Background to the study
The Coca-Cola Company is a multinational company which was established in 1886.The firm operates within the United States beverages-soft drinks industry with its headquarters located at Atlanta, Georgia. Since it was founded in 1886, the firm has been specializing in the manufacture, distribution and marketing of non-alcoholic beverages. Over the years it has been in operation, Coca-Cola Company has been very successful (Stevens’s para. 4). This is evidenced by the fact that the firm has become the market leader within the beverages and soft drink industry.
One of the factors that have contributed to the firm’s success is its commitment with regard to strategic marketing. For example, in an effort to attain an optimal market position, the firm has adopted the concept of franchising (Ohmann 211). This has enabled the firm to be effective in its international marketing. The firm is also committed towards its internationalization strategy. During the 1990’s, the firm heavily invested in building manufacturing plants in Africa and Eastern European countries. By 2008, the firm had ventured in more than 200 countries (Stevens para. 9).
The firm has formulated effective vision, mission and values which serve as its roadmap in the firm’s operations. These components depict the firm’s commitment towards the various stakeholders such as the customers, the shareholders, suppliers, competitors and the society in which it operates (The Coca-Cola Company Fact Sheet 1).The firm’s mission entails refreshing the world, inspiring moments of optimism through its products and actions.
In an effort to meet the market demand, Coca-Cola Company has developed a wide range of products. This has been achieved through incorporation of the concept of product diversification and product line extension. As a result, the firm has managed to develop a wide range of products. The firm markets over 450 brands which are distributed in over 200 countries (The Coca-Cola Company 1).
An extensive product line enables a firm to attain economies of scale. Additionally, product diversification and product line extension enables a firm to provide its customers with a wide range of products to select from. The result is that the firm is able to meet the customers’ product preferences amongst the customers.
To ensure that the products developed are successful upon being introduced in the market, it is paramount for firm’s management teams to formulate a comprehensive marketing strategy. To achieve this, the firm’s management team should have a comprehensive understanding of the market in which their firm operates. One of the ways through which firm’s can achieve this is by conducting a market analysis and trend analysis. Additionally, a comprehensive marketing strategy should be formulates.
This report is aimed at evaluating The Coca-Cola Company product lines and its products. The report also illustrates a market and trend analysis of the beverages and soft drink industry. The report does not include other operational activities of Coca-Cola Company other than the various marketing activities.
History of Coca-Cola Company products and product lines
Upon its establishment, the Coca-Cola Company started with only one beverage which was known as Coca-Cola. The product was only sold in only one location, Jacobs’ Pharmacy in Atlanta, Georgia (The Coca-Cola Company 17). However, as a result of its ingenuity with regard to new product development, the firm has managed to develop over 500 brands and over 3,500 beverage products (The Coca-Cola Company 17). Additionally, the firm is very committed towards improving the quality of its products in an effort to meet its customer’s product needs.
There are two main categories of soft drink products which are offered within the industry. These include sparkling and still beverages (Yahoo Finance para. 1).
In its operation, The Coca-Cola Company has diversified its soft drink products offering into the two categories. The firm has attained this by venturing into six market segments. These include the energy drinks, carbonates, fruit juice, bottled water, functional drink, ready-to-drink tea and ready-to-drink coffee.
The Coca-Cola Company has realized that consumers are increasingly consuming energy drinks so as to stimulate them in their activities. As a result, the firm has ventured into production of energy drinks that are aimed at energizing the consumer’s. The energy drinks produced by Coca-Cola Company aid in increasing alertness. This is because they contain taurine or caffeine. In addition, they also have herbal ingredients for example ginseng, minerals and vitamins. To meet the customers’ product preferences, Coca-Cola Company produces a variety of energy drink brands. Some of these include the Gladiator, Play, Rehab, Mother and Burn (The Coca-Cola Company 1).
In an effort to ensure the safety of their population, many countries have formulated dietary guidelines. For example, the US incorporated the Dietary Guidelines for Americans in 1980. Additionally, there have been numerous recommendations that people should take plenty of vegetables and fruits (The Coca-Cola Company 1).
To meet the market needs, Coca-Cola Company has diversified it juice and juice drink products. With regard to juices and juice drinks, the firm ensures that they are produced from fresh fruits. This has significantly improved product loyalty amongst the consumers. The firm produces over 100 brands of juice and juice drinks. Examples of these drinks include Bright & Early, Fuze, Minute Maid, Fruitoia and Hi-C (Spelman Research 6).
