estimates of Nidan's purchase price are between $560$620 million.
12. In April 2010, Coca-Cola Company purchased a majority share
of Innocent, the British fruit smoothie maker. Last year the
company bought an 18% share of the company for more than
$45 million, and recent purchases of additional shares
increased Coke's stake to 58%.
In June 2010, Coca-Cola Company agreed to pay Dr Pepper
Snapple Group (DPS) $715 million for the continued right to sell
their products following the company's acquisition of Coca-Cola
Enterprises (CCE). The deal covers the next 20 years with an
option to renew for an additional 20 years.
13. MARKETING RESEARCH
Coca-Cola's most senior executives commissioned a secret
effort named "Project Kansas" — headed by marketing vice
president Sergio Zyman and Brian Dyson, president of CocaCola USA – to test and perfect the new flavor for Coke itself. It
took its name from a famous photo of that state's renowned
journalist William Allen White drinking a Coke; the image had
been used extensively in its advertising and hung on several
executives' walls. The company's marketing department again
went out into the field, this time armed with samples of the
possible new drink for taste tests, surveys, and focus groups.
The results of the taste tests were strong – the sweeter mixture
overwhelmingly beat both regular Coke and Pepsi. Then tasters
were asked if they would buy and drink it if it were Coca-Cola.
Most said yes, they would, although it would take some getting
used to. A small minority, about 10–12%, felt angry and
alienated at the very thought, saying that they might stop
drinking Coke altogether. Their presence in focus groups
tended to skew results in a more negative direction as they
exerted indirect peer pressure on other participants.
The surveys, which were given more significance by standard
marketing procedures of the era, were less negative and were
key in convincing management to move forward with a change
in the formula for 1985, to coincide with the drink's centenary.
But the focus groups had provided a clue as to how the change
14. would play out in a public context, a data point that the
company downplayed but which was to prove important later.
Management also considered, but quickly rejected, an idea to
simply make and sell the new flavor as yet another Coke
variety. The company's bottlers were already complaining about
absorbing other recent additions into the product line in the
wake of Diet Coke. Many of them had sued over the company's
syrup pricing policies. A new variety of Coke in competition with
the main variety could, if successful, also dilute Coke‘s existing
sales and increase the proportion of Pepsi drinkers relative to
Early in his career with Coca-Cola, Goizueta had been in
charge of the company's Bahamian subsidiary. In that capacity,
he had improved sales by tweaking the drink's flavor slightly, so
he was receptive to the idea that changes to the taste of Coke
could lead to increased profits. He believed it would be "New
Coke or no Coke" and the change must take place openly. He
insisted that the containers carry the "NEW!" label, which gave
the drink its popular name.
Goizueta also made a visit to his mentor and predecessor as
the company's chief executive, the ailing Robert W. Woodruff,
who had built Coke into an international brand following World
War II. He claimed he had secured Woodruff's blessing for the
reformulation, but even many of Goizueta's closest friends
within the company doubt that Woodruff truly understood what
15. GLOBAL MARKETING STRATEGY
Many have written on topics related to global strategy, but only
a limited number of conclusions have been reached.Mesadag
(2000) argues that global marketing is a particular form
of international marketing which – in its truest form does not
exist. Its essences that it covers a broad spread of the world‘s
countries and that it strives to consciously standardize its
marketing strategy between those countries.Svensson (2001),
comments that a company‘s global strategy is closely related to
its corporate strategy.
The corporate strategy guides the performance of a company‘s
overall business activities and the allocations of resources to
achieve established business goals. Others state that when a
company pursues a global strategy, it looks at the world market
as a whole rather than at markets on a country-by-country
basis (Jeannet and Hennessey, 2001).Levitt (1983) argues that
the optimum global strategy is to produce single standardized
product and sell it through a standardized marketing
programmed. The challenge for the global corporation is to
achieve low cost operations and also to produce products of a
high standard. This strives for low cost through standardizing
products is key and will result in growth for the corporation.
Companies that dominate small domestic markets will gradually
be eased out by the low cost producing global
corporation.Kogut (1985) in his perspective of global strategy,
16. emphasizes strategic flexibility, whilst Collis (1991) has
summarized global strategy in the following4 points:
A global strategy is required whenever there are important
interdependencies among a business‘s competitive position in
different countries. The acid test is whether a business is better
off in one country by virtue of its position in another.
