COCACOLA
Brief history
The Coca-Cola Company’s core undertaking is to benefit and refresh everyone it reaches. Founded in 1886, Coca cola is 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. The corporate headquarters are established in Atlanta
Competitors
Coca-Cola’s top competitors for the soft drinks industry are PepsiCo (31.6%) and Cadbury- Schweppes (15.8% of market), which combined, represent about 48% of the total market (ref.9). Coca-Cola is leading with 43.7% of the total soft drinks market.
In the functional drinks sector, PepsiCo is the current market leader with 60.5% of the market shares in 2004. Coca-Cola Co is second with 32.8% (ref.2, see Appendix D1). Bubble Buzz will launch into a currently unserved subset of that market (RTD “Ready-To-Drink” Bubble Tea), which is until now unexisting. It is anticipated that the following brands could potentially compete with Bubble Buzz in the functional drinks market: Brisk, Lipton Iced Tea, Sobe (owned by PepsiCo), as well as Snapple’s and Hawaiian Punch (owned by Cadbury/Schweppes). Bubble Buzz also creates a potential situation for cannibalism with Coca-Cola’s very own brands of iced tea and other functional drinks.
The current market fortraditional Bubble Tea is fragmented, since the distribution is restricted to local outlets and selling points such as counters and small Bubble Tea shops in scattered locations across Canada
Strengths
1. World’s leading brand
Coca-Cola has strong brand recognition across the globe. The company has a leading brand value and a strong brand portfolio. Business-Week and Interbrand, a branding consultancy, recognize. Coca-Cola as one of the leading brands in their top 100 global brands ranking in 2006.The Business Week-Interbrand valued Coca-Cola at $67,000 million in 2006. Coca-Cola ranks well ahead of its close competitor Pepsi which has a ranking of 22 having a brand value of $12,690 million Furthermore, Coca-Cola owns a large portfolio of product brands. The company owns four of the top five soft drink brands in the world: Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce brand extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the company has made large investments in brand promotions. Consequently, Coca-cola is one of the best recognized global brands. The
company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate new markets and consolidate existing ones.
company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate new markets and consolidate existing ones.
2. Large scale of operations
With revenues in excess of $24 billion Coca-Cola has a large scale of operation. Coca-Cola is the largest manufacturer, distributor and marketer of nonalcoholic beverage concentrates and syrups in the world. Coco-Cola is selling trademarked beverage products since the year 1886 in the US US
3. Robust revenue growth in three segments
Coca-cola’s revenues recorded a double digit growth, in three operating segments. These three segments are Latin America, ‘East, South Asia, and Pacific Rim ’ and Bottling investments. Revenues from Latin America grew by 20.4% during fiscal 2006, over 2005. During the same period, revenues from ‘East, South Asia, and Pacific Rim ’ grew by 10.6% while revenues from the bottling investments segment by 19.9%. Together, the three segments of Latin America, ‘East, South Asia, and Pacific Rim ’ and bottling investments, accounted for 34.8% of total revenues during fiscal 2006. Robust revenues growth rates in these segments contributed to top-line growth for Coca-Cola during 2006.
Weaknesses
1. Negative publicity
The company received negative publicity in India
2. Sluggish performance in North America
Coca-Cola’s performance in North America was far from robust. North America is Coca-Cola’s core market generating about 30% of total revenues during fiscal 2006. Therefore, a strong performance in North America is important for the company. In North America the sale of unit cases did not record any growth. Unit case retail volume in North America decreased 1% primarily due to weak sparkling beverage trends in the second half of 2006 and decline in the warehouse-delivered water and juice businesses. Moreover, the company also expects performance in North America to be weak during 2007. Sluggish performance in North America could impact the company’s future growth prospects and prevent Coca-Cola from recording a more robust top-line growth.
3. Decline in cash from operating activities
The company’s cash flow from operating activities declined during fiscal 2006. Cash flows from operating activities decreased 7% in 2006 compared to 2005. Net cash provided by operating activities reached $5,957 million in 2006, from $6,423 million in 2005. Coca-Cola’s cash flows from operating activities in 2006 also decreased compared with 2005 as a result of a contribution of approximately $216 million to a tax-qualified trust to fund retiree medical benefits. The decrease was also the result of certain marketing accruals recorded in 2005. Decline in cash from operating activities reduces availability of funds for the company’s investing and financing activities, which, in turn, increases the company’s exposure to debt markets and fluctuating interest rates.
Market trends
Technology- With the growing use of the internet and other electronic technologies, global communication is rapidly increasing. This is allowing firms to collaborate within the country and international market. It has driven competition greatly as companies strive to be first- movers. Specifically, the global soft drink market’s compound annual growth rate (CAGR) is expected to expand to 3.6% from 2004 to 2009 (Datamonitor, 2005).
Socio-Cultural – the growing trends societal concerns, attitudes, and lifestyles are important to consumers. For instance, in the United States and Europe , people are becoming more concerned with a healthy lifestyle. “Consumers awareness of health issues such as obesity and inactive lifestyles represent a serious risk to the carbonated drinks sector” (Datamonitor, 2005, p.15). The trend is causing the industry’s business environment to change, as firms are differentiating their products in order to increase sales in a stagnant market.
The low growth rates are of concern for soft drink companies, and several are creating new strategies to combat the low rates. Buyers want innovation with the products they buy. In today’s globalizing society, being plain is not good enough. According to Barbara Murray (2006c), Firms are already differentiating by taste, e.g. Coca-Cola company product line includes regular Coca-Cola, Diet Coke, Diet cherry Coke, cherry Coke, Vanilla Coke, Coca- Cola with Lime, Coca-Cola with lemon and many more (Murray, 2006a).(www.thecoca-colacompany.com)
Niche 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 are basically those people who take this drink daily and those areas where the demands are 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.
Future growth
Globally, per capital consumption of Coca-Cola’s beverages has grown from 32 drinks in 1985 to 55 drinks in 1995, and on to 77 drinks per person in 2005. Much of this increase in the last ten years has been driven by developing countries. There is considerable room for growth in per capital consumption. Since the vast majority of the worlds population resides in developing countries, where per capital consumption is low, in the long-term, there is obviously considerable room for global growth in the beverage industry. Considering the wide range of beverages Coca-Cola can bring to market in a country, and the company’s success with marketing, it seems reasonable that Coca-Cola will capture a large part of this growth. Another source for growth is purchasing competitors with local brands that have the potential for a wider market. When these new brands are integrated into Coca-Cola’s distribution network and marketed globally, the return on these acquisitions can be impressive, even when Coca-Cola purchases the company for a substantial premium.
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