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coca cola

  1. 1. Horizontal Expansion Strategy VIPUL SACHAN BBA 3rd Semester
  2. 2. Objectives To understand the concept of Horizontal Expansion with respect to Advance Sales and Service Pvt. Ltd. Evaluate the existing resources. To develop the business , expand market coverage. The benefit of Horizontal Expansion for the company at retailers end.
  3. 3. Contents Section 1: Company Profile. Section 2: Profile of Organization imparting training. Section 3: Details of Organizational activities. Section 4: Conceptual background of topic. Section 5: Details of work completed
  4. 4. Section 1 Company Profile
  5. 5. Past and Present 1894 … A modest start for a bold idea A stores owner, Joseph A. Biedenharn, began bottling Coca-Cola to sell, using a common glass bottle called a Hutchinson 1899 … The first bottling agreement In a meeting with Candler, Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive rights to bottle Coca-Cola across most of the United States (specifically excluding Vicksburg) -- for the sum of one dollar.
  6. 6. Past and Present 1900-1909 … Rapid growth The three pioneer bottlers divided the country into territories and sold bottling rights to local entrepreneurs. By 1909, nearly 400 Coca-Cola bottling plants were operating, most of them family-owned businesses . Some were open only during hot-weather months when demand was high. 1916 … Birth of the contour bottle A group representing the Company and bottlers asked glass manufacturers to offer ideas for a distinctive bottle. The contour bottle became one of the few packages ever granted trademark status by the U.S. Patent Office. Today, its one of the most recognized icons in the world - even in the dark!
  7. 7. Past and Present 1940s … Post-war growth During the war, 64 bottling plants were set up around the world to supply the troops. Many of these war-time plants were later converted to civilian use, permanently enlarging the bottling system and accelerating the growth of the Companys worldwide business. 1950s … Packaging innovations For the first time, consumers had choices of Coca-Cola package size and type -- the traditional 6.5-ounce contour bottle, or larger servings including 10-, 12- and 26-ounce versions. Cans were also introduced, becoming generally available in 1960.
  8. 8. Past and Present 1960s … New brands introduced Following Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined brand Coca-Cola in the 1960s. Mr. Pibb® and Mello Yello® were added in the 1970s. The 1980s brought diet Coke® and Cherry Coke®, followed by POWERADE® and DASANI® in the 1990s. 1970s and 80s … Consolidation to serve customers The Company encouraged and invested in a number of bottler consolidations to assure that its largest bottling partners would have capacity to lead the system in working with global retailers.
  9. 9. Past and Present 1990s … New and growing markets After the fall of the Berlin Wall, the Company invested heavily to build plants in Eastern Europe. And as the century closed, more than $1.5 billion was committed to new bottling facilities in Africa. 21 st Century … The Coca-Cola bottling system grew up with roots deeply planted in local communities. This heritage serves the Company well today as people seek brands that honor local identity and the distinctiveness of local markets.
  10. 10. Products and CompetencyOriginated as a soda foundation beverage in 1886 to one of the most popular beverage over the world because: Adoption of strong bottling system. Massive levels of penetration and recognition. Distribution network.
  11. 11. Products and CompetencyProducts Three business units-sparkling beverages, still beverages and emerging brands will define Coca- Cola’s focus in the North America market, where it faces stiff competition from rival PepsiCo Inc and makers of healthier beverages such as juices. Fanta® in the 1950s, Sprite®, Minute Maid®, Fresca® and TaB® joined brand Coca-Cola in the 1960s. Mr. Pibb® and Mello Yello® were added in the 1970s. The 1980s brought diet Coke® and Cherry Coke®, followed by POWERADE® and DASANI® in the 1990s. Today hundreds of other brands are offered to meet consumer preferences in local markets around the world.
  12. 12. Section 2 Profile of Organization imparting training
  13. 13. Advance Sales & ServicePvt. Ltd. Advance Sales & Service Pvt. Ltd. Is a marketing and distribution, Franchise of Brindavan Bottlers Pvt. Ltd. Lucknow, Barabanki, Lalitpur, Jhansi, Lakhimpur, Sitapur & Faizabad are the distribution and market area for Advane Sales & Service Pvt. Ltd.