The sources of these interdependencies can be identified,
including scale economies (Levitt, 1983), accumulated
international experience, possession of global brand name, a
learning curve effect (Porter,1985), and the option value or
cross-subsidization (Hamel and Prahalad, 1985) that a multimarket presence confers.
The critical issues that a global strategy must address include
the configuration and co-ordination of the business‘s worldwide
activities (Porter, 1986).
The organization structure should be aligned with and derived
from the global strategy.
17. STRATEGIC APPROACH AND COMPETITIVE
The Coca Cola Company is known for its marketing expertise
and the company has always followed a great marketing
strategy that is responsible for bringing the success to the
company for over a century. The biggest strength of Coca Cola
is its brand. It has taken a lot of effort and good strategy to
create the widely known brand. Apart from this, there are
various strategies that
Coca Cola has followed over the years in order to achieve
competitive advantage using its
Strategic capabilities. These strategies include:
Marketing and branding strategy:
Healey (2008) defines a brand as a promise of satisfaction and
emphasis that good branding reinforces reputation, generates
loyalty and assure quality. Few companies in this world have
developed a brand as strong as Coca Cola. The company has
used its marketing resources to create a brand that is widely
own and has become the biggest competitive advantage for the
company. Coca Cola has been successful in creating brand
loyalty among its consumers. This is a result of u stained
marketing efforts starting from early 20th century. Coca Cola
has adopted innovating marketing techniques right from the
times of Candler and Robert Woodruff. Apart from usual
advertising through bill boards and newspapers, Coca Cola
focused on organizations, universities and colleges and this
increased sales while promoting the brand name.
Coca Cola’s global strategy:
18. Coca Cola has used its organizational capability to adopt a
global strategy Gay et.al. (2007) – using a mix of central and
local marketing functions in order to achieve maximum
marketing and distribution effectiveness. Using this, Coca Cola
maintains the strong global brand while introducing the local
elements in the marketing to make sure that the product image
is in harmony with the local culture.
NEW PRODUCT INTRODUCTIONS
Coca Cola follows out to in approach while developing New
products. Coca Cola has always preferred taking note of
customer preferences and Designing its products according to
them, instead of taking an internal approach – the Process of
taking stock of internal assets and expertise and using them to
produce something that customers would buy. Based on these,
the company either introduces a new product or acquires a
company producing the suitable product. This is essential to
Survive in the changing market and to change the product
portfolio according to customer requirements
19. SWOT ANALYSIS
World's leading brand.
Decline in cash from
Large scale of operations.
Robust revenue growth in 3
Sluggish Performance in
Dependence on bottling
Sluggish growth of
Growing bottled water
Growing Hispanic Population
WORLD’S LEADING BRAND
Coca-Cola has strong brand recognition across the globe. The
company has a leading brand value and a strong brand
portfolio. Business-Week and Inter-brand, a branding
consultancy, recognize. Coca-Cola as one of the leading
brands in their top 100 global brands ranking in2006.The
Business Week-Inter-brand valued Coca-Cola at $67,000
million in 2006. Coca-Cola ranks well ahead of its close
competitor Pepsi which has a ranking of 22 having a brand
value of $12,690 million Furthermore; Coca-Cola owns a large
portfolio of product brands. The company owns four of the top
20. five soft drink brands in the world: Coca-Cola, Diet Coke, Sprite
Strong brands allow the company to introduce brand
extensions such as Vanilla Coke, Cherry Coke and Coke with
Lemon. Over the years, the company has made large
investments in brand promotions. Consequently, Coca-cola is
one of the best recognized global brands. The company‘s
strong brand value facilitates customer recall and allows CocaCola to penetrate new markets and consolidate existing ones.
LARGE SCALE OF OPERATIONS
With revenues in excess of $24 billion Coca-Cola has a large
scale of operation. Coca-Cola is the largest manufacturer,
distributor and marketer of non-alcoholic beverage
concentrates and syrups in the world. Coco-Cola is selling
trademarked beverage products since the year 1886 in the US.
The company currently sells its products in more than 200
countries. Of the approximately 52 billion beverage servings of
all types consumed worldwide every day, beverages bearing
trademarks owned by or licensed to Coca-Cola account for
more than 1.4 billion.
