Coca Cola New Product Analysis

The Coca-Cola Company’s core undertaking is to benefit and refresh everyone it reaches. Founded in 1886, we are the world’s leading manufacturer, marketer, and distributor of non-alcoholic beverage concentrates and syrups, which are used to produce nearly 400 beverage brands that make up for our wide portfolio. Our corporate headquarters are established in Atlanta, and we are holding local operations in over 200 countries around the world. Our activities cover all sectors of the beverage industry. We are the second leading player in functional and Asian specialty drinks, while ranking number one in value for the ready-to-drink tea sector (ref.1, p.1).

description of the new product, & strategic role in the future position of the company

“Bubble Buzz” will be a bottled beverage and will be positioned as the only ready-to-drink Bubble Tea product available on the market. The beverage will have a green tea base with enhanced fruit flavors (passion fruit, strawberry and lime) as well as tapioca pearls. It will bring an entirely unique drinking experience to its consumers. It will present itself as a funky and unusual alternative to traditional tea while providing the great taste of authentic fruit juice in an attractive and convenient packaging. The strategic role of Bubble Buzz for The Coca-Cola Company is centered around three objectives:

• To stay at the forefront as the market leader in innovative product introductions and successful product launches;
• To strengthen and satisfy the needs of the more adventurous Generation Y consumers with a new eye-catching and functional product.
• To become the market leader in the functional drinks segment with increased market shares.

INDUSTRY ANALYSIS

Consumption: The sales volume for the functional drinks segment (ref. D2) in UK has reached $342.2 millions in 2004 for a volume of 125.9 million liters (ref.2). This product segment has shown a steady growth since 1999: an increase of 13.5% over a period of 6 years (Appendix A). The consumption rate per capita in 2004 has reached 3.94 liters, which represents a 4.0% increase compared to 1999 .The growth of this particular market is largely due to a slow shift in consumer trends.

Trends: Through the early 1960s, soft drinks were synonymous with “colas” in the mind of consumers. In the 1980s and 1990s, however, other beverages (from bottled water to tea) became more popular. Coca-Cola and Pepsi responded by expanding their offerings

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through alliances (e.g. Coke & Nestea) and acquisitions (e.g. Coke & Minute Maid), but also by focusing efforts on portfolio diversification. Today, while the soft drink industry’s value has increased in 2004, the volume sales of carbonated soft drinks has declined due to a large proportion of consumers who are opting for the trend towards healthier alternatives in the functional drink segment (energy drinks, smoothies, milk & juice drinks, sports drinks) as well as bottled juices and water .Companies have been actively engaged in new product developments in order to counter the growing concerns about negative health impacts of high-fructose drinks, but also to increase the demand in a market where product offerings are quickly maturing .New flavor introductions and health-conscious formulations have been launched in an attempt to offset the decline in carbonated soft drink sales .The functional market is expected to show sustained growth and consumer interest in the future years as consumption shifts to trendier, healthier and more sophisticated products .

SWOT ANALYSIS (Strengths and weaknesses, opportunities and threats)

Strengths

• Brand strength
• Effective stride in new markets
• Results of operations
• Strong existing distribution channels

Weaknesses

• Reliant upon line extensions
• Reliant upon particular carbonated drinks
• Brand dilution
• Entrance into difficult non-core categories
• Saturation of carbonated soft drink segment

Opportunities

• New product introductions
• Brand is attractive to global partners
• Strong competition

Threats

• Potential health issues
• Free trade

STRENGTHS

• Brand strength

The Coca-Cola Company is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. The Coca-Cola brand is unarguably one of the most recognizable brands in the 200 countries where it sells its products. The strong brand name is one of the basis for the company’s competitive advantage on several of its core markets.

• Effective strides in new markets

Coca-Cola has partnered with several companies (such as the joint venture with Nestlé) in order to increase the ability to react to demands and changes in the markets of iced tea, coffee and juices. The developing markets are more complex than the carbonated soft drinks.

• Results of operations

In 2004, net-operating revenues totaled approximately $21.9 billion, an 8% increase

from 2002. Gross profit totaled $14.3 billion in 2004. The company generated $5,968 million from its operating activities and re-invests heavily into its business. The ability to generate significant cash flows is one of the its key strengths (ref.16).

• Strong existing distribution channels

Coca-Cola has operations worldwide and is well established in its distribution channels (such as store retailers or vending machines). Therefore, a new product launch can typically rely on the existing distribution system in order to reach the majority of its target market while requiring no major supply / delivery developments.

