Coca Cola Situational Analysis

We can all proudly say for a beverage brand like Coca-Cola that nobody is unaware of it in the entire globe as it has surely become a household name for all of us. It would be interesting for us to know about its origin prior to know its critical marketing strategies and company’s belief to make it up to this stage.

Coca-Cola was discovered, we would rather say invented in 1886, just out of curiosity to know what the mixture of certain ingredients does. It was John Pemberton, an Atlanta based pharmacist, who created this amazing mixture of fragrant and caramel coloured liquid. He then took that mixture to the nearest pharmacy to get it carbonated and the thing that came up is now has become a greatest known brand in this world.

In the initial stage, Coca-Cola had sold just 9 glasses a day for an entire year. But, a century later it has produced nearly 10 billion gallons of syrup. After just three years of this invention, an Atlanta based businessman Asa Griggs Candler acquired rights of the business and brand in just £1500. He then became the first official president of Coca-Cola enterprise.

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As a natural salesperson Asa Candler started marketing the brand in 1893. He found out various brilliant and innovative ideas of promoting the brand. He started distributing promotional coupons for complimentary taste of the beverage, and outfitted distributing pharmacists with clocks, urns, calendars and apothecary scales bearing the Coca-Cola brand. People saw Coca-Cola everywhere, and the aggressive promotion worked. That was the start it needed and successfully achieved. Further the company grown after its expansion to the other parts of US territories and of the world.

During its journey from 9 glasses a day to over 9 billion servings a day around the world, Coca-Cola Company has struggled hard over time to safeguard the company and the brand. It has mainly focussed on advertising as their main strategy for expansion. Many brand tags have changed from time to time like “Demand the genuine” and “Accept no Substitute”. It was to make customers aware of brand’s value and keep them away from buying substitute products of Coca-Cola.

Market Share

Being the biggest company in the soft drink industry, Coca Cola enjoys the largest market share. This company controls about 59% of the world market.

Global Market Share

The market of the company is geographically vast and it is controlling it with great success. In 2002, the company grew their carbonated soft-drink business by nearly 250 million unit cases and generated record volumes. Because carbonated soft drinks are the largest growth segment within the non-alcoholic ready-to-drink beverage category measured by volume, that is why they are focusing more on this and they are continually increasing the pace because they know that accelerating this pace is crucial to their future success. Thus they are increasing their market day by day. The operation income earned by Coca Cola Company can be illustrated by the following pie chart.

This strategy has worked a lot and it has helped them to become the World’s leading Soft Drink Company. The global unit sale of the Coca Cola Company is increasing from the last ten years. The data of the global unit sale of the Coca Cola Company can be represented by following chart.

So there is positive growth in the market of the Coca Cola Company. There is a worldwide volume increase by 4% with strong international growth of 5%. This is only due to the innovative marketing programmers, which has deepened the relationship of the customers and Coca Cola. The financial health and success of their bottling partners is a critical component of The Coca-Cola Company’s ability to build and deliver leading brands.In 2002, the company had worked with their bottlers to turn good intentions into reality by improving the system economics. The results in 2002 reflect this steadily improving and mutually constructive relationship between the Company and their bottling partners. The main reason behind this relationship is to continue realizing shared opportunities for growth, with closer coordination of operations including customer relationships, logistics and production.

Market Share by Area:

Coca Cola is the world-renowned soft drink and the company is currently operating throughout the world. The worldwide total is about 17.8 billion.

The operation review according to the segments is as follows.

Operation Review

The volume is least in the Africa and most in the North America. The data about the market share of this company area wise is given in the following table.

The above table shows the geographical earning of the Coca Cola Company and from this data; we can find out that the customers of Coca Cola are increasing which is shown by the company’s per capita income. Unit case equals 24 eight-ounce servings. The column, which shows the non-alcoholic beverages consist of commercially, sold beverages, as estimated by the Company based on available industry sources. The country column is derived from

The Company’s unit case volume while the industry column includes non-alcoholic ready-to-drink beverages only, as estimated by the Company based on available industry sources.

In Asian population, which is the satisfied customer of Coca Cola, is approximately 3.2 billion and the average consumer enjoys close to two servings of our products each month. Through an intense focus on Coca-Cola, innovation and new beverages, the company has achieved volume growth of 10 per cent in 2002. With developing economies and populations, this region has strong long-term potential, and the company is building an exciting family of beverage brands in addition to expanding the popularity of our core brands, led by Coca-Cola. In China, for example, sales of Coca-Cola increased 6 per cent. The total unit case sale of Coca Cola in Asia can be shown by the following pie chart.

