Marketing Plan Final March 29

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Student Names & McGill ID

BRILLANT, Aïsha 260194236 CHENG, Chin-Yun 260014110

JOLIN LESSARD, Audrey 260180785 LEBLANC, Geneviève 260188501

MURCIA, Nicolas 260177704 NGUYEN, Jean-Louis 260078995

TIAN, Yu 260177360

Course Information

Marketing Management I MCGR 352, Section 005

Professor: Constantina Kavadas

Marketing Plan

Part 1: Market and Consumer Profile

Date of submission: Wednesday, March 29th, 2006

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The following marketing plan forms the basis for the introduction of an innovative new

product by the Coca-Cola Company. The analysis allows us to outline the best strategies

to follow for the achievement of the company’s strategic goals. “Bubble Buzz” will be

marketed as a unique functional drink while striving to reinforce the company’s status as

the leader in innovation and successful product launches. The marketing strategies will

enable to reach a market size of an estimated 8,688,300 people (targeted) with a

forecasted sales growth prospect of 7.3% over the next 4 years, while satisfying the needs

of the still-unserved market for ready-to-drink bubble tea. Success will be reflected by a

sizeable capture of market shares within this market, while strategically carrying the

company up to the top spot as the market leader in the functional drinks segment of soft

drinks.

Brief description of the company

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).

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Brief 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 Canada

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

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3.94 liters, which represents a 4.0% increase compared to 1999 (ref.3). 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

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 (ref.5). 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 (ref.4). New flavor

introductions and health-conscious formulations have been launched in an attempt to

offset the decline in carbonated soft drink sales (ref.6). 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 (ref.7).

Profitability & future growth potential: In 1993, Concentrate Producers earned 29%

pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total

industry profitability of 14%. While the functional drinks sector only accounts for 3.7%

of the total soft drinks sales in 2004 (Appendix B), estimates are forecasting a growth of

7.3% in sales and 11.0% in volume consumption by 2009 (ref.4).

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SWOT ANALYSIS (Strengths and weaknesses, opportunities and threats)

Strengths Weaknesses

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

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

Opportunities Threats

New product introductions Brand is attractive to global partners

Strong competition Potential health issues Free trade

Explanations in APPENDIX C

COMPETITION

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 for traditional 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. However, direct competition from these local players is

not anticipated, since the marketing roll-out will initially emphasize on product awareness

and both sales channels do not reach or serve the same market (retailing vs.

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counter/restoration). A strong distribution system already exists with Coca-Cola, since

partnerships and channels are already in place. This will facilitate the product’s reach into its

target market. Further data concerning competing market shares and distribution channels are

available in Appendix D(1-3).

Barriers to entry:

Business practices Manufacturing

� Due to the number of competitors, it will be hard to prevent imitation behaviour (especially from PepsiCo)

� Risk of competing with emerging private labels (e.g. President’s Choice)

� Given the wide array of brands (saturation in the soft drink market), it becomes a challenge for Bubble Buzz to stand out

� Producing bottled Bubble Tea requires sizeable capital investments for the specific needs of the manufacturing chain (from ingredients to final packaging specifications)

� The marketing campaign to make this unknown brand popular requires more promotional expenditures than a traditional brand extension

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.

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SEGMENTATION VARIABLES AND BREAKDOWNS FOR CANADIAN CONSUMER

MARKET OF BUBBLE TEA MAIN DIMENSIONS VARIABLES BREAKDOWNS

Region Nationwide (all provinces and territories) with emphasis on urban / metropolitan areas, and adapted strategies for all geographical groups

Area size 5000-19,999 to 4,000,000+ Density Urban, suburban

Climate All (East, West)

Age 10-29 years old (teenagers, studying age and young adults) Gender Male and Female Income All under $30,000 Occupation Students; new graduated; new workers; young professionals Education Elementary 4th grade, High school, CEGEP and University Race All: Asian, Black, White, Native; other; with adapted strategy

for Asian consumers already familiar with Bubble Tea

Home

ownership Renting apartment/condo, living with parents (Highly discretionary in personal spending)

Personality Brand conscious, anchored in popular culture, inclined for differentiation and sophistication, very tolerant towards multiculturalism and internationalism (open-minded), quick maturation with modern products

Lifestyle Most of them dependent on parents, no major responsibilities, highly influenced by peer groups, active life, importance of school, work and social life

Benefits

sought COMMUNICATION BENEFITS

-Nutritional information -Informational text on history of product FUNCTIONAL BENEFITS

-Healthier than soft drinks -Convenient, easy to take out PERCEPTUAL BENEFITS

-Quality/Premium price -Social standing/good-looking

Usage rate Seasonal (peak in summer), daily-basis, weekly basis User status Non-user, regular user (current user through existing bar-shops)

Loyalty

status None, medium, strong

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.

