The Coca-Cola Company

 

Since its beginning in the spring of 1886, Coca-Cola has grown to become the most recognized trademark in history. Operating out of more than 195 countries worldwide, Coca-Cola is the most popular beverage on earth and is enjoyed over 773,000,000 times daily.

The Coca-Cola Company is the world’s leading manufacturer, marketer, and distributor of non-alcoholic beverage concentrates and syrups, with world headquarters in Atlanta, Georgia. The Company and its subsidiaries employ nearly 31,000 people around the world. Syrups, concentrates and beverage bases for Coca-Cola, the Company’s flagship brand, and over 230 other Company soft-drink brands are manufactured and sold by The Coca-Cola Company and its subsidiaries in nearly 200 countries around the world.

Production

One of The Coca-Cola Company’s greatest strength lies in the ability to conduct business on a global scale while maintaining a local approach. By contract with The Coca-Cola Company or its local subsidiaries, local businesses are authorized to bottle and sell Company soft drinks within certain territorial boundaries and under conditions that ensure the highest standards of quality and uniformity. The Company takes pride in being a world-wide business that is always local. Bottling plants are, with some exceptions, locally owned and operated by independent business people who are native to the nations in which they are located. Bottlers provide the required capital for investments in land, buildings, machinery, equipment, trucks, bottles and cases. Most supplies are purchased from local sources, often creating new supply industries and areas of employment within local economies. The Company supplies the concentrates and beverage bases used to make its products and provides management assistance to help its bottlers ensure the profitable growth of their businesses. Product manufacturing, quality control, plant and equipment design, marketing and personnel training are just a few of the areas in which the Company shares its expertise. The strong commitment of bottlers to their own profitable volume growth helps to meet the Company’s strategic goals and furthers the interests of the world-wide production, distribution and marketing systems.

Operating structure

The Company’s operating management structure consists of five geographic groups plus the Minute Maid Company.

  1. The North American Group comprises the US and Canada.
  2. The Latin America Group includes the Company’s operations across Central and South America, from Mexico to the tip of Argentina.
  3. The Greater Europe Group stretches from Greenland to Russia’s Far East, including some of the most established markets in Western Europe and the rapidly growing nations of East and Central Europe.
  4. The Africa and Middle East Group, the Company’s most populated operating group, encompasses the Middle East and the entire continent of Africa.
  5. The Asia Pacific Group has operations from India through the Pacific region including China, Japan and Australia.
  6. The Minute Maid Company – the Company’s juice business - is located in Houston, Texas. It is the world’s leading marketer of juices and juice drinks.

Strategy and mission

The strategy of The Coca-Cola Company has for a long time been best characterised as follows: global marketing and local manufacturing. However, the global marketing approach has been changed to local marketing because of the differences in consumer demands and experiences. To implement their “think local, act local” philosophy, the following key areas are considered:

Mission: to maximize share-owner value over time.

In order to achieve this mission, we must create value for all the constituents we serve, including our consumers, our customers, our bottlers and our communities. The Coca-Cola Company creates value by executing a comprehensive business strategy guided by six key beliefs:

  1. Consumer demand drives everything we do.
  2. Brand Coca-Cola is the core of our business.
  3. We will serve consumers a broad selection of the non-alcoholic ready-to-drink beverages they want to drink throughout the day.
  4. We will be the best marketers in the world.
  5. We will think and act locally.
  6. We will lead as a model corporate citizen.

The ultimate objectives of the Coca-Cola’s business strategy are to increase volume, expand their share of world-wide non-alcoholic ready-to-drink beverage sales, maximize the long-term cash flows and create economic-value-added by improving economic profit.

The Coca-Cola Company is positioned to capture opportunity:

Objectives

lower investment requirements.

The Coca-Cola Company is confident that all the steps they have taken will put them on the forefront of change. They believe that they have a strong understanding of consumer habits and will continue to learn more as they continue to build our core carbonated soft drink business and as they enter into new categories. With the Coca-Cola’s new culture taking hold, combined with their great brands and bottling partners, they are optimistic about their ability to deliver on volume growth and financial results consistently over the long-term.

Overview of the financial results

Table 1

Marketing

Consumers will have different experiences, given their personal preferences and location. The Coca-Cola is adjusting its approach so that it can tap into these differences and provide the appropriate marketing activities and beverages to connect with consumers.

Its “think local, act local” approach to marketing allows to adapt communications to fit local circumstances. Coca-Cola Company wants to provide consumers with beverages to fit their different life styles and life stages.