WEAKNESSES

• Relying upon line extensions

Coca-Cola is relying on brand extensions increase sales in specific lines, particularly its long-time carbonated soft drink products (i.e. the introduction of Vanilla Coke helped maintain sales for the core Cola beverages). However, there is a strong risk of cannibalizing existing sales in the long term (for example, Bubble Tea might deter on sales for iced tea).

• Reliant upon particular carbonated drinks

The long-time presence of Coca-Cola’s Coke beverage has established this particular line as a flagship product. While the core Coke products bring a solid base of sales and loyalty to the company, consumers’ expectations also become more and more anchored and single-lined, taking away freedom in the areas of line diversification and product modifications (taste, packaging, price).

• Brand dilution

The tremendous amount of existing brands and new product being introduced by the company could diminish the value and differentiating strength of each product that is being manufactured.

• Entrance into difficult non-core categories

The Coca-Cola Company is a truly global multinational business giant. While some categories of products are distributed in many areas of the globe (Coke, Powerade, etc.), geographical needs already require that these global brands are heavily adapted to their target region. Furthermore, many smaller and diversified product lines are more or less popular in one particular region over another. Therefore, the process of diversifying the production and marketing each product involves costly investments. These capital requirements typically increase as the product becomes heavily focused (for example, since the Coca-Cola brand is highly recognizable worldwide, marketing a bottle of Coke in Japan would be less difficult than marketing a bottle of “Qoo” in that same country – “Qoo” being a lesser-known non-carbonated drink which was one of Coca-Cola’s newest brand introduction in 1999).

• Saturation of carbonated soft drink segment

Due to the countless number of brands available on the market, it becomes increasingly difficult in the soft drinks segment to innovate and create new products that genuinely stand out from their competition. And as we have seen, an analysis of the industry has shown that growth in the soft drinks market becomes difficult and challenging when the conditions and consumer trends cause a market demand that stays stagnant.

OPPORTUNITIES

• New product introductions

The functional drinks market is one that particularly allows more innovation opportunities and gives greater freedom for creativity in the design, production, manufacturing, distribution, promotion and retailing choices and processes.

• Brand is attractive to global partners

Because of the company’s size (including value, brand name and operating revenues) and wide portfolio base, Coca-Cola enjoys a strong purchasing power over its suppliers, and also attracts large partnerships with various levels of consumer reach (e.g. Burger King, movie studio promotions, sponsorship agreements, etc.). Existing brand awareness also provides an international playing field for powerful marketing strategies.

THREATS

• Strong competition

Coca-Cola is competing in a global market that is characterized by an oligopoly between several (but few in numbers) competitors. The fight for market shares and sales in crowded markets becomes a complex one.

• Potential health issues

The current trend of consumer and consumers groups’ awareness towards goods and services is both beneficial and threatening for companies in the food and beverages industry. Over the last few years, concerns over health issues have risen in the media through an expanded and ever-growing network of “knowledge outputs” (journals, TV channels, internet and so on). The move of the younger generation towards a healthier lifestyle call for careful planning and decision-making in new product developments. Large companies can also easily become the target of consumers’ apprehension.

• Free trade

In an era of globalization, large international competitors can come out with comparative advantages (the constant fight to remain the first mover and market leader in a long-term spectrum). Issues arise when dealing with price competition and economic growth. Trade organizations are also faced with public pressure which can disrupt operations in one or more areas of the company.

TARGET MARKET

Segment identification: RTD (Ready-to-drink) bottled Bubble Tea, to be established within the Functional Drinks sector

Segment needs: The product will cater to both physiological needs (hydrating and nutritional value) and social needs (perception of a social, fun drink with a sense of belonging within peer consumer groups) – (ref.11, p.127).

Segment trends: The current trends include a shift away from junk foods and carbonated drinks, a growing interest for healthier / beneficial products for the “mind and body” (ref. 10), the trend towards the availability of on-the-go products for those with an active lifestyle, as well as the trend for personalization through customization (or for beverages, through variety-seeking in a wide introduction of flavours – ref.6).

Segment growth potential: Statistical reports anticipate a segment growth of 1.72% over the next 9 years (2015) for the 10-29 years old subsets (ref.12). Refer to Appendix E.

Size of the segment (population): 8,688,300 (329,600 L). Refer to Appendix E.

Positioning strategy: The only RTD bottled bubble tea available. Funky & eye-catching bottle, functional packaging, premium-priced, cool, new and unusual, unique drinking experience, aspects of play (tapioca pearls, oversized colored straw), variety of flavors, sweet, refreshing, for hip & young people, healthier alternative to heavy-sugar drinks.