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CUSTOMER ANALYSIS

Profile:

Name: Bob Thomson Date of Birth: 25.03.85 Age: 20 Occupation: University Student Country: Canada Needs: Healthy lifestyle/Social belonging People: Roommate/Friends/Family Places: Clubs/Coffee shops/University/Gym Activities: Basketball Team

Due to his active and quick-paced life, Bob wakes up at 6:30AM every morning. Today,

he puts on his trendy Lacoste Polo and Diesel Jeans, and of course, he always has his

Puma shoes on. After having called his friends with his new Samsung camera phone, he

leaves his apartment and goes to his gym by metro, while listening to his favourite music

that he downloaded to his iPod. Bob usually likes to work out before he has to head to

University. That way, he feels he has more energy and feels ready to confront his busy

day attending courses and getting things done. On his way to school, Bob knows he is

thirsty and he feels the need for something very refreshing. He stops at a convenience

store next to the gym. Standing in front of all the choices in the beverages aisle, one

particular bottle catches his sight. And he instantly recognizes the brand. He knows that

this is a bottle of Bubble Buzz, because not only does his other friends often drink it, but

he also heard them talk about this brand new product that Coca-Cola just launched. He

also previously saw Bubble Buzz ads when he surfed on his favourite websites. He grabs

a bottle, and takes a closer look at the nutritive information label. He is very pleased to

see that the new drink is more nutritive and definitely healthier than the other soft drinks

that were available on the shelves next to it. The higher price of the product doesn’t

bother him, since he perceives “Bubble Buzz” as a high-quality, functional product,

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which is manufactured by a well renowned company. Plus, he did not feel like simply

buying bottled water, or carbonated soft drinks. Because of his inclination towards more

sophisticated tastes, and because he likes to try new products on his own, he thinks this

bottle is worth the price. Because of his busy schedule, Bob prefers to save time as much

as he can. Thus, he decides to buy two bottles. One to quench his immediate thirst, and

another one that he wants to save for later in the day. He sees that the packaging is so

convenient and easy to carry, and so when he exits the store, he puts the second bottle in

his backpack. He attends all of his classes. During his break, he always hangs out with his

friends. A lot of them are drinking from different “Bubble Buzz” flavours. He opens his

second bottle, since he had such a great experience with the first one. He liked that the

beverage was so unusual, yet refreshing. The drink surpassed many of his expectations.

He has no doubt about it. Bob will continue to buy Bubble Buzz for its good taste, and

also because at his age, he sees it is the coolest trend right now.

Based on the aforementioned analysis, Bubble Buzz appears to be a profitable and

innovative product with a strong outlook for market share presence and segment growth

opportunity. Upon implementation of the marketing plan, the Coca-Cola Company will

regain increased market shares and claim its targeted situational position of market leader

in the functional drinks segment as well as keeping its long-standing consumer

recognition for innovative and successful product launches in diversified markets. Further

analysis will be required in order to confirm the practicability and quantitative extent of

the marketing plan’s future potential for the company.

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Marketing Plan

Part 2: Marketing Strategy

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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

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

The actual product

o Packaging and labeling: see figure below

o 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”.

o Trade name: Bubble Buzz™, a Coca-Cola product

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

o Brand equity: Coca-Cola provides a quality, consistent, innovative and accessible soft

drink reputation.

Augmented product

o Nutritional information, Status (social drink), Features promoting the website, Health

benefit of a green tea base (ref.17)

Marketing considerations

o 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-

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Cola’s strategy is to broaden distribution quickly, which is currently feasible thanks to the

company’s high manufacturing capacity.

o Product class: Food & beverage � Soft Drinks � Functional Drinks (refer to Appendix

D2 for a break-down of the functional drinks market).

o 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:

1. Consumer demand 2. The product lifecycle 3. Potential substitutes

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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.

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• 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

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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.

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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.

Projected Financial Performance

Revenues $ 597,124.00 Based on sales @ different channel’s price

COGS 214,964.64 Based on weighted average percentage in past data

C.M. 382,159.36 Revenues - COGS

Fixed Costs :

SG&A cost : 113,453.56 Half of the O/H costs estimated, based on past data

Capital expenditures : 25,676.33 4.3% of revenue, based on past data

Profits 243,029.47 CM – SG&A – Capital expenditures

Requirement for success analysis:

C.M. per bottle = 382,159.36 / 328,000 = $1.17 Break-even: (113,453.56+25,676.33) / 1.17 = 118,914 (bottles) Market share: 118,914 / 1,000,000 = 11.9%

In one year, if Coca-cola can sell 118,914 bottles of Bubble Buzz, or in other words

achieve 11.9% of the functional drink market share, it will break even.