The company‘s operations are supported by a strong
infrastructure across the world. Coca-Cola owns and operates
32 principal beverage concentrates and/or syrup manufacturing
plants located throughout the world.
In addition, it owns or has interest in 37 operations with 95
principal beverage bottling and canning plants located outside
the US. The company also owns bottled water production and
still beverage facilities as well as a facility that manufactures
juice concentrates. The company‘s large scale of operation
allows it to feed upcoming markets with relative ease and
enhances its revenue generation capacity.
21. ROBUST REVENUE GROWTH IN 3 SEGMENTS
Coca-Cola‘s revenues recorded a double digit growth, in three
operating segments. These three segments are Latin America,
‗East, South Asia, and Pacific Rim‘ and Bottling investments.
Revenues from Latin America grew by 20.4% during fiscal
2006, over 2005. During the same period, revenues from ‗East,
South Asia, and Pacific Rim‘ grew by 10.6% while revenues
from the bottling investments segment by 19.9%.
Together, the three segments of ―Latin America‖, ―East, South
Asia‖ and ―Pacific Rim‖ bottling investments, accounted for
34.8% of total revenues during fiscal 2006. Robust revenues
growth rates in these segments contributed to top-line growth
for Coca-Cola during 2006.
The Coca-Cola Company has been involved in a number of
controversies and lawsuits related to its relationship with
human rights violations and other perceived unethical practices.
There have been continuing criticisms regarding the Coca-Cola
Company's relation to the Middle East and U.S. foreign policy.
The company received negative publicity in India during
September 2006.The company was accused by the Centre for
Science and Environment (CSE) of selling products containing
pesticide residues. Coca-Cola products sold in and around the
Indian national capital region contained a hazardous pesticide
22. On 10 December 2008, the US Food and Drug Administration
(FDA) wrote to Mr. Muhtar Kent, President and Chief Executive
Officer, to warn him that the FDA had concluded that CocaCola's product Diet Coke Plus 20 FL OZ was is in violation of
the Federal Food, Drug, and Cosmetic Act.
In January 2009, the US consumer group the Centre for
Science in the Public Interest filed a class-action lawsuit
against Coca-Cola. The lawsuit was in regards to claims made,
along with the company's flavours, of Vitamin Water. Claims
say that the 33 grams of sugar are more harmful than the
vitamins and other additives are helpful.
SLUGGISH PERFORMANCE IN NORTH AMERICA
Coca-Cola‘s performance in North America was far from robust.
North America is Coca-Cola‘s core market generating about
30% of total revenues during fiscal 2006. Therefore, a strong
performance in North America is important for the company.
In North America the sale of unit cases did not record any
growth. Unit case retail volume in North America decreased 1%
primarily due to weak sparkling beverage trends in the second
half of 2006 and decline in the warehouse-delivered water and
juice businesses. Moreover, the company also expects
performance in North America to be weak during 2007.
Sluggish performance in North America could impact the
company‘s future growth prospects and prevent Coca-Cola
from recording a more robust top-line growth.
DECLINE IN CASH FROM OPERATING ACTIVITIES
The company‘s cash flow from operating activities declined
during fiscal 2006. Cash flows from operating activities
decreased 7% in 2006 compared to 2005. Net cash provided
23. by operating activities reached $5,957 million in 2006, from
$6,423 million in 2005. Coca-Cola‘s cash flows from operating
activities in 2006 also decreased compared with 2005 as a
result of a contribution of approximately $216 million to a taxqualified trust to fund retiree medical benefits.
The decrease was also the result of certain marketing accruals
recorded in 2005.Decline in cash from operating activities
reduces availability of funds for the company‘s investing and
financing activities, which, in turn, increases the company‘s
exposure to debt markets and fluctuating interest rates.
During 2006, its acquisitions included Kerry Beverages, (KBL),
which was subsequently, reappointed Coca-Cola China
Industries (CCCIL). Coca-Cola acquired a controlling
shareholding in KBL, its bottling joint venture with the Kerry
Group, in Hong Kong.
The acquisition extended Coca-Cola‘s control over
manufacturing and distribution joint ventures in nine Chinese
In Germany the company acquired Apollinaire‘s which sells
sparkling and still mineral water. Coca-Cola has also acquired a
100% interest in TJC Holdings, a bottling company in South
Africa. Coca-Cola also made acquisitions in Australia and New
Zealand during 2006. These acquisitions strengthened CocaCola‘s international operations.