So the company is emphasizing more in this area and is trying to develop a strategy, which can increase the growth of the consumption of Coca Cola by the people of Asia. Among the countries of Asia, Japan has the highest percentage, which is about 29%. Among others, Pakistan, India and Bangladesh are those countries where the average consumption is increasing day by day.

PRODUCTS:

There are different brands of the Coca Cola Company, which are currently in use through out the world. This company not only deals in the carbonated drinks but also other drinks. While launching its product, the marketing team considers the culture of the country.

Major brands of coca cola

• Coke
• Sprite
• Fanta
• Diet coke
• Coke classic

The overall volume of this company is as follows.

The commitment of the company is to devote resources to water only in markets where it expects profitable growth. This strategy has paid dividends. The company has successfully applied its approach to brands in several key markets, including Ciel in Mexico, Mori No Mizudayori in Japan, Bonaqua in Russia and Kinley in India. Backed by a strong network of bottling partners through out the United States, Dasani became the nation’s fastest-growing water brand. In Eurasia, the entire Turkuaz brand team worked together to launch Turkey’s first purified water brand. This year, Coca-Cola Company also successfully energized a major piece of its beverage strategy-water. By the end of 2001, it’s bottled water volume exceeded 570 million unit cases, making it the second biggest contributor to the growth of the company after carbonated soft drinks. Three of the water brands, Dasani, Ciel and Bonaqua each achieved sales of over 100 million unit cases for the year.

In 2001and 2002, the company has also made good progress in coffees and teas. Beverage Partners Worldwide, the renewed and strengthened marketing partnership with Nestlé S.A., began operations in 2001. This partnership combines Nestlé’s knowledge in life science, research and development with the expertise of Coca Cola Company in brand building and distribution.

At the same time, the company grew Georgia coffee in Japan by 3 percent through award-winning marketing in a category that was flat for the year. Also in Japan-where The Coca-Cola Company is the leader in the total tea category, the second-largest category in the non-alcoholic ready-to-drink segment-it launched Marocha Green Tea. With sales of 46 million unit cases for the year, Marocha Green Tea is the fastest-growing product in the fastest-growing category: green tea. The popularity of Marocha is also recognized by the industry with a leading trade journal naming Marocha the most popular new food and beverage product of the year.

STRATEGIC PLANNING

In the year 2002, the company had a great success, as the strategy worked which resulted in making Coca Cola Company the world’s leading company. In 2001, company accomplished the crust of it’s strategy as

Worldwide volume increased by 4 percent with strong international growth of 5 percent and clear signs that our North American business is growing solidly and predictable.

Earnings per share grew by 82 percent, as we delivered on our commitment to create volume growth while aggressively

Return on common equity grew from 23 percent in 2000 to 38 percent this year.

Return on capital increased from 16 percent in 2000 to 27 percent in 2001.

The company has generated free cash flow of $3.1 billion, up from $2.8 billion in 2000, a clear indication of its underlying financial strength.

The strategy for the future of the company is very straightforward. The marketing strategy for the year 2002 is as follows,

Accelerate carbonated soft-drink growth, led by Coca-Cola.

Selectively broaden the family of beverage brands to drive profitable growth.

Grow system profitability and capability together with our bottling partners.

Serve customers with creativity and consistency to generate growth across all channels.

Direct investments to highest potential areas across markets.

Drive efficiency and cost-effectiveness everywhere.

MAJOR COMPETITOR PEPSI INTERNATIONAL

HISTORY

PepsiCo is a world leader in convenient foods and beverages, with revenues of about $27 billion and over 143,000 employees. The company consists of the snack businesses of Frito-Lay North America and Frito-Lay International; the beverage businesses of Pepsi-Cola North America, Gatorade/Tropicana North America and PepsiCo Beverages International; and Quaker Foods North America, manufacturer and marketer of ready-to-eat cereals and other food products. PepsiCo brands are available in nearly 200 countries and territories.

Many of PepsiCo’s brand names are over 100-years-old, but the corporation is relatively young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company, including Gatorade, in 2001.would entertain the listener with the latest musical selections rendered by violin or piano or both. The new name, “Pepsi Cola”, is derived from the two of the principle ingredients, Pepsin and Kola Nuts. It was first used on the August 28. At that time, Bradham’s advertising praises his drink as “Exhilarating, invigorating, aids digestion”.