The firm produces different types of soft drinks. Examples of these soft drinks include the sparkling beverages which are non-alcoholic. The sparkling beverages are categorized as regular, caffeine-free and caffeinated drinks, no-calorie and low-calorie beverages. Additionally, the sparkling beverages contain minerals such as phosphorous and potassium.
On the other hand, the carbonated drinks contain different varieties of sweeteners, ingredients and flavorings (The Coca-Cola Company 1). Example of carbonates produced by the firm includes Diet Coke, CF Diet Coke, Coke Classic and Sprite.
The firm has also ventured into production of ready-to-drink coffee and tea. With regard to coffee, the firm has specialized in the production of different varieties of coffee according to the customer’s preferences. Some of its coffee products include caffeinated, brewed, roasted, instant, flavored and de-caffeinated coffee. The firm offers a variety of ready-to-drink teas such as green tea, herbal tea, sweet tea and Iced tea (The Coca-Cola Company 1). The firm also offers a variety of sports drinks such as Powderade and Powerplay.
Market analysis
In order to understand the market within which they operate, it is critical for firms to conduct a market analysis. Market analysis enables a firm to understand the threats and potentials presented within a particular market. Over the past few years, the beverages and soft drink industry has been undergoing a significant transformation. Some of these transformations have arisen from an increment in the rate at which individuals are consuming beverages and soft drinks (Deichert, Ellenbecker, Klehr, Pesarchick & Ziegler, 2006). This has made the industry to be very lucrative. Additionally, it has also led to an increment in the market share for non-alcoholic drinks. A market review conducted in 2006 revealed that beverages and soft drinks account for 46.8% of the total non-alcoholic drink industry (Deichert et al1).
However, the high rate at which firms within the industry are undertaking product development has made the industry to become saturated. Some of the new products which have been introduced in the industry include coffee, tea and bottled water (Deichert et al 1). Additionally, there has also been an increment in the number of new product categories which are being introduced in the industry. Some of these products include energy drinks and sports products. This has forced firms within the industry to incorporate new product lines in their operation (Deichert et al 1).
As a result of the high rate at which new products are being introduced into the market, analysts have forecasted that there will be a slight reduction in industry growth (Deichert et al 1). However, the industry’s profitability will remain. This trend has forced some of the industry players such as Coca-Cola Company to consider establishing its-self in alternative market segments such as sports drinks and bottled water.
There are three main players within the soft drink industry. These include Coca-Cola, PepsiCo and Cadbury Schweppes. Amongst these companies, Coca-Cola is the market leader commanding a market share of over 50%. On the other hand, Cadbury Schweppes and PepsiCo have a market share of 21% and 7% respectively (Deichert et al 3). Other market players include National Beverage and Cott Corporation.
Market share
The US beverage and soft drink industry is dominated by a few firms which include Coca-Cola, PepsiCo and Dr. Pepper Snapple. These firms account for 92% of the total market share within the industry. The Coca-Cola Company has a market share of 45% while PepsiCo have a market share of 33%. On the other hand, Dr. Pepper Snapple Group’s market share is 14% as illustrated by the figure below.
According to industry analysts, it is expected that Coca-Cola Company and PepsiCo will increase their market share in the future. The growth in their market share is expected to arise from the increment in the rate at which small firms are consolidating their operations due to increment in the industry input prices (Anderson 4).
One of the factors which have contributed to the high growth rate that Coca-Cola Company is experiencing relates to the fact that it has developed a strong brand in addition to having higher margins (Anderson 4).
Porters Five Forces
The beverage and soft drink industry is very competitive as a result of the large number of industry players. However, the greatest competition comes from rival companies. Therefore, it is critical for firms within the industry to consider the industry pressures as outlined by the Porter’s five forces. These include rivalry in the industry, threat of new entrants, supplier power, buyer power and substitute products.
Intensity of rivalry
This is one of the greatest competition challenges that Coca-Cola Company faces. The Coca-Cola Company, Cadbury Schweppes and PepsiCo are the largest firms which operate within the industry. PepsiCo and Coca-Cola account for 70% of the total market share (Angelkov, Black, James & Lutz 1). Additionally, these firms have established themselves within the global market. This poses a competitive threat to the firm with regard to distribution channels. Considering the intensity of competition between the largest firms, one can categorize the industry as being an oligopoly (Carbaugh 420). An oligopoly market entails a market that is characterized by a few firms whereby each of the firms has the capability to implement competitive pricing strategy (Carbaugh 420).