As consumers are having different experiences, it has been recognised that the commercial beverage industry is in different stages of development around the world. If we look at theoretical beverage consumption of eight 8-ounce glasses of liquid a day, it becomes apparent that the commercial beverage industry only provides 25% of the liquid that is consumed by the world’s population. The non-commercial beverage consumption is basically tap water and/or homemade fruit juices. Over time, the Coca-Cola Company is expecting that this non-commercial portion of consumption will continue to decline and that the commercial beverage industry will grow.

This 25% slice that represents the commercial beverage industry can be broken down into three segments (see Figure1): alcoholic beverages, not ready-to-drink beverages and ready-to-drink beverages.

 

Figure 1. Segments of commercial beverage industry (http://www.thecoca-colacompany.com/investors/octpresents/sld012.htm).

This chart represents the consumption of the commercial beverages in the entire world. If we look at the total size of the commercial beverage industry, it can be seen that alcohol and not ready-to-drink beverages are becoming a smaller portion of the total industry. These two segments are experiencing some growth, but not at the same rate as ready-to-drink non-alcoholic beverages. The Coca-Cola Company has chosen to expand into the ready-to-drink non-alcoholic segment of the commercial beverage industry because this is the fastest growing segment as you can see in the graph. This trend of faster growth in the ready-to-drink non-alcoholic segment is true in every operating group around the world. This is also predicted that this trend will continue, as an increasing desire for convenience is a trend that can be observed in consumers all over the world.

Focusing on the ready-to-drink non-alcoholic segment, there are several categories within this segment (see Figure 2). It can be easily seen that the CSD (carbonated soft drinks) and packaged water segments are the largest. The Coca-Cola Company is just getting started in many categories outside of CSDs. They have articulated very clearly that they intend to participate in all of these beverage categories to meet their growth objective.

Figure 2. Coca-Cola’s share in beverage categories (http://www.thecoca-colacompany.com/investors/octpresents/sld014.htm).

Earlier this year, the Coca-Cola Company reconfirmed its long-term target for unit case volume growth at 7-8% (see Figure 3). This target reflects their belief that the ready-to-drink non-alcoholic beverage segment is going to continue growing and that The Coca-Cola Company is going to do better than the rest of this segment of the commercial beverage industry. This chart shows Coca-Cola’s unit case volume trends over the past five and a half years. It can be seen that after three years of 8+ growth from 1995-1997, the growth was slowed in 1998 based on the global economic crisis and then continued to face challenges in 1999. But now the tables are turning again. Thus far in 2000, volume is up 5% through June and the company is remaining comfortable with the estimate of 5% volume growth for the full year. Looking ahead to 2001 and 2002, they are still comfortable with their prior guidance of 6-7% and 7-8% worldwide unit case volume growth, respectively. This accelerating trend will result from the continued success of their local marketing approach and improving economic conditions in most markets around the world.

Figure 3. Coca-Cola Company’s volume targets (http://www.thecoca-colacompany.com/investors/octpresents/sld032.htm).

Sponsorship

The Coca-Cola Company sponsors the world’s most exciting sports events, including World Cup Soccer, the National Football League, National Basketball Association, NASCAR, the Tour de France, the Rugby World Cup, COPA America and numerous local sports teams. The Coca-Cola Company has sponsored the Olympic Games since 1928.

The Coca-Cola Company Estonia

In the first part of the term paper we analysed the overall strategy of the Coca-Cola Company, which has ensured its success and made it the most well-known brand in the world. However, the situation is not so promising everywhere. The Coca-Cola Company has faced many setbacks during the last years. First of all, the Company was shocked by the poison scandal in Europe, due to what part of the production had to be removed from sales. Besides that a group of black employees filed a lawsuit against the Company because of the racial discrimination. In addition to that there is also a range of smaller litigations with the bureaucracy in Europe. To emphasise some problem areas the Company faces, we would like to bring out its current situation in Estonia. The world’s leading brand Coca-Cola is doing poorly in Estonia. The profit of the Coca-Cola Estonia has decreased continuously during the last two years and at the end of the last fiscal year the profit had turned into a 20 million loss (EEK). This was a 40 million kickback in comparison with the year 1998 (see Figure 4).

Figure 4. Coca-Cola kahjumis (Rumenssen, I. Äripäev 23.10.2000).

