Feb 15, 2016
It is an industry in which players constantly innovate , in order to come up with better products to gain more consumers and satisfy existing consumers
Consumers perceive beverages in two different ways i.e. beverages are luxury and beverages have to be consumed ocassionally.
Market size, growth rate and overall profitability are three economic indicators that can be used to evaluate the soft drink industry. The market size of this industry has been changing.
Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry.The growth rate has been recently criticized due to the U.S. market saturation of soft drinks.
Despite solid growth in consumption, the global soft drinks market is expected to slightly decelerate, reflecting stagnation of market prices. The change is attributed to the other growing sectors of the non-alcoholic industry including tea and coffee (11.8%) and bottled water (9.3%). Sports drinks and energy drinks are also expected to increase in growth as competitors start adopting new product lines.
In order for soft drink companies to continue to grow and increase profits they will need to diversify their product offerings.
• Founded in 1886 by John C. Pemberton• World’s leading manufacturer, marketer, and
distributor of nonalcoholic beverage concentrates and syrups
• More than 300 brands• Corporate Headquarters in Atlanta with local
operations in over 200 countries around the world
Coca-Cola Company Background
The Coca-Cola Company
Type Public
Traded as NYSE: KO
Dow Jones Industrial Average Component
S&P 500 Component
Industry Beverage
Founded 1892
Founder(s) Asa Griggs Candler
Headquarters Coca-Cola headquarters,
Atlanta, Georgia, U.S.
Area served Worldwide
Key people Muhtar Kent
(Chairman & CEO)
Products List of The Coca-Cola Company products
Revenue US$ 46.542 billion (2011)[1]
Operating income US$ 10.154 billion (2011)[1]
Net income US$ 8.634 billion (2011)[1]
Total assets US$ 79.974 billion (2011)[1]
Total equity US$ 31.921 billion (2011)[1]
To improve its position, for the past year and a half, Coca-Cola has been undergoing a strategic transformation. It has been broadening its focus from the slower growth carbonated soft drink segment to the higher growing non-alcoholic/noncarbonated beverage segment.
"Think Local, Act Local" business strategy.
To support its brands and increase consumer awareness of its products, Coke makes significant investments in sales and marketing.
To develop its brand strategy Coke's global marketing force heavily invests in product and packaging research, developing targeted consumer advertisements and promotions and soliciting customer feedback.
Coke has introduced new beverages in almost every non-alcoholic ready-to-drink category (water, sports drinks, fruit drinks, teas, coffee) through internal development or external acquisitions and has been shaping products and marketing initiatives to meet local needs.
72% of its operating profits are from outside U.S.
Coca Cola company is increasing from last ten years. The data of global unit sale of Coca cola company can be represented by following graph.
Competitor Market CapPepsiCo, Inc. (PEP) 85BCadbury Schwepps plc (CSG) 12.6BCott Corporation (COTT) 1BNational Beverage Corp (FIZ) .203B
Major competitors
• Grocery stores• Convenience stores• Restaurants• Vending machines
Places to Sell
STRENGTHS• Global recognition, the world’s leading brand of carbonated soft drinks• Fast growth internationally• Strong manufacturing and distribution channel • Consumer loyalty
WEAKNESSES• Sluggish performance domestically• Slow response to customers’ evolving tastes • High turnover rate
OPPORTUNITIES• Continuous international expansion• Changing demographics of the US, new target markets• Growing market for healthy drinks• Smaller regional competitors struggling to exist
THREATS• Intense competition• Slow growth in market for carbonated beverages• Economic downturn influencing consumers’ purchasing power• Evolving consumer preferences• Negative publicity
Threat of New Entrants/Potential Competitors:
Median Pressure
•Entry barriers are relatively low for beverage industry: there is almost 0 consumer switching cost and very low capital requirement.
•There are more and more new brands appearing in the market with usually lower price than Coke products
•However Coca-Cola is seen not only as a beverage but also as a brand. It has a very significant market share for a long time and loyal customers are not very likely to try a new brand beverage.
Threat of Substitute Products:
Median to high pressure
•There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t
•tell the difference between Coca-Cola coke and Pepsi coke.