The objectives of the marketing plan are strategically centered around 3 criteria: to create a strong consumer awareness towards a completely new bubble tea product from Coca-Cola, to establish a wide brand recognition through the capture of market shares in the functional drinks segment, and to become the top market leader in that particular segment within the forecasted sales figures.

PRODUCT STRATEGY

The core

Bubble Tea beverage in a pre-bottled, ready-to-drink format.

The actual product

Packaging and labeling: see figure below

Branding: colorful, aspect of play, round shaped, prominent Bubble Buzz logo written in modern font, catchphrases such as “Think outside the Bubble” and “Get Your Buzz”.

Trade name: Bubble Buzzâ„¢, a Coca-Cola product

Brand personality: energy, funky, cool, functional, original, funny, healthy, etc.

Brand equity: Coca-Cola provides a quality, consistent, innovative and accessible soft drink reputation.

Augmented product

Nutritional information, Status (social drink), Features promoting the website, Health benefit of a green tea base (ref.17)

Marketing considerations

Product life cycle: Bubble Buzz is a low-learning product. With a strong marketing campaign, “sales [will] begin immediately and the benefits of the purchase are readily understood” (ref.11, p.301). Since Bubble Buzz is prone to product imitation, Coca-Cola’s strategy is to broaden distribution quickly, which is currently feasible thanks to the company’s high manufacturing capacity.

Product class: Food & beverage  Soft Drinks  Functional Drinks (refer to Appendix D2 for a break-down of the functional drinks market).

Bubble Buzz follows the practice of product modification (ref.11, p.304): Coca-Cola is introducing an existing beverage (bubble tea) but redefines the drink with a new, more convenient package. Bubble Tea will now become a widely available drink in multiple retailing (distribution) channels.

PRICE STRATEGY

The price strategy that will be undertaken should consider the following aspects:

• Consumer demand
• The product lifecycle
• Potential substitutes

Customer demand

Customer demand is a crucial factor which is driven by tastes, income and availability of others similar products at a different price (mentioned later in the potential substitutes section). For a lot of consumers, value and price are highly related: ”the higher the price, the higher the value”. Consequently, Coca-Cola’s intention to position Bubble Buzz as a unique, innovative and attractive product gives it a certain control over Bubble Buzz price. To be able to implement higher pricing though, the minimization of the non-monetary costs to customers should also be include along with awareness of the product (notably by advertising) and value (benefits) .

The product lifecycle

The company should take advantage also to the fact that the newer the product and the earlier in its lifecycle the higher the price can usually be. It ensures a high profit margin as the early adopters buy the product and the firm seeks to recoup development costs quickly and it also brings a certain prestige to the product.

Potential substitutes

Coca-Cola is constrained by the monopolistic market in which it competes. The main characteristic however is product differentiation.

Other constraints (See Appendix M)

PROMOTION STRATEGY

Objectives:

To initiate strong awareness about the launch of Bubble Buzz throughout Generation Y (10-29 years old) consumers as well as their parents.

To win market shares over our top functional drinks competitor, PepsiCo.

Message:

The promotional outputs will convey the clear message that “Bubble Buzz is a healthy drink for sporty and young people who simply enjoy taking care of their body and life.”

Concepts:

“Think outside the bubble”: Be Bold, Be Original, Be Different, Be Yourself.

“A good spirit in a good body.”

“For the out-of-the-ordinary individuals who like to challenge themselves.”

Media selection:

Before choosing the appropriate medias, it is important to note that Generation Y consumers only give partial attention to media. However, they can be reached through integrated programs. They are typically using more than one communication media at a time; a behaviour that is often called “multitasking”. This group of consumers doesn’t give its full attention to one single message, but rather uses continuous partial attention to scan the media. Marketers can still communicate with Generation Y by using a variety of targeted promotional tools. Another important tactic to reach our target market is through “Viral” or “Buzz” marketing, which Coca-Cola will heavily use in this campaign (campus, contests).

Advertising:

Refer to APPENDIX H for detailed explanations

Output

Examples

Television

MTV, Much Music, VrakTV, YTV

Radio

MIX96, CKOI 96.9, 94.7 FM, Universities

Magazines

For girls: Cosmo, Elle

For boys: Sports Illustrated (or Kids edition)

Internet

Banners on select websites (gaming, sports, etc.)

Official promotional website: www.BubbleBuzz.ca

Outdoors

Billboards and prints in select areas including:

Campuses, transportation (bus, metro, stations)

Tourist areas in high seasonal periods

Outskirts of key cities in geographical reach

Others

Not relevant

Personal selling

Direct contact with retailers, sales kit strategies to be explained later in the text.