This however has not influenced its leading position in the market as the whole market of the soft drinks has decreased. As the market is in the growth stage, new entrants have entered the market and this has also influenced the companies in the soft drink industry. As the soft drink industry faces seasonal fluctuations, then the sales numbers of all soft drink manufacturers were cut back due to the cold and rainy summer. The Coca-Cola had a 42% market share in the second quarter in 2000. In comparison with the 72% market share in 1997-1998, it has decreased remarkably and mainly because of the success of the substitutes, which have entered the market. The most successful of these is kvass, which received a very positive response from the consumers (see Table 2 and Figure 5). The kvass is said to be the one who has taken away the market share from the Coca-Cola – 10% accordingly. The success of kvass is the more amazing as the producers of kvass have not spent much on advertising, but the advertisements of Coca-Cola are dominating. The main reasons for the success of kvass are nostalgia and an approximately 15% lower price than the one of the Coca-Cola. The Coca-Cola is very surprised at the success of the kvass. As the CEO of the Coca-Cola Baltic, Jan-Ole Pedersen, has said, they have also though about whether they should start producing kvass, but they are afraid of that the success of kvass is temporary. Coca-Cola has many products, which are produced and sold beside the core brands. For instance, Coca-Cola has a Frisco product line in Lithuania, which includes kvass as well, but they have said that it is not their first priority. Frisco is cheaper than Coca-Cola or Fanta and thus more competitive in the Lithuanian market. But as the Coca-Cola Company has changed its principles and their present slogan is – “think locally, act locally” – then according to that it quite likely that they start producing kvass in case the market situation demands it.

Table 2

Top 10 beverages in Estonia

       
    Manufacturer Market share

1

Coca-Cola Coca-Cola Co

8,6%

  Regular 2l    

2

Linnusekali AS Ösel Foods

5,2%

3

Sprite 2l Coca-Cola Co

5,1%

4

Fanta Orange 2l Coca-Cola Co

4,9%

5

Coca-Cola Coca-Cola Co

4,8%

  Regular 0,5l    

6

Sprite 0,5l Coca-Cola Co

4,5%

7

Rigas Kvas 1,5l AS Gutta

4,46%

8

Tartu Tartu Õlletehas

3,9%

  limonaad 1,5l    

9

Coca-Cola Coca-Cola Co

3,87%

  Regular 1,25l    

10

Sprite 1,25l Coca-Cola Co

3,7%

Source: Profindex, January 1999. (Sepp, K. Vana toote turule toomine uuendatud kujul. Äripäev 06.04.1999.).

Figure 5. Most popular beverages (Voog, A. Õlut noortele ja kalja vanematele. Äripäev 30.08.1999.).

Summary

The Coca-Cola Company has been a dynamic company, always moving to anticipate and meet the present and future desires of customers and consumers. The world is changing with blinding speed in countless ways: technologically, educationally, culturally and economically. Coca-Cola Company has been able to meet these changes seeing them as new opportunities. Although it has faced many difficulties along the way, it has still been a very successful company and probably continues this way. Coca-Cola has for a long time followed the strategy: global marketing and local manufacturing. They have taken a global approach to different countries trying to reach as wide market as it could, giving them quite standardized products, which are produced locally. With the changes taking place in the global market, companies must try to remain as close to the customers and consumers as it can in order to meet their different desires in the best way. Due to that the Coca-Cola Company has also changed its strategy from global marketing and local manufacturing to local marketing and local manufacturing. This will help the company to differentiate its products in more specific way, which will result in meeting the different needs and desires of consumers and the market situation in a particular country as well. Our opinion is that this strategy will help Coca-Cola to manage its situation in Estonia as well. They have still ensured its leading position in Estonian beverage market and to maintain this they must try to accommodate their products according to the needs of our customers. This may mean developing new products and why not kvass as well if Estonia consumers demand it.

 

Appendix 1

Estonian soft-drink market

Source: Data of Estonian manufacturers (Eesti Ekspress Online. http://www.ekspress.ee/Arhiiv/2000/10/Aosa/Ari1.html)

 

 

Appendix 2

Financial highlights of the Coca-Cola Company

Source: The Coca-Cola Company announces expected third quarter worldwide volume trends (27.09.2000. http://pages.infinit.net/colakid/

 

 

Appendix 3

Financial highlights of the Coca-Cola Company

 

Source: The Coca-Cola Company announces expected third quarter worldwide volume trends (27.09.2000. http://pages.infinit.net/colakid/

Coca-Cola slogans from 1886 to 1993 Appendix 4

Autorid: Allen Matt, Meelis Anvelt, Triin Kink, Kersti Kukemelk, Kadi Skoblov, Annika Urva

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