The Bargaining Power of Buyers: Low pressure•The individual buyer has little to no pressure on Coca-Cola•The main competitor, Pepsi is priced almost the same as Coca-Cola.•Consumer could buy those new and less popular beverages with lower price but the flavor is different and the quality is not guaranteed.•Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is lessened because of the end consumer brand loyalty.•There are many kinds of energy drink and soda products in the market. Coca-cola doesn’t really have a special flavor. In a blind taste test, people couldn’t tell the difference between Coca-Cola coke and Pepsi coke.•People are getting concerns of negative effects of carbonated beverages. Increasing number of consumers begin to drink fruit juice, lemonade and tea instead of soda products.
The Bargaining Power of Suppliers:
Low pressure
•The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine. The suppliers are not concentrated or differentiated.
•Any supplier would not want to lose a huge customer like Coca-Cola.
Rivalry Among Existing Firms: High Pressure•Currently, the main competitor is Pepsi which also has a wide range of beverage products under its brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages and commit heavily to sponsoring outdoor festivals and activities. As Coca-Cola has a longer history, it is advertised in a more classical approach while Pepsi tried to attract younger generation by using pop stars as brand ambassadors. Currently Coca-Cola slightly topped Pepsi as the possessor of the most U.S market share.•There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique flavors.
Major factors influencing the level of demand of the productThere are a lot of factors that affect the demand of the product. The list of these factors is given below· PricePrice is the major factor that affects the demand of the product. If the price Is not suitable to the consumers or
customers than they will switch of the product.· QualityIf a company provides the quality services or products than the demand of the product also increases. In the
quality of the product the consistency in the performance of the product is very important.· SupplySupply and the demand of the product are the market forces and played the main role in the product demand. If
the supply of the product decreased than in some cases the demand of the product increase as well as the price of the product can also increased.
· TasteTaste of product is the major factor that affects the demand of the product. Like if the product is of good taste
than the future demand of the product will increase and vise versa. If customers don’t find the taste of product according to their taste, than they will not buy that product in future.
· Number of usersIf the number of users increase in the market than the demand of the product also increases.· IncomeIncome level of the customers had a great impact on the demand of the product. It directly relates to the
purchasing power of the customer. If customer has a purchasing power than definitely he can buy the product which he/she demand.
· CompetitorsCompetitors are the biggest threat to the demand of product. If competitors offer the same products as the
company offers than the customers got more alternatives. So increased alternatives, increases the bargaining power of the customers and they can switch of to more suitable product.
General Trends……First, the entry/exit of major firms is a trend in the industry that will likely lead to change
A second trend in the macroenvironment is globalization.
Third, changing societal concerns, attitudes, and lifestyles are important trends.
The fourth trend is of growing buyer preferences for differentiated products.
The last trend, product innovation, is necessary to combat buyers need for a variety of tastes.
Political analysisHow far government intervenes in operation of a company. Factors may include tax policy,trade restriction , environment policy.
Unrest or change in government or any kind of protest by activists may decline demand for product.
Creates instability for the company to penetrate in the markets of such countries.
Economic factorsAnalyze potential areas where firm can grow and expand.Includes interest rate , exchange rate , inflation rate , wage rate .
Economic growth purchasing power increases. Gives company a good chance to market the product.
Impact on revenues due to fluctuating foreign currency exchange rates.
Increase in interest rate may deter the company in further investment as cost for borrowing is higher. Coca cola use derivative financial instrument to cope up with fluctuating interest rates.
Increase in inflation employee demand for higher wage rate to cope up with cost of living.
Social factors
Cultural aspects and attitude , health consciousness among people, population growth with age distribution. Company has to adjust with changing society.
B2C company. Directly related to consumers. Social changes most important to consider.
Population growth rate and age distribution are important because non-alcoholic Markets have most of its share from children and youngsters.
Technological factors
Most important in packaging. Company rely on bottling partners for significant portion of their business.
Necessary for company to maintain cordial relation with bottling partners.
Should give ample support in pricing, marketing and advertising.
Legal factorsInclude customer law , health and safety law, product safety, advertising , labelling.
In coca cola business is subjected to various laws and regulation in numerous countries in which they do business
Environmental factorsWeather conditions and seasons in which people prefer to buy cool beverages.
Must follow environmental issues related to product manufacturing, packaging and Distribution in various countries.