Shwetha Gowri Nagaraj · Follow
16 min read · Jun 20, 2020
Coca-Cola started its journey in Atlanta in 1886 and was initially sold for as low as 5 cents in a small pharmacy. Dr. John S. Pemberton discovered an ingenious way to create a cold drink with a unique taste. First ever Coca-Cola formula started with a flavored syrup and carbonated water mixture. When the testers did their sampling of the new soda, they found if very refreshing and perfect in taste.
However, the inventor of Coca-Cola couldn’t witness his invention to touch the sky limits; he passed away within two years. He sold the stakes from his business to multiple parties, among whom was the largest stakeholder- Asa G. Candler. A prominent businessman of Atlanta, who took the distribution of Coca-Cola to the next level and expanded it to outside of Atlanta.
In 1894, Joseph Biedenharn started bottling Coca-Cola and was the first person to put it in a bottle. He set up a small bottling machine in Mississippi soda fountain and gave the idea to others. It was only until later 1899, that the bottling of Coca-Cola was done on a large scale when three businessmen bought the bottling rights from Mr. Candler. Now, Coca-Cola was bottled across multiple locations in USA and there was different packaging used.
So, there was no distinctive packaging for Coca-Cola and the stakeholders agreed on getting one uniform design for the bottle. In 1977, a patent was filed for the new design for Coca-Cola bottles.
From 1977 till now, Coca-Cola has changed many bottling designs and followed multiple ad campaigns to gain popularity. However, now it doesn’t require any more advertisem*nts, it is known by its brand and there are many other products from the same brand which are equally famous.
Coca-Cola is one of the biggest beverages brand in the world. Although Pepsi Co has been its huge competitor always, Coca-Cola has sustained the competitiveness and has always been the leaders in the industry of beverages. In the following section, we discuss the Internal analysis of Coca-Cola company covering all the strengths and weakness of the company.
Strengths:
1. Brand Power — Unlike the other small beverages company, Coca-Cola has the power of influencing the buyers to buy its products as compared to others, mainly because of its Brand awareness globally. (DeFranco.K.,2015) Customers trust the brand and would rather choose Coca-Cola as compared to the other brands in the same market segment.
2. Global presence — Coca-Cola has its presence in over 200 countries creating a community or a state of mind with belongingness amongst the consumers. Coca-Cola also has a large distribution network. (Bhasin, H.,2019) Almost every country you go has Coca-Cola sold in their market, which is also one of the reasons of their enormous brand identity worldwide. The distributors play an important role in making sure that the manufacture’s product reaches the end customers quickly and effectively. Coca-Cola’s distribution network is one of the largest yet diverse and has wide-spread reach to various customers especially the ones that are remote and unreachable otherwise.
3. Marketing Strategies & Consistency — Coca-Cola has striking marketing strategies. Coca-Cola’s Red White Signature Logo has been consistent from when they had started off and it is imprinted into mostly everyone’s minds. Coca-Cola’s taste could never be copied and remains different in the market segment. (Talbot, P. , 2019) The shape of Attractive bottles, the very famous brand ambassador, the ads and ad-campaigns that Coca-Cola choses for marketing its products in each of the 200 plus countries it holds its presence, all make it one of the top brands for beverages.
4. Customer Loyalty — Customer is the biggest power for Coca-Cola. With such impressive products that tastes good and overwhelming consistency of quality over a decade, the customers are attracted to Coca-Cola brand always. (Tierney,J. ,2016) Wide reach of audience will not only increase the brand awareness, but also help the company target more customers. Coca-Cola has a phenomenal fan-following throughout the world which is unbeatable and can only grow more.
5. Market power and Cost leadership — Since Coca-Cola has the advantage of its brand, it can easily operate its market power by either decreasing its price to eliminate the new commers entering into the market segment or even strike its already (Bhasin, H.,2019) existing competitors from the market. Coca-Cola also introduces variety of its own products to capture the market and gain profits. For example, Coca-Cola introduced co*ke zero, to capture the health-conscious audience rather than they chose new entrant in the market segment. As per the NYSE, Coca-Cola (KO) has the largest market share. Coca-Cola also launched the production of its product with personalized bottles (Esterl, M. ,2014) with user’s name on it, this became a huge hit in social media and a trend altogether, leading to increased number of sales.