After this point, every bottle Coca cola sells will generate average $1.17 towards the

profits. The potential profits can up to $1,030,770.001 based on our target market.

Expected Costs:

COGS: $597,124 * 36% = $214,964.64 O/H: $597,124* 38% = $226,907.12

Expected Revenues (total) = $597,124 (refer to Appendix J)

1 $1.17*(1-11.9%)*1,000,000 = $1,030,770

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

Reasons:

1. 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.

2. 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% )

3. 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.

4. 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.

5. 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:

1. 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.

2. 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:

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1. 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

China2, 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$13.

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.

3. 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.

4. 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.

2 Appendix L (Prices in China) 3 The change of currency: CAD$1= CNY$ 6.88

APPENDIX A (ref.2)

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Million Litres /

Million $CDN

Off-Trade Consumption Indicators (Functional Drinks)

Volume 115.3 117.8 119.7 122.1 124.0 125.9

Sales 296.7 312.1 318.1 324.7 327.4 342.2

1999 2000 2001 2002 2003 2004

APPENDIX B (ref.4)

Off-Trade Sales of Soft Drinks by Sector: Value 1999-2004C$ million 1999 2000 2001 2002 2003 2004

Carbonates 4,651.40 4,726.30 4,828.20 4,991.10 4,959.60 4,938.90

Fruit/vegetable juice 2,135.20 2,239.60 2,347.00 2,454.60 2,497.60 2,613.10

Bottled water 385.9 447.3 551.2 666.8 763 859.4

Functional drinks 296.7 312.1 318.1 324.7 327.4 342.2

Concentrates 193 186.5 171.3 166.5 159.2 161.9

RTD tea 234 257.4 265 275.4 286.8 307.4

RTD coffee 0.2 0.4 0.6 0.8 0.9 1.1

TOTAL 7,896.40 8,169.60 8,481.30 8,879.90 8,994.50 9,224.10

Off-Trade Sales of Soft Drinks by Sector (2004)

Carbonates

Fruit/vegetable juice

Bottled water

Functional drinks

Concentrates

RTD tea

RTD coffee

TOTAL

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APPENDIX C (ref.1 & 8)

STRENGHTS

Brand strength (see Appendix F for brand rankings)

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).

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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.

24

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.

25

APPENDIX D (ref.2 & 5) D1. Off-Trade Company Shares of Functional Drinks by Value 2000-2004 % off-trade value rsp 2001 2002 2003 2004

QTG Canada Inc (PepsiCo) 56.4 58.2 59.5 60.5

Coca-Cola Ltd 32.2 32.4 33.1 32.8

Monarch Co, The 7.5 5.8 4.5 3.3

South Beach Beverage Co 1.1 1.1 1 1

GI Energy Drinks Corp 0.1 0.1 0.2 0.2

Snapple Beverage Group 0.1 0.1 0.2 0.2

Private label 0.8 0.8 0.8 0.8

Others 1.7 1.4 0.7 1.4

TOTAL 100.0 100.0 100.0 100.0

D2. Functional Drinks Sectors (Segmentation) by Value, 2005 *Based on United States report

D3. Functional Drinks Sales by Distribution Format (2004) Distribution Channel % Sales

Supermarkets/hypermarkets 30.8

Independent food stores 2.8

Convenience stores 1.5

Discounters 5.9

Direct sales 0

Vending 0.1

Others 58.9

Total 100

26

APPENDIX E (ref.12)

Population by Age: 1990-2015 '000 1990 1995 2000 2005 2010 2015 10-14 yrs 1,877 1,997 2,056 2,111 1,963 1,868 15-19 yrs 1,938 1,980 2,096 2,157 2,228 2,068 20-24 yrs 2,124 2,009 2,070 2,264 2,348 2,426 25-29 yrs 2,583 2,185 2,076 2,209 2,438 2,529 TOTAL 8,741 8,891 Total (Canada) = 32,241 Source: National statistical offices, Euromonitor International Note: as at January 1st

Functional Drinks:

Consumption growth (Liters) from 1998 to 2003: 0.06 per year Projected consumption (Liters) in 2005: 4.12

Market size calculations (ref.14 & 15):

Total Canadian (10-29yo) Soft Drink Yearly Consumption (L)