These also give Coca- Cola an opportunity for growth, through
new product launch or greater penetration of existing markets.
Stronger international operations increase the company‘s
capacity to penetrate international markets and also gives it an
24. opportunity to diversity its revenue stream. On 25 February
2010, Coco cola confirms to acquire the Coca cola enterprises
(CCE) one the biggest bottler in North America. This strategy of
coca cola strengthens its operations internationally.
GROWING BOTTLED WATER MARKET
Bottled water is one of the fastest-growing segments in the
world‘s food and beverage market owing to increasing health
concerns. The market for bottled water in the US generated
revenues of about $15.6 billion in 2006.
Market consumption volumes were estimated to be 30 billion
litres in 2006. The market's consumption volume is expected to
rise to 38.6 billion units by the end of 2010. This represents a
CAGR of 6.9% during 2005-2010.
In terms of value, the bottled water market is forecast to reach
$19.3 billion by the end of 2010. In the bottled water market,
the revenue of flavored water (water-based, slightly sweetened
refreshment drink) segment is growing by about $10 billion
annually. The company‘s Dasani brand water is the third bestselling bottled water in the US. Coca-Cola could leverage its
strong position in the bottled water segment to take advantage
of growing demand for flavored water.
GROWING HISPANIC POPULATION IN U.S
Hispanics are growing rapidly both in number and economic
power. As a result, they have become more important to
marketers than ever before. In 2006, about 11.6 million US
households were estimated to be Hispanic. This translates into
a Hispanic population of about 42 million.
The US Census estimates that by 2020, the Hispanic
population will reach 60 million or almost 18% of the total US
population. The economic influence of Hispanics is growing
even faster than their population. Nielsen Media Research
25. estimates that the buying power of Hispanics will exceed $1
trillion by 2008- a 55% increase over 2003 levels.
Coca-Cola has extensive operations and an extensive product
portfolio in the US. The company can benefit from an
expanding Hispanic population in the US, which would translate
into higher consumption of Coca-Cola products and higher
revenues for the company.
Coca-Cola competes in the non-alcoholic beverages segment
of the commercial beverages industry. The company faces
intense competition in various markets from regional as well as
global players. Also, the company faces competition from
various non-alcoholic sparkling beverages including juices and
nectars and fruit drinks. In many of the countries in which CocaCola operates, including the US, PepsiCo is one of the
company‘s primary competitors. Other significant competitors
include Nestle, Cadbury Schweppes, Groupe DANONE and
Competitive factors impacting the company‘s business include
pricing, advertising, sales promotion programs, product
innovation, and brand and trademark development and
protection. Intense competition could impact Coca-Cola‘s
market share and revenue growth rates.
DEPENDENCE ON BOTTLING PARTNERS
Coca-Cola generates most of its revenues by selling
concentrates and syrups to bottlers in whom it doesn‘t have any
ownership interest or in which it has no controlling ownership
interest. In 2006, approximately 83% of its worldwide unit case
26. volumes were produced and distributed by bottling partners in
which the company did not have any controlling interests. As
independent companies, its bottling partners, some of whom
are publicly traded companies, make their own business
decisions that may not always be in line with the company‘s
interests. In addition, many of its bottling partners have the right
to manufacture or distribute their own products or certain
products of other beverage companies.
If Coca-Cola is unable to provide an appropriate mix of
incentives to its bottling partners, then the partners may take
actions that, while maximizing their own short-term profits, may
be detrimental to Coca-Cola. These bottlers may devote more
resources to business opportunities or products other than
those beneficial for Coca-Cola. Such actions could, in the long
run, have an adverse effect on Coca-Cola‘s profitability.
In addition, loss of one or more of its major customers by any
one of its major bottling partners could indirectly affect CocaCola‘s business results. Such dependence on third parties is a
weak link in Coca-Cola‘s operations and increases the
company‘s business risks.
SLIGGISH GROWTH OF CARBONATED BEVERAGES
US consumers have started to look for greater variety in their
drinks and are becoming increasingly health conscious. This
has led to a decrease in the consumption of carbonated and
other sweetened beverages in the US. The US carbonated soft
drinks market generated total revenues of $63.9 billion in 2005,
this representing a compound annual growth rate (CAGR) of
only 0.2% for the five-year period spanning 2001-2005. The
performance of the market is forecast to decelerate, with an
anticipated compound annual rate of change (CAGR) of -0.3%
for the five-year period 2005-2010 expected to drive the market
to a value of $62.9 billion by the end of 2010.