Weakness:
1. Health concerns — Although Coca-Cola has won its brand power with the loyalty from customers due its outstanding taste, the drink is not at all healthy. Coca-Cola has high amounts of sugars and carbohydrates that effect health adversely. Coca-Cola introduced another segment especially for kids called the Minute Maid Smoothie for kids, this has high sugar content, that is even more than what Coca-Cola had. Health experts say that Sugar is a very bad for health and the consumption of sugar puts the overall health at risk for both kids and adults.
2. Product diversifications — Since Coca-Cola has the biggest strength of its brand, Coca-Cola must also market and introduce its product variants into the market. Like introducing snacks product or healthy drinks and many more. In this way Coca-Cola can gain the market shares and a sustainably for the future.
In the following section, we discuss the external analysis of Coca-Cola company, covering all the threats and opportunities of the company.
Opportunities –
1. Market Coca-Cola’s existing products and introduce new sub-products– Coca-Cola has a wide variety of products like Energy drinks, Healthy drinks like Coconut water, Orange juices, Simple plain pure drinking water, tea, coffee and many more. But many of these are not yet popular, and few might be popular but not as big as the parent company Coca-Cola itself. (Staff,J. ,2018)Hence, there is a fantastic opportunity to market and popularize these lesser known brands so that the company gains more profit and attract back the customers who are moving away due to health hazards associated with Coca-Cola.
2. Merger & Acquisition — Coca-Cola can acquire or merge smaller well doing companies to in turn increase its profit and business. These smaller profit driving companies can strengthen Coca Cola’s place in the industry further.
Threats –
1. Environment damage by its plastic — Maintaining a healthy environment is the crucial to having a quality of life for us as well as the future generations to come. (Lucas, A. ,2019) Coca-Cola uses one-time plastic for the product packaging, and these are non-reusable. Usage of plastics are indirectly creating ecological imbalance.
2. Indirect Competitors — (Bhasin, H.,2019) Although Coca-Cola is one of the biggest brands in Soft drinks market segment, there are huge Indirect competitors that do not belong to the same division of industry. These indirect competitors are capturing Coca-Cola’s market share. These are the companies offer healthier beverages such as Starbucks, Real, Tropicana, Gatorade are all affecting the market share of Coca-Cola. These companies are gaining customer attention for the health benefits it impacts by the usage of their products.
3. Water usage issues — (Davenport, C., 2014) Coca-Cola uses enormous amount of water to produce its beverages. The company also agrees that water is the key ingredients in making their beverage. This is impacting the locals in the region with water crisis, drying up of wells, water drought, shortage of water needed in that region for harvesting and other useful daily needs for the existence. In countries like India, Mexico, and many more where the Coca-Cola has its manufacturing plant established, all have over-consumed the water from the local reigion leaving the locals devasted with water crisis.
4. Increased cost of labor and raw materials — The increased rates and tariff by the USA Government on raw materials and the labor charges and tax effects the sale of Coca-Cola products in the lower price. “Coca-Cola CEO James Quincey announced this week that rising costs were driving an unusual mid-year need to raise prices to consumers. The reason is “the freight, the metals, the steel, the aluminum going up, the labor going up,” he said during a CNBC interview. He directly mentioned tariffs to the Wall Street Journal.” (Sherman, E. ,2018).
5. Nutritious drinks — (DeFranco.K, 2015) No doubt that in present times, almost every person is health conscious and are aware of the healthy benefits of using organic over chemicals, using natural over harmful processed drinks and food intakes. This is resulting in creating a huge barrier for the future for Coca-Cola since it is neither natural nor good for health. There are several media posts and research on how harmful Coca-Cola is and what health risks does it impact on the users. These are educating the customers on the health risks of carbonated sugar packed drinks over natural and healthy drinks. For example — Baltimore USA restaurants banned from including sodas, sugary drinks on kids’ menus. (Press, A. ,2018).
The Coca cola company uses its functional level strategies to make improvement on efficiency, innovation, and customer responsiveness as below:
Efficiency:
Competitive factors impacted the Coca cola company on many aspects, such as pricing, advertising, sales promotion programs, instore displays and point-of-sale marketing, product and ingredient innovation (COCA-COLA.,2018). Company need to increase efficiency in production techniques, the introduction of new packaging, new vending and dispensing equipment, to keep the Coca cola company in the most efficiency way.