Public relations

Stands or special displays and events in schools, malls, sports events (i.e. 2008 Beijing Summer Olympic Games), sponsorship activities

Publicity

Conferences, press releases (print and online), buzz marketing through TV coverage

Promotional Mix:

Consumer oriented:

Contests: “Win another Bubble Buzz flavour”, “Uncover a secret code underneath the bottle cap and win sporting goods and electronics by logging on the website”, “Win a trip for the 2008 Olympics in Beijing”. (Arguments: It will increase consumer purchases and encourage consumer involvement with the product).

Samples: distributed in supermarkets, school/universities. Samples are a way to avoid product resistance since people are not used to find bubbles in their drinks. Arguments: It will encourage new product purchases and it represents low risk for consumers since they get it for free. They have nothing to loose by trying it.

Point-of-purchase: in supermarkets (to reach the parents of generation Y). Arguments: It is also a mean to increase product trial and provides a good product visibility.

Others: In subsequent years, engage in product placement in TV shows or movies.

Trade oriented:

Allowances and discounts: case allowance (Arguments: The “free goods” approach will be used so it can encourage retailers to buy more of the product to get a certain amount for free).

Cooperative advertising: to encourage retailers to buy our product and to maintain our high level of advertisement that consumers expect from Coca-Cola.

Other considerations:

Scheduling of the advertising: Pulse scheduling (promotional presence year-round, but emphasized and intensified before and during summer).

IMC (integrated marketing communication)

Target Audience:

Intermediary: personal selling will be more often used

Ultimate consumer: Coca-Cola will use more of mass media because the amount of potential buyers is large.

PLACE (DISTRIBUTION STRATEGY)

Bubble Buzz will be distributed through these channels: supermarkets, convenience stores, independent food stores, discount stores, multiple grocers, vending machines, direct sales.

China is the target country we’re going to expand our product.

Reasons:

With a total population of 1,313,015,000 in the end of 2005 and 327,714,000 in our target market (age 10 to 25 years old), compared with the total population of Canada—304,453 million, there definitely is a great potential worth to work on.

absolute expenditure on food and non-alcoholic beverages is expected to increase from 1,777 billion in 2005 to 2,154 billion in 2010 (though the proportion of consumer expenditure on this part is decreasing from 28.39% to 25.75% )

Soft drinks industry is one of the fast growing industries in China, especially fruit/vegetable juice, RTD tea, and Asian speciality drinks and bottled water have shown a sharp increase during 1998 to 2003.

Bubble tea was originated in Taiwan. Soon after its introduction in China, it became one of the most popular beverages sold in tea stores on the streets due to the similar taste and similar cultural background. So, it is a good chance for us to enter into this market.

Since we are the top sponsor for the upcoming Beijing Olympic in 2008. With more opportunities to expose to the public, it is going to benefit our sale there.

Our entry-strategy for entering China is through licensing.

Reasons:

We have already provided licenses for manufacturing our products in China (licensing the bottlers and supply them with our syrup required for producing). Therefore, added in one or two more products in our production chain would not be that difficult.

It is relatively low risk when compared with direct investment there. It is low cost to export our new products there since we can maintain lower labour cost and lower material cost if we produce our products locally, especially in China.

Changes to be made:

Price: Price sold in China is going to change to accommodate the local desire. As we set our price sold in Canada $2.00. Compared to the price sold in the bubble tea store ($ 3.50), it is about 57.14%. So, with the information we gathered from the tea store in China [1] , the price sold there would be 57.14% of what sold in the tea store—$12 Yuen in China currency. Then, it would be around $7 Yuen, about CAD$1 [2] .

Naming the product: In order to be recognized and accepted more easily for the local market, we need not only translate our product name but also make sure there’s not hidden unintended meaning that would damage our product.

Develop other flavours that would attract the local market: Since milk based bubble tea sell better in China, we will add in this product line. Also, we will avoid using too many artificial colors as they are not appreciated as much as in Canada. Moreover, people in China are becoming more and more health concerned, especially the amount of sugar and additives added in the drinks. We will make some changes in the ingredients used to appeal the local market, i.e. less sugary drinks.

Promotion: In contrast to the radio ads in Canada, we will use more TV and Web advertisement there due to the highly exposed environment in China. Also, we will put more emphasis on the ads on the public transportation such as underground/subway system and bus service due to the more frequent use of the public transport service there. Also, since the outdoor display screen is quite popular in big cities, we will also take advantage of it