  14. 14. Management Profile General Manager - Sanjeev Garg Head of Sales(City)- Rajan Sharma Head of Sales(Outer)- B.K. Shrivastav Marketing Executive Manager – Chitresh Tiwari HR Head – Manu Mehrotra HR Executive – Pooja Chandwani
  15. 15. Negative Publicity In 2003, it was revealed that several midlevel employees had rigged a marketing test for Frozen Coke done three years earlier at Burger King Restaurants in Virginia. Led to the departure of the head of Cokes fountain division, and the company issued an apology to Burger King and its franchisees and offered to pay them US$21 million.
  16. 16. Negative Publicity 2004: the launch of the Dasani brand into the European market was cancelled when bottles in Britain were found to contain elevated levels of bromate, a substance that can cause cancer after long-term exposure. 2006: Coca-Cola was accused by the Center for Science and Environment (CSE) in India of selling products containing hazardous pesticide residues. These pesticides included chemicals which could cause cancers, damage the nervous and reproductive systems and
  17. 17. Negative Publicity Coca-Cola’s products are always labeled as “junk food”. People criticize Coca-Cola’s beverage contain too much sugar and high is calories. One of the important factors of causing high obesity rate in developed countries.→ Negative publicity badly affects brand image and the demand for Coca-Cola products.→ Badly affect the company’s growth prospects in the international markets.
  18. 18. Sluggish Performance inNorth America In North America, the sale volume recorded falls between 2006 and 2009. Unit case retail volume in North America decreased 1% primarily 2006. In early 2009, the domestic sales volume dropped 2% in a quarter.
  19. 19. Lack of Diversification Most of the brands are various kinds of beverages. PepsiCo, has a better diversification. PepsiCo’s product mix (up to 2009) consists of 63% food, and 37% beverages.→ Lack of diversification will affect Coca-Cola’s sales seriously if the demand for beverages decreases.
  20. 20. Section 3 General Environment Analysis
  21. 21. Globalization Growth of use of Internet and other electronic technologies — allow firms to collaborate with domestic market and expand into world markets. Research by Just-Drinks — a global beverage industry research institution. Between 2009 and 2014, the compound annual growth rate (CAGR) of global functional soft drink value sales will increase from 5.07% (2001-2008) to 5.84% (2009-2014). The global soft drinks market is estimated to reach a value of at least US$484 billion by 2014.
  22. 22. Increasing Concerns onHealth Issue Soft drinks have been introduced for more than a century. Buyers want innovation with the products they buy. Increasing concerns on healthy lifestyle, especially in developed countries. Consumer awareness of health problems arising from obesity and inactive lifestyles represent a serious risk of the carbonated drinks sector.→ Lead Coca-Cola to differentiate its products in order to increase sales in a stagnant market.
  23. 23. Section 4 External Analysis(Porter’s Five Forces)
  24. 24. Five Forces Model1. Threat of New Entrants Low in the soft-drink industry. High fixed costs. Limited bottlers , new entrants , build their bottling plants. High capital requirement , 1998 - US$75 million. Advertising and marketing expenditure in the industry , 2000 - around US$2.6billion (mainly by Coca-Cola, Pepsi and their bottlers ). Extremely difficult for an entrant.
  25. 25. Five Forces Model1. Threat of New EntrantsCoca-Cola and PepsiCo :Agreements : prohibit bottlers from taking onnew competing brands for similar products.Backward integration : buying significantpercent of bottling companies.
  26. 26. Five Forces Model1. Threat of New Entrants Retailers enjoy significant margins : 15-20% on soft drinks. Difficult for the new entrants : at a lower margin. Heavy advertising. Strong brand name. Loyal customers.