27. Moreover in the recent years, beverage companies such as
Coca-Cola have been criticized for selling carbonated
beverages with high amounts of sugar and unacceptable levels
of dangerous chemical content, and have been implicated for
facilitating poor diet and increasing childhood obesity.
Moreover, the US is the company‘s core market. Coca-Cola
already expects its performance in the region to be sluggish
during 2007. Coca-Cola‘s revenues could be adversely affected
by a slowdown in the US carbonated beverage market.
Coca-Cola India was the leading soft drink brand in India till
1977 when it was forced to close down its operation by a
socialist government in the drive for self sufficiency. After 16
years of absence, coca cola returned to India and witnessed a
different culture and economic platform. During their absence,
Parle brothers introduced a new type of cola called THUMS
UP. Along with, they also formulated a lemon flavoured drink,
LIMCA, and mango flavoured, MAAZA. In 1993, coca cola
bought the whole Parle Brother operation, in a hope to beat the
main competitor (Pepsi). They presumed that with the tried and
tested products of Parle they will be able to regain their throne
in the Indian soft drink market. Pepsi having a 6 year head start
helped revive the demand for global cola but it was not easy for
the soft drink giant (coca cola) to return to India. Pepsi put more
focus on the youth of the country in their advertisements but
coca cola tried influencing Indians with the ‗American‘ way of
life, which turned out to be a mistake.
Coca-Cola invested heavily in India for the first five years,
which got them credit of being one of the biggest investor in the
country; however, their sales figures were not so impressive.
Hence, they had to re-think their market strategies. Coca-Cola
learned from Hindustan Lever that reducing their will result in
more turnover, hence leading to profit. They launched an
extensive market research in India. They ascertained that in
India 3 As must be applied; Affordability, Availability and
Acceptability. Coca-Cola learnt that they were competing with
local drinks such as ―Nimbu Pani‖, ―Narial Pani‖, ―Lassi‖ etc.
28. and reached to a conclusion that competitive pricing was
unavoidable. Since then they introduced a 200 ml glass bottle
Further, they had different advertising campaigns for different
regions of the country. In the southern part, their strategy was
to make Bollywood or Tamil stars to endorse their products. In
various regions they tried portraying coca cola products with
different regional food products. One of the most famous ad
campaigns in India was ‗Thanda Matlab Coca-Cola‘; they
featured the same quote with different regional entities.
Presently, Coca-Cola is the biggest brand in soft drinks and is
way ahead in market share i.e. 60% in Carbonated Soft drinks
Segment, 36% in Fruit drinks Segment, 33% in Packaged water
Segment, compared to its arch rival, Pepsi. Diversifying their
product range and having a competitive pricing policy, they
have regained their throne. With virtually all the goods and
services required to produce and market Coca-Cola being
made in India, the business system of the Company directly
employs approximately 6,000 people, and indirectly creates
employment for more than 125,000 people in related industries
through its vast procurement, supply, and distribution System.
The Indian operations comprises of 50 bottling operations, 25
owned by the Company, with another 25 being owned by
franchisees. That apart, a network of 21 contract packers
manufactures a range of products for the Company.
On the distribution front, 10-tonne trucks – open bay threewheelers that can navigate the narrow alleyways of Indian cities
– constantly keep our brands available in every nook and
corner of the Country‘s remotest areas.
29. BCG MATRIX
A Coca-cola beverage limited is now at a stage of question
mark if we place it in a BCG Matrix. Because overall market is
growing and it has relatively less market shares then its real
competitor PEPSI. Only about 5% of the cold beverages are
being utilized and this number is increasing. Coke is sold in the
1:2 approximately ratio with respect to Pepsi as market share
or Coca-Cola Company is 27% and that of Pepsi is 68%.