# Male 10-29yo Yrl Consumption (soft drinks) (Population) (Liters) 4,436,800 4,858,296 Total yrl consumption (soft drinks – Liters) # Female 10-29yo Yrl Consumption (soft drinks) (Population) (Liters) 7,961,891 ≈ 8 million Liters 4,251,500 3,103,595 Total Canadian (10-29yo) Functional Drink Yearly Consumption (L)

8,000,000 L x 4.12% (functional drink market share) = 329,600 L 329,000 L is approximately equivalent to 1,000,000 cans (355mL volume)

MARKET SIZE:

8,688,300 people

329,600 L

≈ 1,000,000 cans

The market size represents our targeted pool of consumers. Further analysis in the marketing strategy plan will allow for estimates of the forecasted sales in the market segment specific to the RTD Bubble Tea drinks.

27

APPENDIX F (ref.13)

28

APPENDIX G

29

APPENDIX H (ref.16)

30

APPENDIX I (ref.16)

31

APPENDIX J

CALCULATIONS

Based on Coca-Cola’s previous financial statements, we will see the average COGS/Revenues for year 2005, 2004, and 2003 is 36%4. Similarly, Operating Costs / Revenues = 38%5 Moreover, since our target market are 1,000,000 cans annually assuming Coca-cola maintains its market share in functional drink 32.8%, we predict our sales as 1,000,000 * 32.8% = 328,000 bottles. We use the ratio of average capital expenditures / net operation income for North America to estimate the fixed cost we need for producing Bubble Buzz in Canada: 4.3%6 of the total revenue. Expected Revenues:

Supermarket Independent Stores Others Total

Price ($) 1.50 1.75 $2.00 -

Sales (%)7 30.8% 10.2% 59% 100%

Sales ($) 101,024 33,456 193,520 328,000

Revenues ($) 151,536 58,548 387,040 597,124 Note: “Independent stores” include convenience stores, independent food stores, and discount stores. “Others” include multiple grocers, vending machines, & direct sales.

Expected Costs:

COGS: $597,124 * 36% = $214,964.64 O/H: $597,124* 38% = $226,907.12 Note about expected costs: O/H costs include operations overhead and general and

administrative overhead. The former is generally associated with the recurring management or support of the activity, which is normally relevant cost. The latter includes salaries, equipment, space and other activities related to headquarters management, accounting, personnel, legal support, data processing management and similar common services performed outside the activity, which are irrelevant. Because there is no enough data to show the ratio of these two parts, we estimate half of the O/H costs as irrelevant costs.

4 From table 1: (8,195+7,674+7,776) / (23,104+21,742+20,857) = 36% 5 From table 1: (8,739+85+7,890+480+7,287+573) / (23,104+21,742+20,857) = 38% 6 From table 2: (265+247+309) / (6,676+6,423+6,157) = 4.3% 7 From table 3

32

APPENDIX K

Population data for Export Potential analysis

33

APPENDIX L

Sample board of bubble tea prices in China (with price range from $10 to $15).

34

APPENDIX M

Pricing strategy (Other constraints)

The first possible constraint would be the regulations on pricing. Another constraint

would be that Coca-Cola must not set a price that is too high because competitors will be

attracted by potential profits and will follow by a lower price. After having taken all the

important factors into consideration, two price-level fixing approaches seem appropriate.

1. Profit-oriented approach: Target profit

One of the central objectives of this project being to become the market leader in

functional drinks, Coca-Cola is willing to stay among the top competitors, if not

becoming the greater, by achieving a certain target profit. This could be obtained by

establish a price that will largely cover variable and fixed costs while bringing

tremendous profits.

2. Competition-approach: Above market

Competitors and potential substitutes prices can also be part of the strategy. Having a

higher price could make customers aware of the additional benefits and the higher quality

of Bubble Buzz.

APPENDIX

N

Promotion Schedule

Step

Output

Period of time

Arguments

1

Personal selling

February to September

To make Canadian retailers aware of Bubble Buzz so they can

order it in time for Summer time

2

Radio spots

February to April

Radio is the most listened media by students (based on

researches); the target market would hear our radio spot

several times a day. This will ease the recognition of Bubble

Buzz in future promotion tools.

3

Magazines ads

Mid-March to June

The target market will then match an image with the name of

the product more easily. The recognition of Bubble Buzz will be

faster.

4

Television spots

April to September

To send a widespread message over Canada that Bubble Buzz

is now available. Critical step in the promotion.

5

Sample distribution April to September

To get potential buyers to try Bubble Buzz and to create an

addiction to it.