Innovation/Customer Responsiveness:
The Coca cola company improved brands, products, packages, sweeteners and equipment to meet the evolving needs of our customers and consumers and invested in many ways to provide people with more beverage choices with less sugar. The company also uses CSR as its marketing tool to gain emotional benefits in consumers mind. Its promotion like through CSR include “Support my school” campaign with NDTV in 2010 or write your name on your own co*ke bottle.
The Coca cola company uses two major business level strategies as follows:
Differentiation Strategy:
The Coca Cola company has always focused on differentiating its products in beverage industry, which comprised beverage portfolio of 3300 products. Beverages are divided into diet category, 100% fruit juices, fruit drinks, water, energy drinks, tea and coffee etc. Coca Cola established a unique position in the Global beverages industry and has its market share around 200 countries. Coca Cola company always focus on differentiating its brand. Since consumer access has largely been established in the market, the company continuing invest in its brand and infrastructure programs but generally at a slower rate than gross profit growth. Differentiation Strategy helps the Coca Cola company always capture the market share.
Low Cost Strategy:
The Coca Cola company has its pricing strategy based on different situations and timeline, based on the competitors pricing or different promotions will be offered. And each sub-brand of Coca Cola has different pricing strategy (Bhasin, H.,2019). Their pricing strategy is based on the Competitors, for example, Pepsi is the direct competitor to co*ke in the beverage market. Customers may compare the price then choose the lower price beverage product. The objective of Coca Cola is to target every consumer of the country, therefore Coca Cola set its prices at a level which no competitor can offer to its consumers. And Coca Cola always charges the same prices as are being charged by its competitors. This strategy gains a competitive advantage in the beverage markets.
Coca-Cola focuses on the major company-level strategies as follows:
Growth strategy:
Coca-Cola is present all over the world with more than 200 countries. Coca-Cola focuses most of its budget on its business growth projects around the world. Depending on when and where, Coca-Cola will have different growth strategies to meet the needs of the company’s business strategies.
When expanding markets, or creating new products and new customers, Coca-Cola will focus on a horizontal growth strategy. If investing in its supply chain, Coca-Cola will focus on vertical growth strategy.
Stability strategy:
Depending on Coca-Cola’s market position, it can choose to suspend the growth strategy and choose a stable strategy to focus on product quality control, or focus on marketing, R&D, supply chain.
Retrenchment strategy:
For businesses that have not grown during a definite period of time, Coca-Cola will use a Retrenchment strategy to offer a number of different ways for these businesses, such as cutting budgets for some departments. manufacturing, marketing, R&D, eliminating operations, or selling out whole unit to private investors.
Within the industry, Coca-cola is the most recognition with 94% of the world’s population as the world’s most valuable brand. The main competition comes from PepsiCo, Dr Pepper Snapple, and Nestle, among others. Coca-Cola Company performance varies by regions as follows:
- EMEA (Europe, Middle-East and Africa):
Revenue in this region is constantly increasing from 2016 to 2018 and will continue to increase in the near future. The primarily revenue is led by sparkling soft drinks and Fuze Tea.
- Latin America: This region had a good profit growth in 2017, however, 2018 did not grow due to a decrease in volume in Argentina and Mexico markets. The company hopes to grow in the near future in this market in non-chemical products with energy drinks and sports drinks.
- North America: This area saw good profit growth until 2018 and the company hopes to continue growing in the next two years led by sparkling soft drink.
- Asia-Pacific: The demand of this market depends mainly on China. The increase depends on the amount sold in this market.
- Bottling Investments: Bottled investment revenue has dropped sharply in recent years, but with most of the refranchising made, revenue will be expected to fall at a much lower rate.
- Global Ventures: After acquiring Costa in 2019, revenue is expected to increase in the next two years.
“The red and white Coca-Cola logo is recognized by 94% of the world’s population.” That says a whole lot about global operations and quality of the reach. The Company’s global strategy during the 1980s continued to bring consumers on every continent refreshing products for every occasion and every lifestyle. In 1982, soft-drink history was made with the introduction of Diet co*ke®, the first extension of the trademarks Coca-Cola and co*ke, and the most successful new soft drink since Coca-Cola itself. Within two years, Diet co*ke had become the top low-calorie soft drink in the world. Advertising during the 1970s and 1980s continued a long tradition that presented Coca-Cola as one of life’s simple pleasures, distinctive and acceptable anywhere. In 1976, the “co*ke Adds Life” campaign was introduced, laying the foundation for the 1979 introduction of “Have a co*ke and a Smile,” a campaign of heart-warming emotion best captured by the famous television commercial featuring Pittsburgh Steelers tackle “Mean” Joe Greene. In early 1982, the theme “co*ke Is It!” was launched around the world to reflect the resurgent, positive spirit of the 1980s and to reaffirm the leadership of Coca-Cola. “Can’t Beat the Feeling” wrapped up the 1980s, while “Can’t Beat the Real Thing” led the way into the 1990s, and the innovative “Always Coca-Cola” campaign debuted in 1993, followed by “Coca-Cola … Real” in 2003 and “The co*ke Side of Life” in 2006.