1990-2002

The advertisement of the Pepsi changes to, “You got the right choice baby, Uh-Huh!” .With the extensive usage of the stars in the ads, the popularity of Pepsi increase. In 1992 Pepsi-Cola formed a partnership with Thomas J. Lipton Co. Today Lipton is the biggest selling ready-to-drink tea brand in the United States. Outside the United States, Pepsi-Cola Company’s soft drink operations include the business of Seven-Up International. Pepsi-Cola beverages are available in more than 190 countries and territories.

In Asia, they selected Lahore to make their regional office. This was done in 1970. This regional office is monitoring all the operations carried out in South West Asia. As in Pakistan, they only entered beverage industry. They have eleven bottlers covering whole Pakistan. The plant operating here is Riaz Bottlers (Pvt) LTD. This plant was established at Lahore in 1974. The total capacity of the plant is 30,000 cases per day. They have four filling lines in the plant operating on the three shift bases. Each shift is of eight hours. They have permanent work force of 750 people and them employee approximately 1000 people more on temporary basis during summer season.

Pepsi’s Products

• Pepsi
• Teem
• Mirinda
• Pepsi Max
• Pepsi Lemon
• Pepsi Blue
• Mountain Dew
• 7up

PROMISE OF COKE

The basic proposition of our business is simple, solid and timeless. When we bring refreshment, value, joy and fun to our stakeholders, then we successfully nurture and protect our brands, particularly Coca-Cola. That is the key to fulfilling our ultimate obligation to provide consistently attractive returns to the owners of our business.

TARGET MARKET

Coke’s commercials basically based on young generations, So, the young generation is the target market of Coke because they want to represent Coke with the youth and energy but they also consider about the old people they take then as a co-target market.

MAJOR SEGMENTS

Major segments are basically those people who take this drink daily and those areas where the demands is higher then the other areas. There are so many people who take this drink daily and those people who take weekly and those who take less often are always there as well. So, their basic segments are those people who take this drink regularly.

FACTORS AFFECTING SALES

There are so many factors, which affects the sale of coke. Here we are discussing three major factors which effects coke.

1. Per capita income
2. Competitors
3. Weather

Per Capita Income

First we will discuss about “Per capita income”. This is major factor that affects the sale of this soft drink. Because which every passing year budgets are becoming very strict and tight in order to purchase things. So the disposable incomes of the people are coming down. They spend heavily on rents, utilities, and education and basic necessities and after that when they get extra money they think about this soft drink .So the decreasing per capita income effects badly in selling and production of this soft drink.

And to get through with this difficulty there is need to increase the level of per capita income of Pakistan because it is much lesser than the rest of the countries.

Competitors

Coke’s major competitor is “PEPSI” and there is no hesitation to say this because everyone knows that and all the other cold drinks and water, coffee, tea is the competitors.

Weather

Weather is the third major factor in effecting the Coke’s selling. This is underdeveloped market so the coke’s consumption in summers is 60% and in winters is 40%.

MAJOR CUSTOMERS NEED

First of all the majority don’t care that what they are going to have. In other words, they don’t care before drinking that whether it is “Pepsi” or “coke”. They don’t actually differentiate between these two brands in order to their tastes.

Consumers basically drink what they get.

They believe on “WHAT COLD THEY SOLD”

Consumer’s availability in brands is basically works like:

Push availability

Pull consumer’s demand.

For this reason, Coca-Cola has provided their coolers and freezers in the market. They have maximum number of coolers and freezers in the market. They provide this infrastructure free of cost just to provide child coke to their customer, which they want to be purchase.

Their salesman and mechanics regularly visit all the shops where coke has its infrastructure to check that either it is in proper condition or not, if not then they immediately change or repair it.

STRATEGIES OF QUALITY

After Micro and macro analysis Brand “coke” is primarily role

• Enhance competition moments
• When people watch cricket
• Through commercialization
• Fun time

Though these strategies, there could be better understanding and better connection with the public. These are the “key consumption”.

THREATS FROM COMPETITORS

Threats are well planned. Price is the major threat. When price goes certain beyond the exact price whether come down or go higher its effects the consumption of soft drink.

Because when the price goes higher people go for the substitute of “coke” i.e. Pepsi.

And when price goes down they think that there is must be something wrong in it.

In short it all depends on customer’s perception.

TARGETS THAT WOULD LIKE TO ATTAIN

Every organization runs on the bases of profit maximization so Coke is also looking for a high profit margin.