  27. 27. Five Forces Model2. Threat of Substitutes Strong. Many kinds of substitutes appear. (bottled water, sports drinks and coffee etc) Increase of numbers and varieties of water and sports drinks. Trend to healthier drinks. Coffee and tea – caffeine. Low switching costs. Substitute products are quality and innovation.
  28. 28. Five Forces Model3. Threat of Suppliers Low. Does not do any bottling itself. Done by independent bottlers. Coca-Cola Enterprises. Coca-Cola integrated Coca-Cola Enterprises earlier in 2010. Better control distribution. Quicker to market with products.
  29. 29. Five Forces Model4. Bargaining Power of Buyers Moderate. Buyers : Large grocers, convenience stores, supermarkets, and restaurants. Buy large volumes - bargain a lower price. Decreased demand for unhealthy soft-drinks - larger bargaining power.
  30. 30. Five Forces Model5. Competitive Rivalry Strong. The competitive pressure from rival sellers is the greatest challenging faced by Coca-Cola. Main competitor : PepsiCo - power struggle Coca-Cola owns four of the top five soft drink brands : Coca-Cola, Diet Coke, Fanta, and Sprite. North America : PepsiCo US$22billion Coca-Cola US$7billion Global market : Coca-Cola has higher sales.
  31. 31. Five Forces Model5. Competitive Rivalry Brand name loyalty. The Brand Keys’ Customer Loyalty Leaders Survey (Brand Loyalty, 2010). Diet Pepsi ranked 258 th (the highest ranking of soft drink). Diet Coke ranked 336 th (the highest ranking of Coca-Cola’s product).
  32. 32. Section 5 Key Future Challenges andS trategicRecommendations
  33. 33. Declining Sales Volume Volume sale of carbonated Year soft drink in US 2005 - 0.2% 2006 - 0.6% 2007 - 2.3% 2008 - 3.0% 2009 - 2.1% 2005 – 2009 - 8.2% William Pecoriello, a leading beverage industry analyst from Morgan Stanley & Co, maintain a forecast for a 1.5% annual volume decline for the carbonated soft drink segment.
  34. 34. Declining Sales VolumeRecommendations:Focus more on bottled water, noncarbonateddrinks, and especially energy drinks.Growth of energy drink: 50% in 2006; 10% in2010.Energy drinks and healthy drinks: majorbeverage needs of young consumers andhealth conscious consumers.
  35. 35. Health and WellnessTrend 2001’s study: Daily serving sweetened soft drink increases the risk of becoming obese. 2004’s study: Discouraged obese children to take diet soft drinks since they have no nutritive value.
  36. 36. Health and WellnessTrend Most soft drink consumers are slowly shifting their consumption to products that are healthier or have fewer negative side-effects. Elder consumers who concern about diabetes: Switch from high-calorie soft drink to water or low-calorie juice. Young working class: Energy drinks, sport drinks, fer organics and more “natural” beverage to lower the consumption of negative chemicals.
  37. 37. Health and WellnessTrendRecommendations:Provide industry leadership in the health andwellness area.Market different kinds of products fordifferent population segments : – Baby boomers’ market: Tea and water beverage which contain less sodium and sugar. – Young generation market: Sport drink and energy drink, organic .
  38. 38. Increased Competitionfrom PepsiCo PepsiCo overtook Coca-Cola in terms of its market capitalization in December 2006: Coca- Cola US$97.9 bn ; PepsiCo’s US$98.4 bn. By the end of 2010, Pepsi Co has a higher gross profit than Coca-Cola by US$8.8 billion.→ PepsiCo can invest more capital on research & development on beverage.→ PepsiCo will remain a strong threat for Coca- Cola.
  39. 39. Increased Competitionfrom PepsiCoRecommendations:Within the products in PepsiCo, only 37% ofproducts are beverages.→Verticalexpansion of Coca-Cola vsHorizontal expansion of PepsiCo .→Focus on beverages business and relatedbusinesses, e.g. bottling, sugar plantation, oreven tin can and glass recycling business.
  40. 40. Coca-Cola should be sensitive ofany new trend and position itself as a unique brand in order tokeep its competitive advantage.