30. PORTER’S FIVE FORCE ANALYSIS
RIVALRY AMONG EXISTING FIRMS:
The greatest competition that Coca-cola faces is from the rival
sellers within the industry. Coca-Cola, Pepsi Co, and Cadbury
Schweppes are among the largest competitors in this industry,
and they are all globally established which creates a great
amount of competition. Aside from these major players, smaller
companies such as Cott Corporation and National Beverage
Company make up the remaining market share. All five of these
companies make a portion of their profits outside of the United
Though Coca-Cola owns four of the top five soft drink brands
(Coca-Cola, Diet Coke, Fanta, and Sprite), it had lower sales in
2005 than did PepsiCo (Murray, 2006c). However, Coca-Cola
has higher sales in the global market than PepsiCo, PepsiCo is
the main competitor for Coca-Cola and these two brands have
been in a power struggle for years (Murray, 2006c). Coke has
been more dominant with a 53% of market share as in 1999
compared to Pepsi with a market share of 21%.
31. According to Beverage Digest's 2008 report on carbonated soft
drinks, PepsiCo's U.S. market share has increased to 30.8%,
while the Coca-Cola Company's has decreased to 42.7% due
to Pepsi marketing schemes still the higher large gap between
the market share can be attributed to the fact that Coca-Cola
took advantage of Pepsi entering the market late and has set
up its bottler's and distribution network especially in developed
"The Coca-Cola Company" is the largest soft drink company in
the world. Every year 800,000,000 servings of just "Coca-Cola"
are sold in the United States alone. Bottling plants with some
exceptions are locally owned and operated by independent
business people who are native to the nations in which they are
located. Coca-Cola manufactures, distributes and markets nonalcoholic beverage concentrates and syrups, including fountain
It supplies concentrates and beverage bases used to make the
products and provides management assistance to help it's
bottler's ensure the profitable growth of their business. This has
put Pepsi at a significant disadvantage compared to US market.
Overall, Coca-Cola continues to outsell Pepsi in almost all
areas of the world. However, exceptions include India, Saudi
Arabia and Pakistan.
By most accounts, Coca-Cola was India's leading soft drink
32. until 1977 when it left India after a new government ordered,
The Coca-Cola Company to turn over its secret formula for
Coke and dilute its stake in its Indian unit as required by the
Foreign Exchange Regulation Act (FERA).
In 1988, PepsiCo gained entry to India by creating a joint
venture with the Punjab government-owned Punjab Agro
Industrial Corporation (PAIC) and Voltas India Limited. This
joint venture marketed and sold Lehar Pepsi until 1991 when
the use of foreign brands was allowed. PepsiCo bought out its
partners and ended the joint venture in 1994. In 1993, The
Coca-Cola Company returned in pursuance of India's
Liberalization policy. In 2005, The Coca-Cola Company and
PepsiCo together held 95% market share of soft-drink sales in
India. Coca-Cola India's market share was 52.5%.
In Russia, Pepsi initially had a larger market share than Coke
but it was undercut once the Cold War ended. In 1972, Pepsi
Co Company struck a barter agreement with the government of
the Soviet Union, in which Pepsi Co was granted exportation
and Western marketing rights to Stolichnaya vodka in
exchange for importation and Soviet marketing of Pepsi-Cola.
This exchange led to Pepsi-Cola being the first foreign product
sanctioned for sale in the U.S.S.R. Pepsi, as one of the first
American products in the Soviet Union, became a symbol of
that relationship and the Soviet policy.
Brand name loyalty is another competitive pressure. The Brand
Keys Customer Loyalty Leaders Survey (2004) shows the
brands with the greatest customer loyalty in all industries. Diet
Pepsi ranked 17th and Diet Coke ranked 36th as having the
most loyal customers to their brands. The new competition
between rival sellers is to create new varieties of soft drinks,
such as vanilla and cherry, in order to increase sales and
getting new customers.
33. Pepsi is however trying to counter this by competing more
aggressively in the emerging economies where the dominance
of Coke is not as pronounced, with the growth in emerging
markets significantly expected to exceed the developed
markets, rivalry in international market is going to be more
Pepsi advertisements often focused on celebrities, choosing
Pepsi over Coke, supporting Pepsi's positioning as "The Choice
of a New Generation." In 1975, Pepsi began showing people
doing blind taste tests called Pepsi Challenge in which they
preferred one product over the other. Pepsi started hiring more
popular spokespersons to promote their products.