There are three major ways of making money

1. Overnight profit
2. Windfall profit
3. Ethical and un-ethical ways

Over Night Profits

They could be overnight profit that is for the number 1 brand for the year. This could be got my increasing sales volume

Windfall Profit

There can be windfall profit. They are the extras profit. When the consumption is on boom. So, there is different kind of profits.

Ethical and Unethical Ways

Profit can also get through ethical and unethical ways. They believe on this quote

“Everything is fare in love and war”.

Some profits stays for some time like “overnight profits” and some just come and go like “wind fall profits”. And they can also get profit through different approaches.

EXPANDING TARGET MARKET

In last 2 years Coke has come back in aggressive manner.

Consumer has choice

Attractive brand name

Brand differentiating

Consumer Has Got Choice

Now the consumer has got choice. Because now they know the name of another big brand, though coke is the 2nd best name but it can get a better position after some time

Attractive Brand Name

Now the consumers know the Name of Coke, because Coke is the name, which is the most popular after the word “ok”. So people can better differentiate brands with each other.

Brand Differentiation

Now different companies have got different brand names. So, people can distinguish between brands. Two major brands “coke” and “Pepsi” also have brand names.

Coca Cola’s Brand

Coca cola is “US” brand. Because they believe in the togetherness, being people together and friends are being together. Coca Cola strongly believes that Pakistani temperament is “US” not “ME”

Pepsi’s Brand

Pepsi’s brand is basically is basically “ME” branded. They use the temperament of “ME”. In contrast to Coke they believe on individual struggle.

THREATS AND OPPORTUNITIES FOR PRICE

Opportunities

If Coke is considered a luxury product. Then there is the tax rate system

15% – sales tax

20% – excise duty

27% – goes to government

03% – In making Budget

After paying all these taxes coke has to pay electricity charges. We have to spend on distributions. After paying all these expenses Coke’s margin squeezed and consumers have to pay for increasing tariffs.

These are the opportunities through which we can increase the price and can get profits.

Threats

There are much more threats in increasing prices. Because same problem of substitute. If Coke increase the price lets say 1 rupee. Then people definitely won’t go for coke. They have the best substitute of Coke that is Pepsi. So these are the threats in increasing prices. Coke will lose the margin of its profit and can face loss.

STRATEGIES OF GETTING GOALS I.E. “HIGH PROFITS”

To increase the price is the least thing, which Coke can adopt. There are so many ways through which Coke can increase the profits. Some major ways are as follows.

Volume can be increased

Interest level of consumers

To take part in energetic festivals

How to increase the volume of consumers?

Coke can increase the volume by expanding the industry of coke. Through advertisements, offering different interesting things to attract people towards this product.

How to increase the interest level of consumers?

Coke is increasing the interest level of consumers by offering different flavors.

For example Coke is increasing the number of flavors in “Fanta”, this is one of the product of coke. Through offering different flavors Coke can increase the Level of consumers and through this profits can be gained.

How to take part in energetic festivals?

Coke is already taking part in the festival like “Basant” since last 3 years. Coke offers different attractive things in their festival and through this Coke gained high profit and consumption of coke increased on these occasions.

And this year in this year 2002 people were anxiously waiting that what interesting thing coke is going to offer.

MARKETING STRATEGY

Our local marketing strategy enables Coke to listen to all the voices around the world asking for beverages that span the entire spectrum of tastes and occasions. What people want in a beverage is a reflection of who they are, where they live, how they work and play, and how they relax and recharge. Whether you’re a student in the United States enjoying a refreshing Coca-Cola, a woman in Italy taking a tea break, a child in Peru asking for a juice drink, or a couple in Korea buying bottled water after a run together, we’re there for you. We are determined not only to make great drinks, but also to contribute to communities around the world through our commitments to education, health, wellness, and diversity. Coke strives to be a good neighbor, consistently shaping our business decisions to improve the quality of life in the communities in which we do business. It’s a special thing to have billions of friends around the world, and we never forget it.

MARKET POSITIONING

Product Range

The total range of Coca Cola company in Pakistan includes:

Coke.

Sprite.

Fanta.

Diet Coke.

And company offers their products in different bottle sizes these includes:

SSRB (standers size returnable bottle)

LRB (litter returnable bottle)

NRB (no return bottle) or disposable bottle

PET 1.5 (1.5 litter plastic bottle)

CANS (tin pack 330 ml)

Packing

Coca cola products are available in different packing

24 regular bottle shell

6 bottle pack for 1.5 pets

12 bottles in a pack for disposable bottle

24 cans in one pack.