The Coca-Cola Company began building its global network in the 1920s. Now operating in more than 200 countries and producing nearly 450 brands, the Coca-Cola system has successfully applied a simple formula on a global scale: provide a moment of refreshment for a very small amount of money — a billion times a day.
The Coca-Cola Company and its network of bottlers comprise the most sophisticated and pervasive production and distribution system in the world. More than anything, that system is dedicated to people working long and hard to sell Coca-Cola, Diet co*ke, Sprite, Fanta and other Company products.
From Boston to Beijing, from Montreal to Moscow, Coca-Cola, more than any other consumer product, has brought pleasure to thirsty consumers around the globe. For 125 years, Coca-Cola has created a special moment of pleasure for hundreds of millions of people every day.
The history of Coca-Cola is a story of special moments. Moments that originated with Dr. Pemberton in Atlanta and have been multiplied billions of times around the world. Moments made familiar and universal by Mr. Candlers’s unique advertising and Mr. Woodruff’s vision to put Coca-Cola “within an arm’s reach of desire.” Moments that today make Coca-Cola the most ubiquitous consumer product in the world. Each day, Coca-Cola strengthens its position as the world’s soft drink. Every day, people experience a delicious, refreshing moment that only Coca-Cola can bring them. Through more than a century of change, Coca-Cola remains a timeless symbol of quality refreshment.
Coca-Cola’s strategy is noted to be “global.” This strategy is a combination of both strategies previously described. By attaining both qualities of each strategy, Coca-Cola enjoys of an identifiable brand image as well as instilling local practices that allows them to create and embrace cultural differences. Coca-Cola prides itself not just for its distinguishable brand but for its attentiveness to local markets’ needs.
The recommendation of Coca-Cola Company is based on performing various valuation models, which include HR practices, economic profit analysis, relative valuation and a fundamental price to earnings valuation model that revealed the Coca-Cola Company to be overvalued. Even though they find the stock to be overvalued and they feel that KO has some promising outlooks as well as possible challenges in the near future and they want to recommend it as a hold instead of a sell. The Coca-Cola Company is the #1 company within the non-alcoholic beverages industry. They have a 20- year standing of being the leader and investors know that the Coca-Cola Company has an extraordinary reputation for maximizing shareholder value.Opportunities that exist for the company in the future is expanding market share in the non-carbonated beverages segment, a restructuring of their business model, and better consistency of earnings results.
A challenge that the Coca-Cola Company is facing is the struggle with their global competitors in the fact that their HR practices are greater and less than co*ke. If co*ke wants to more reputation in the world, they must produce more incentives for employees from which they more done work hard and produce good quality. Their new management team needs to work on implementing cohesive goals between the two to reach the Coca-Cola Company’s long-term growth potential.
In conclusion Coca Cola ought to enforce work vicinity safety, inclusive place of business, replenishing of water and reforestation. Coca Cola must collaborate with bottling businesses’ partners to be safer for working surroundings save you accidents or illness and to have safe behavior. Coca Cola must additionally cautious use water because it’s far utilized by Coca Cola in many liquids and scarce of water can be a massive trouble in destiny. New companies venturing into international cooperation should understand that although it is a progressive move, it is a move full of variables to be taken care of especially adherence to international processes and policies. There is also the risk of altering precious company values if the international company influence is overwhelming, and that needs to be balanced.
Although Coca-Cola is a superpower in terms of Brand and customer Loyalty as well as sustainability, the company has many drawbacks that can be reshaped and solved for its better future. Regaining the Customers interest by cashing on the power of their huge brand and fan-following is much needed by introducing healthier drinks and snacks. This move will boost the company’s strong competitive advantage along with a higher sustainability. The company must also re-model their packaging process so that their items are packed in eco-friendly packages and consume less water as well.
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