In the late 1990s, Pepsi launched its most successful long-term
strategy of the Cola Wars, Pepsi Stuff. Consumers were invited
to "Drink Pepsi, Get Stuff" and collect Pepsi Points on billions of
packages and cups. They could redeem the points for free
Pepsi lifestyle merchandise. After researching and testing the
program for over two years to ensure that it resonated with
consumers, Pepsi launched Pepsi Stuff, which was an instant
Tens of millions consumers participated. Pepsi outperformed
Coke during the summer of the Atlanta Olympics, held at
Coke's hometown where Coke was the lead sponsor for the
Games. Due to its success, the program was expanded to
include Mountain Dew into Pepsi's international markets
worldwide. The company continued to run the program for
many years, continually innovating with new features each
Coca-Cola and Pepsi engaged in a "cyber-war" with the reintroduction of Pepsi Stuff in 2005 & Coca-Cola retaliated with
Coke Rewards. This cola war has now concluded, with Pepsi
Stuff ending its services and Coke Rewards still offering prizes
on their website. Both were loyalty programs that give away
34. prizes and product to consumers after collecting bottle caps
and 12 or 24 pack box tops, then submitting codes online for a
certain number of points. However, Pepsi's online partnership
with Amazon allowed consumers to buy various products with
their "Pepsi Points", such as mp3 downloads. Both Coca-Cola
and coke previously had a partnership with the iTunes Store.
New entrants are not a strong competitive pressure for the soft
drink industry. Coca-Cola and Pepsi Co dominate the industry
with their strong brand name and great distribution channels. In
addition, the soft-drink industry is fully saturated and growth is
small. This makes it very difficult for new, unknown entrants to
start competing against the existing firms.
Another barrier to entry is the high fixed costs for warehouses,
trucks, and labour, and economies of scale. New entrants
cannot compete in price without economies of scale. These
high capital requirements and market saturation make it
extremely difficult for companies to enter the soft drink industry
therefore new entrants are not a strong competitive force.
Capital requirements for producing, promoting, and
establishing a new soft drink traditionally have been viewed as
extremely high. According to industry experts, this makes the
likelihood of potential entry by new players quite low, except
perhaps in much localized situations that matter little to Coke
or Pepsi. Yet, while this view may reflect conventional wisdom,
some industry observers question whether a new time is
coming, with 'new age' beverages selling to well-informed and
health-informed and health-conscious consumers. This issue
was beginning to grab the attention of both Coke and Pepsi in
the summer of 1992, when they both were not able to explain a
drop in their June 1992 sales.
Numerous beverages are available as substitutes for soft
drinks. Citrus beverages and fruit juices are the more popular
substitutes. Availability of shelf space in retail stores as well as
advertising and promotion traditionally has had a significant
effect on beverage purchasing behaviour. Overall total liquid
consumption in the United States in 1991 included Coca-Cola's
10% share of all liquid consumption.
―For years the story in the non-alcoholic sector centred on the
power struggle between Coke and Pepsi. But as the pop fight
has topped out, the industry's giants have begun relying on
new product flavours and looking to noncarbonated beverages
Substitute products are those competitors that are not in the
soft drink industry. Such substitutes for Coca-Cola products are
bottled water, sports drinks, coffee, and tea, juices etc.
Bottled water and sports drinks are increasingly popular with
the trend to be a more health conscious consumer. There are
progressively more varieties in the water and sports drinks that
appeal to different consumer's tastes, but also appear healthier
than soft drinks.
In addition, coffee and tea are competitive substitutes because
they provide caffeine. The consumers who purchase a lot of
soft drinks may substitute coffee if they want to keep the
caffeine and lose the sugar and carbonation.
Blended coffees are also becoming popular with the increasing
number of Starbucks, Barista and CCD stores that offer many
different flavours to appeal to all consumer markets. It is also
cheap for consumers to switch to these substitutes making the
threat of substitute products very strong (Data monitor, 2005).
The growth rate has been recently criticized due to the market
36. saturation of soft drinks. Data monitor (2005) stated, ―Looking
ahead, despite solid growth in consumption, the global soft
drinks market is expected to slightly decelerate, reflecting
stagnation of market prices.‖ The change attributed to the other
growing sectors of the non-alcoholic industry including tea &
coffee is 11.8% and bottled water is 9.3%. Sports drinks and
energy drinks are also expected to increase in growth as
competitors start adopting new product lines.
