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- 1. 1 To: Muhtar Kent, CEO – Coca Cola Company From: Re: Coca Cola Company Competitive Position and Analysis Date: February 23, 2014 Introduction The Coca‐Cola Company (Coca‐Cola) is a leader in the beverage industry, which operates in more than 200 countries and owns or licenses more than 500 brands of nonalcoholic beverages. Nowadays, Coca‐Cola is the most valuable brand in the world. It is also a globally recognized successful company. The Coca‐Cola was founded in May of 1886. As late as the 1990s, Coca‐Cola was one of the most respected companies in the world, known as a very successful management team. Since 1998, the company has been struggling with some weaknesses and threats. Actually, the company faces some kind of problems in today’s market because of economy and market changes. Analysis of the soft drink industry has been performed to understand the impact of company’s environment. Competitive position The competitive pressure from rivals is the biggest challenge faced by Coca‐Cola Company. PepsiCo is the main competitor for Coca‐Cola and these two brands have been the leading ones for years. Although Coca‐Cola owns four of the top five soft drink brands (Coca‐Cola, Diet Coke, Fanta and Sprite), PepsiCo dominated North America’s market with sales of $ 22 billion, while Coca‐Cola only had about $ 7 billion ‐ however, Coca‐Cola has higher sales in the global market than PepsiCo. Brand name loyalty also remains a competitive factor. The Brand Keys Customer Loyalty Leaders Survey conducted in 2010 shown brands with the highest customer loyalty in the industry. Base on this, Pepsi has a more solid loyal customer base which can make itself more competitive than Coca‐Cola. Coke has a 50% share of the global carbonated soft‐drink industry and over 80% in many markets. Coke appears to have a sustainable scale advantages over its competition ‐ it's competitive advantage is the scale of its global bottling system, even more than the predominance of the Coke brand. Coke should be able to use these scale advantages outside the US to leverage its distribution expanding into other beverage segments.
- 2. 2 COCA COLA DOMINANCE ON MARKET Despite the fact that Coke has seen its stock nearly half since 1998, its main competitor, PepsiCo has seen its stock climb from $ 35 to a high of $ 50 with a 52‐week rise of 14% vs. Coca‐Cola's fall of 24% ‐ reversing the 10 year trend of consistently lagging behind Coca‐Cola. Pepsi internationally manufactures concentrates of brand Pepsi, Mountain Dew and other brands for sale to franchised bottlers in the US and other international markets. Like Coca‐Cola, Pepsi has also been attempting to move into the faster growing non‐carbonated beverage segment with its recent acquisitions of South Beach Beverage Co. and its popular SoBe line of herbspiked fruit, energy, and tea drinks, as well as the prized Gatorade sports drink through a $ 13 billion acquisition of Quaker Oats Co. Pepsi also makes and markets North America's best‐selling brands of ready‐to‐drink coffees and teas with Lipton and Starbucks (joint ventures). Another competitor to Coca‐Cola is National Beverage Co. named FIZ. It is a holding company for various subsidiaries which develops, manufactures, markets and distributes a complete range of beverage products in US. Cott Corporation is a supplier of premium quality retailer brand carbonated soft drinks and also Coca Cola Corporation’s competitor. The Cott's product line also includes flavored beverages and juices, bottled water, organic, high‐energy beverages and iced teas as well. The Company's products are principally sold under customer controlled private labels, but also under its own control brands and licensed brand names. The Company operates its United States business through its indirect, wholly owned significant subsidiary BCB USA Corp., its Cott Beverages Canada division, and its United Kingdom business through its wholly owned significant subsidiary Cott Beverages Ltd. COMPETITORS OVERLOOK
- 3. 3 Changing Industry The Coca‐Cola Company is the world's leading manufacturer, distributor and marketer of non‐ alcoholic beverage concentrates and finished beverages which sells to bottling and canning operations and other authorized wholesalers. As mentioned above, Coca‐Cola produces more than 230 beverage brands and markets four of the world's top five soft drink brands, including Coke, diet Coke, Fanta, and Sprite. Coca‐Cola's finished beverage products bearing the Coca‐Cola Company's trademarks are sold in over 200 countries. In 2000, 72% of Coca‐Cola's Operating
- 4. 4 Income was generated outside the United States and this number is still growing. Coca‐Cola also maintains ownership interest in many bottling and canning operations. NET OPERATION REVENUES BY GEOGRAPHIC SEGMENT Fundamental to Coke's investment and long‐term growth strategy are its marketing expertise, brands and bottling system. To support its brands and increase consumer awareness of its products, Coke makes significant investments in sales and marketing. To develop the ‘brand strategy’ Coke's global marketing invests huge amounts of money in product and packaging research, developing targeted consumer advertisements and promotions and soliciting customer feedback. Despite Coca‐Cola's dominant global position, it’s bottom line has been declined since the passing of its last CEO Roberto Giozueta in 1987 and macroeconomic factors such as the Asian crisis and a product recall and anti‐trust lawsuit in Europe ‐ reversing a 10 year trend of rising growth from $ 43 billion in 1981 to $ 143 billion in 1987. Coke's stock price has fallen from a high of $ 90 in 1998 to its current price of $ 47. To improve its position, Coca‐Cola has started a strategic transformation. It has been broadening its focus from the slower growth carbonated soft drink segment to the higher growing non‐ alcoholic/noncarbonated beverage segment. Coke currently has 60% of its current global volume in carbonated beverages, which is declining at ‐2% compared to the non‐carbonated beverages which is growing at 5% and represents over 45% of the global soft drink industry. Coca Cola has also made many acquisitions in segments such as Planet Java (maker of coffee drinks), Mad River Traders (distributor of new age teas and juices) and a recent tender offer for Odwalla (maker of Fresh Samantha drinks). Coca‐Cola also wants to transition from a centralized carbonated soft‐drink company to an entrepreneurial, consumer needs driven (CSR) non‐ alcoholic beverage company with its "Think Local, Act Local" business strategy.
- 5. 5 Coke has introduced new beverages in almost every drink category through internal development or external acquisitions and has been shaping products and marketing initiatives to meet local needs. References Coca Cola Annual Report: http://www.coca‐colacompany.com/annual‐review/2012/pdf/form_10K_2012.pdf The Coca Cola Company’s Competitors: http://www.hoovers.com/company‐information/cs/competition.The_Coca‐ Cola_Company.3f8a006eaf87d773.html Information about Coca Cola Company’s Competitors from Coca Cola Company’s web site: http://assets.coca‐colacompany.com/79/be/d742827346398d224347d10205b4/10k_12_19.pdf Coca Cola SWOT Analysis: http://www.strategicmanagementinsight.com/swot‐analyses/coca‐cola‐swot‐analysis.html Coca Cola versus PepsiCo Competitive Analysis: http://simplify360.com/blog/coca‐cola‐versus‐pepsi‐competitive‐analysis/ PepsiCo 2010 Annual Report: http://www.pepsico.com/Investors/Annual‐Reports.html Interbrand (2010). Best Global Brands 2010: http://www.interbrand.com/en/best‐global‐brands/best‐global‐brands‐2008/best‐global‐ brands‐2010.aspx Brand Keys, Inc. (2010). Brand Keys Customer Loyalty Leaders 2010: http://www.brandkeys.com/awards/leaders.cfm Coca Cola Femsa web site: http://www.coca‐colafemsa.com/femsa/web/conteudo_en.asp?idioma=1&conta=44&tipo=27617 Coca Cola SWOT Analysis: http://annoyingoptimism.files.wordpress.com/2011/09/3‐ganar‐hw‐3‐powerpoint.pdf