6

Point of purchase

April and September

Making a special section for the Bubble Buzz in Grocery store

will help the new potential buyers to find our product faster and

more easily.

7

Outdoors

May to September

Putting adds in specific places where Generation Y hangs out

will create an increased awareness of Bubble Buzz

8

Public Relations

May to September

We will use special events (sports and others) to promote

Bubble Buzz and also to get in touch with our potential market.

It will allow Coca-Cola to interact with our Generation Y

Consumers.

9

Contest

August to end of September

When the summer will come to its end, we will use contest to

give a second "push" to the sales of the Bubble Buzz.

10 Publicity

All the time

Use of conferences and news to make the general public

aware of the existence of Bubble Buzz.

APPENDIX O

Other considerations for the promotion strategy

Product life cycle of Bubble Buzz: Bubble buzz is at its Introduction stage; we thus must inform consumers in an effort to increase their level of awareness. Awareness is our primary promotional objective. Then the following months after the launch of Bubble Buzz , in its Growth stage, Coca-Cola will have to persuade the consumer to buy the product, to gain preference and to solidify the distribution. Product Characteristics:

• Complexity: Bubble Buzz is more sophisticated than already existing functional and soft drinks. Consumers can eat and drink it which has never been experienced before. Unlike most functional drinks, it also requires a straw. Understanding and familiarity is different when compared with other comparable drinks. We should thus use a little bit more of personal selling to retailers, give more sample, and create advertising on how to use bubble buzz than with other brands from the company.

• Risk: there is no financial, social or physical risk associated with Bubble Buzz thus Personal selling is less needed.

• Ancillary Services: No support or service are required after the sale; refer customers to the website or free 1-800 number for any questions or comments.

Stage of Buying decision: Our target consumer are at the pre-purchase stage: advertising is more helpful at this stage then personal selling because advertising informs the potential customer of the existence of the product and the seller, but in this case the seller is already well known. Channel Strategy: (ref.11, p.478) For Intermediary: Push strategy, in order to gain retailer’s cooperation in ordering and stocking the product. For Ultimate consumer: Pull strategy: We want to direct our promotional mix at ultimate consumers in order to encourage them to ask retailer for the product.

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APPENDIX O

Justifications for advertising selections

-TV: channels for teenagers and for young adults: MTV, Much Music, VrakTV, YTV Arguments: TV communicates with sight, sound and motion, which is needed for Bubble Buzz. It is the only media that can reach 99% of the homes in Canada. Coca-Cola has the budget to cover the high costs of this media. -Radio: 94.7 FM, 96.9 FM University Radios (McGill, UDEM, UQUAM, Concordia, UOTTAWA...) Arguments: Radio is an already segmented medium. There are over 900 radio stations in Canada. The average University or college student is a surprisingly heavy radio listener and spends more time during the day listening to radio than watching network television (book p.502) We could also use of “Interactive radio” as Pepsi has already done in the past. (p.503) -Magazines: We should take advantage of the fact that magazines have become a very specialized medium. There are about 500 consumers magazines in Canada. Good color production is also an advantage that create strong images which is the purpose of Coca-Cola with its Bubble Buzz brand. Each magazine’s readers often represent a unique profile. Reaching: -Young girls: COSMO -Young women: ELLE -Young boys: Sports Illustrated for kids -Young men: Sports Illustrated -Internet: Online advertising is similar to print advertising in that it offers a visual message. It also has additional advantages , it can also use the audio and video capabilities. As we are targeting our ads to young outgoing people, sound and movement may attract more attention from viewers and has the unique feature of being interactive. Interactive media would offer Coca-Cola the opportunity to reach younger consumers who have developed a preference for online communication. Official Website (www.bubblebuzz.ca) -Outdoor: Billboards in specific geographical area would allow us get a good reach and frequency. It is a low cost and flexible alternative. (Campus, malls, Bus and metro stations)

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2006.

39

16. 2004 Annual Report – Form 10K (The Coca-Cola Co.). The Coca-Cola Co. US Securities

and Exchange Commission, File no. 1-2217. http://www2.coca-

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http://www.gjsentinel.com/world/content/shared/news/stories/COKE_0224_COX.html.

Cox News Service. February 24, 2006.

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OTHER CONSULTED REFERENCES

1. New Age Beverages in Hong Kong. Datamonitor. May 2004. Accessed Feb 05,

2006.

2. Boba Tea Direct. Boba Tea Direct LLC. http://www.bobateadirect.com. Date

N/A. Accessed Feb 06, 2006.

3. PREVILLE, Philip. Bubble Tea.

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4. KING, Paul. Will bubble tea burst out across country or go bust?. Nation’s

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