Profitability in the soft drink industry will remain rather solid, but
market saturation has caused analysts to suspect a slight
deceleration of growth in the industry (2005). Because of this,
soft drink leaders are establishing themselves in alternative
markets such as the snack, confections, bottled water, and
sports drinks industries.
In order for soft drink companies to continue to grow and
increase profits they will need to diversify their product
offerings. So in order to compete with the substitutes industry,
coca-cola has diversified from just carbonated drink industry to
other substitute and so have other brands like Pepsi, Dr
BARGANING POWER OF BUYERS:
Individual consumers are the ultimate buyers of soft drinks.
However, Coke and Pepsi's real 'buyers' have been local
bottlers who are franchised -or are owned, especially in the
case of Coke- to bottle the companies' products and to whom
each company sells its patented syrups or concentrates. While
Coke and Pepsi issue their franchise, these bottlers are in
effect the 'conduit' through which these international cola
brands get to local consumers
Through the early 1980's, Coke's domestic bottlers were
typically independent family businesses deriving from
franchises issued early in the century. Pepsi had a collection of
37. similar franchises, plus a few large franchisees that owned
many locations. Until 1980, Coke and Pepsi were somewhat
restricted in owning bottling facilities, which was viewed as a
restraint of free trade. Jimmy Carter, a Coke fan, changed that
by signing legislation to allow soft-drink companies to own
bottling companies or territories, plus upholding the territorial
integrity of soft-drink franchises, shortly before he left office.
Also, the three most important channels for soft drinks are
supermarkets, fountain sales, and vending. In 1987,
supermarkets accounted for about 40% of total U.S. soft drink
industry sales, fountain sales represented about 25%, and
vending accounted for approximately 13%. Other retailers
represent the remaining percentage.
While both Coca-Cola and Pepsi distribute their bottled soft
drinks through a network of bottling companies, Coca-Cola
uses its own network of wholesalers for their fountain syrup
distribution, and Pepsi distributes its fountain syrup through its
BARGANING POWER SUPPLIERS:
The principal raw material used by the soft-drink industry in the
United States is high fructose corn syrup, a form of sugar,
which is available from numerous domestic sources. The
principal raw material used by the soft-drink industry outside
the United States is sucrose. It likewise is available from
Another raw material increasingly used by the soft-drink
industry is aspartame, a sweetening agent used in low-calorie
soft-drink products. Until January 1993, aspartame was
available from just one source -the NutraSweet Company, a
subsidiary of the Monsanto Company- in the United States due
to its patent, which expired at the end of 1992.
Coke managers have long held 'power' over sugar suppliers.
They view the recently expired aspartame patents as only
enhancing their power relative to suppliers.
38. ICONIC BRAND
―The Coke Side of Life‖ campaign takes on the most recent
cultural contradiction in the youth segment by addressing its
widespread desire to be viewed as expressive individuals and
alleviating anxiety created by misrepresentations in reality
television. Using Holt‘s theory, The Stalwart Group will position
Coca-Cola Classic – an already iconic brand – as a product
that accepts and promotes individuality, expression and realism
as the solution to the false representation of truth in reality
The truth is, you are often a product of your environment – a
combination of everything you surround yourself with. Our
target market is slowly accepting what reality television portrays
as genuine. From make-up to friendships, teenagers keep
everything very near to the surface – just in case a new trend or
belief comes along and changes what is considered ―cool.‖
Individuality lies underneath the surface and is not invited by
society to shine through. The Stalwart Group‘s integrated
marketing communications campaign will break through reality
television‘s chokehold on today‘s youth by addressing and
resolving the cultural contradiction that youth experiences on a
Coca Cola is a truly global company with presence in multiple
countries. The company‘s biggest competitive strength comes
from the strong brand that has been developed over 125 years
of consistent marketing efforts. Economies of scale and the
network with suppliers and distributors
Also contribute to the success.
Marketing and advertising has been the most important function
that has taken Coca Cola to new heights. The company has
adopted innovating marketing techniques right from the times of
Candler and Robert Woodruff. Apart from usual advertising
through bill boards and news papers, Coca Cola focused on
organizations, universities and colleges and this increased
sales while promoting the brand name.
Bell, L., 2004.
The Story of Coca Cola.
Mankato: Smart Apple Media
Kotler, P., 1991.
Henry, A. 2008.
Understanding Strategic Management.
New York: Oxford university
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