PRICE STRATEGY

Trade Promotion

Coca cola company gives incentives to middle men or retailers in way a that they offer them free samples and free empty bottles, by this these retailers and middle man push their product in the market. And that’s why coca cola seen more in the market. And they have a good sale in the market because according to the expert which product seen more in the market that sells more.

“Seen as sold”

They do agreements with a shop keepers and stores to exclusive sale in that stores. These stores are called as KEY accounts in their local language.

And coke also invest heavy budget on these stores and offers them free samples and free bottles and some time cash incentives.

Different Price In Different Seasons

Some times Coca Cola Company change their product prices according to the season. Summer is supposed to be a good season for beverage industry in Pakistan.

So in winter they reduce their prices to maintain their sales and profit. But normally they reduce the prices of their pet bottles or 1 litter glass bottle.

PROMOTION STRATEGIES

Getting shelves

They gets or purchase shelves in big departmental stores and display their products in that shelves in that style which show their product more clear and more attractive for the consumers.

Eye Catching Position

Salesman of the coca cola company positions their freezers and their products in eye-catching positions. Normally they keep their freezers near the entrance of the stores.

Sale Promotion

Company also do sponsorships with different college and school’s cafes and sponsors their sports events and other extra curriculum activities for getting market share.

UTC Scheme

UTC mean under the crown scheme, coca cola often do this type of scheme and they offer very handy prizes in it. Like once they offer bicycles, caps, tv sets, cash prizes etc. This scheme is very much popular among children.

DISTRIBUTION CHANNELS

Coca Cola Company makes two types of selling

Direct selling

Indirect selling

Direct Selling

In direct selling they supply their products in shops by using their own transports. They have almost 450 vehicles to supply their bottles. In this type of selling company have more profit margin.

Indirect Selling

They have their whole sellers and agencies to cover all area. Because it is very difficult for them to cover all area of Pakistan by their own so they have so many whole sellers and agencies to assure their customers for availability of coca cola products.

FACILITATING THE PRODUCT BY INFRASTRUCTURE

For providing their product in good manner company has provided infrastructure these includes:

Vizi cooler

Freezers

Display racks

Free empty bottles and shells for bottles

ADVERTISEMENT

Coca cola company use different mediums

Print media

Pos material

Tv commercial

Billboards and holdings

Print Media

They often use print media for advertisement. They have a separate department for print media.

POS Material

Pos material mean point of sale material this includes: posters and stickers display in the stores and in different areas.

TV Commercials

As everybody know that TV is a most common entertaining medium so TV commercials is one of the most attractive way of doing advertisement. So Coca Cola Company does regular TV commercials on different channels.

Billboards And Holdings

Coca cola is very much conscious about their billboards and holdings. They have so many sites in different locations for their billboards.

EXPECTATIONS FOR THE COMING YEAR

Every thing starts from the attitude of consumer’s behavior. And the basic key to attract the consumers is to throw the “money away”.

And positive feeling felling with the brand, which they used to have Coke wants to advertise their products heavily in the coming year. And it will take the 10% of their profits. And when we take it as a global level it is $ I billion.

Coming year is the challenging year for the industry of Coke. They have to take lots of decisions that how to increase the production and where they have to spend money.

For gaining success in coming year they have to have some important things like:

Loyal consumers are important for company’s success.

Workers should be the brand centric not the promotion centric.

They should know how much to for the brand activities.

They should also know that how much to do with the promotion activities for brand.

HOW COKE DETERMINE THE YEARLY BUDGET

Coke determines its yearly budget by the

Sales volume

Profitability

Target volume

Sales Volume

Coke determines its yearly budget through the sales volume. They first concentrate on the thing is “what is the condition of their sales?” if the condition is good of their sales then they definitely increase their production and sales volume. Otherwise they concentrate on their old strategies.

Profitability:

The second thing through which they determines budget is the “profit” .if they r getting profits with the high margin, then they definitely want to increase their profits in the next coming year. Every organization runs on the basis of getting high profits. No organization wants to face Loss in their business. To get profit is the first priority of the Coke.

Target Volume:

To run the business every industry has some targets, which they want to achieve in a specific time period. If industry achieves those goals in that period then for the coming year it increases the volume of the target.

So Coke Follow the same thing it has also some goals and targets to achieve in the given time period. When they succeed to achieve that target then they increase their target volume in the next year.