Coca Cola Company
BY PATHFINDER CONSULTING
RAYMOND M HICKS
History of Coca Cola
World's largest soft-drink company
First invented by John Pemberton, a pharmacist, in
Atlanta, Georgia in 1886
Combined syrup with carbonated water and sold the
drink at a soda fountain in a local drug store
Selling 1.7 billion servings of beverages everyday to
consumers in over 200 countries through more than
300 bottling partners
Most recognized and powerful brand valued at $70
billion in 2010
Mission: To refresh the world…Inspire moments of optimism
and happiness…Create value and make a difference
2020 Vision: Double Revenues by the year 2020
Profit- Double revenue/ increasing system margins
People- Great place to work
Portfolio- Double servings to over 3 billion a day
Partners- Preferred and trusted beverage partner
Planet- Global leadership
Publicly traded company
Shares held by insiders, different institutional and
mutual fund owners, and individual investors
Largest shareholder is Berkshire Hathaway
1997- Asian financial crisis dropped overseas sales
1999- Belgium alleged contamination fears
Consumers' taste preferences started to shift to
Sodas were blamed for contributing to obesity
Existing bottlers' franchise agreements
2008 recession sent consumers to purchase cheaper,
private-label water, causing a 15% market share drop
Missed several big opportunities to expand
Issues Identification (Cont.)
Pepsi- Quaker Oats, Gatorade
DPS- Dr. Pepper, Sunkist, A&W, Canada Dry, Snapple
Issues/challenges that the firm may face:
Threat of competitors
Strategic direction firm has chosen:
Cost leadership – lower cost to gain a competitive
Property, Plant and Equipment
Buildings and facilities constructed all over the world
Strong Financial Position
Large positive cash flows
Training and development result in competent and motivated
Constant innovation, R&D, new iterations of products to keep
up with market
Intellectual Property Rights
Stymie intense competition with patents and trademarks
High level of brand loyalty and brand visibility
Brand Name and Loyalty
Distribution and Manufacturing Networks
Value Chain (Primary)
Supplies of Components
Research and Development
Sales and Marketing
Demographic& Global: The soft drink industry reaches the global
market , anywhere in the world. Coca Cola, Pepsi,Red bull are selling
beverages in over 200 countries, and still are becoming more global.
Physical Environment: Ecological, social, economic systems
interactively influence the soft drink industry to have potential or
Economic: Coca Cola reaches the most powerful brand in the world
valued at $70 billion in 2010, and the global economy is expanding
significantly after the recession. Because of the challegnes, it is trying to
go more environmental friendly economy. There was low growth in the
market for carbonated drinks, especially in Coca-Cola’s main
market, North America.
Political: The FDA controlled Non- Alcoholic Beverages with the help
of government. Government keeps track of the manufacturing
procedure of these products in terms of regulations. Changes in Laws
and Regulations(like accounting, tax), changes in Non-Alcoholic
business era(competitor pricing policy), and Political Conditions(
especially in international market) will effect the operation.
Sociocultural: Society’s attitude and cultural values change
with anti-obesity campaigns.( healthier, Demand for carbonated
Technological: As new tech comes in, new products comes into
the market, such as cherry new Coke in 1985, but consumers
prefer the original coke.
The soft-drink business model involved four primary participants
1.Concentrate producers: Blend common ingredients and
flavors, and ship the mixture in the containers to bottlers.( Marketing
,research, maintain relations, negotiating with supplier).
2.Bottlers: Buy the syrup, add carbonated water, then package the
drinks into bottles.( specialized production line, have right to operate in
3.Retailers: Supermarkets, restaurants, cafeterias, convenience stores(
fountain or vending).
4.Suppliers: Key suppliers-caramel coloring, citric acid, and caffeine.
Porter’s 5 forces
1/5:Threat of New Entrants (Low threat)
The cost of entry is very prohibitive; very high capital required; brand
loyalty is strong; difficult to provide significant enough margins to
2/5: Bargaining Power of Suppliers (Low threat)
large number of suppliers for the ingredients; commodities are
inexpensive; Coloring, sugar, high-fructose corn syrup easily achieved.
3/5: Bargaining power of Buyer ( Medium threat)
Divided supermarkets(low) national mass merchandising
chains(high), fountain sales, vending machines and gas stations(low);
consumer’s lifestyle changes in the long run( high).
Porter’s 5 forces(cont.)
4/5 Threat of substitute products( High threat)
Large number of substitute products; Competitors offer similar price.
5/5 Intensity of rivalry among competitors(Very high)
Competitors such as Pepsi, Dr Pepper have international presence and
have competitive market share in every line. As the world market and
information becomes more accessible, the rival continuously grows.
As a main rival in soft drink industry against coke, Pepsi expanded
through a franchise bottling network but with a greater focus on retail
sales over fountain( fast foods like taco bell). Pepsi is second to coke in
Included Dr pepper, Sunkist, A&W, is the third largest play North
America with about 16% of the market, products like RC cola is also
world widely available.
Around the World, usually local brands compete with Coke, such as Big
Cola in Mexico, Qibla Cola in England, Cola Turka in Middle East and
Options for the Future
Acquire, Repair, and Refranchise
Take over management of the various facets of the Coca-Cola supply
chain, primarily the bottling distilleries.
Revamp and update the current model utilized by the line of production.
After “fixing” the problematic stages of product creation, refranchise the
organization to further cut future costs associated with owning an entire
Refocus on core competency.
Options for the Future (Cont.)
Absolute Control over Production
Acquire each part of the Coca-Cola supply chain from raw material to
Vertically integrate the product towards a streamlined model to minimize
the total cost of goods sold.
Utilize the lower cost of goods sold to lower price of product in an effort to
drive competitors, especially Pepsi, out of their larger market share.
Benefits and Drawbacks
Acquire, Repair, Refranchise
Solves supply chain problem.
Accounts for Coca Cola’s core competency
Does not account for future supply chain problems due to lack of oversight.
Is short-sighted in scope, and may lead to the same problems down the line.
2. Absolute Control over Production
Vertical integration leads to more efficient production, a better product, and lower
Allows Coca-Cola to ensure quality across the board for each facet of its product.
Extremely Expensive option
Overlooks profit maximization in an effort to better production
Strays away from core competency
Projected Outcomes of Options
Acquire, Repair, Refranchise
Solves immediate issue faced Coca Cola.
Capital investiture will lead to a lowering of cost.
Best option for maximization of profits for any foreseeable projection.
Absolute Control over Production
Will lead to higher immediate costs.
Vertical integration is a tried and true method for expanding profit margins.
Efficiency in production will lead to lower of COGS, permitting lower retail prices of
Strong buyer power will lead to capturing a greater share of the soft drink
market, increasing long-term revenue.
Option 2, Absolute Control over Production
Best method for achieving 2020 goal of doubled revenue over a ten year
Coca Cola’s high product standard will streamline the entire process of
production and avoid future inefficiency.
Control over the supply chain will allow greater ability to adapt in the face of
a changing consumer attitude towards soft drinks.
Capital investiture in supply-chain efficiency will provide a long lasting
competitive advantage that should not be refranchised to avoid risk of repeat