The firm also experiences competitive pressure arising from brand name loyalty. According to a survey conducted in 2004 by the Brand Keys, Diet Coke which is one of Coca-Cola’s main brand was ranked 36th while Pepsi was ranked 17th (Deichert 15).
The brand loyalty indexes of the two companies have improved significantly over the past few years. In 2011, Diet Pepsi was ranked 1st while Diet Coke was ranked 2nd (Brand Keys 1). In an effort to improve their competitiveness, firms within the industry are shifting their focus towards development of new soft drink products so as to increase their sales by attracting new customers.
To remain competitive, firms within the soft drink industry are adopting the concept of acquisition. For example, in 2007, Coke acquired Glaceau. Additionally, on 7th February 2011, Coca-Cola Company announced its intention to acquire Honest Tea (Anderson 4). PepsiCo has also integrated the concept of acquisition as evidenced by its recent announcement to acquire Russian juice maker. The two firms announced their acquisition intentions at the same time in order to limit the probability of their competitor gaining cost synergies (Anderson 4).
Threat of new entrant
The threat of new entrant into the industry is relatively low which makes the competitive pressure that the firm faces to be minimal (Andersosn 1). This arises from the fact that the industry is dominated by the largest firms which include Coca-Cola, Cadbury Schweppes and PepsiCo. The resultant effect has been a decline in the industry’s attractiveness due to the small growth which characterizes the industry. Additionally, new entrants are faced by numerous barriers to entry. This is due to the fact that the new entrants have to incur a substantial amount of fixed cost in order to establish themselves in the market (Anderson 3).
These costs arise from the fact that the firms have to attain substantial economies of scale in order to succeed. Examples of such costs include labor, distribution trucks and warehouses. According to Angelkov et al (3), establishing an efficient distribution channel is one of the core barriers of entry into the industry. Additionally, the largest industry players such as Coca-Cola and PepsiCo have entered into an agreement with bottlers and syrup suppliers. This has significantly reduced the threat of new entrant (Anderson 3).
However, one of the major sources of threat of new entrants arises from private labels specifically Cott Corporation (Angelkov et al 3). Within the carbonated soft drink market, private labels account for 8.1% of the total market share (Angelkov et al 3).
Buyers bargaining power
The soft drink industry is characterized by moderate buyer bargaining power (Anderson 3). This is due to the fact that consumers can easily switch to other competing products and incur a relatively small switching cost (Anderson 4). Over the past few years, the degree of rivalry between PepsiCo and Coca-Cola has increased as the economic pie becomes smaller (Anderson 5). Institutional consumers such as restaurants enter into exclusive contracts which cover a number of years with either Coca-Cola Company or PepsiCo. Considering the intensity of industry competition, firms the buyers can use the offers by a competing firm as leverage for future contracts (Anderson 3).
Bargaining power of suppliers
The bargaining power of suppliers within the soft drink industry ranges from low to moderate. To be effective in their operation, it is paramount for soft drink producers to have a constant supply from bottling suppliers and syrup concentrate producers (Anderson 4). There are a large number of syrup concentrate producers and bottling companies. This has made these firms to be price takers (Anderson 4). Additionally, it is not easy to differentiate the soft drink manufacturers. This makes the soft drink manufacturers to have a higher position at the negotiating table.
Threat of substitute products
Since the beginning of the 21st century, there has been a significant reduction in the volume of soft drink consumption. This trend has arisen from the large number of substitute products which are being produced in the industry. Examples of such products include coffee, energy drinks, water, tea and low-calorie substitutes. This trend has also arisen from an increment in the rate at which consumers are shifting their consumption patterns (Anderson 4). Additionally, some countries have removed consumption of soft drinks from learning institutions. This may have adverse effects on the firm’s effort to build its brand loyalty (Anderson 4).
Industry SWOT analysis
The chart below illustrates the soft drink industry’s strengths, weaknesses, opportunities and threats.
Market trends
The over the past decade, the US soft drink industry has experienced a significant transformations. One of these transformations relate to an increment in the rate at which individuals are consuming soft drinks (Spelman Research 2). Additionally, the carbonated soft drink market segment has lost a significant proportion of its market share. This has arisen from the rate at which competing firms are venturing into production of functional drinks and bottled water (Spelman Research 2). For example, during the period ranging from 1997 to 2002, the carbonated soft drink market shared declined from 72% to 66%. This is an indication of the changes in consumer tastes and preferences (Spelman Research 4).
Currently, consumers are increasingly becoming health conscious. As a result, they are shifting towards consumption of healthy beverages. Additionally, there has been a shift towards increased consumption of non-carbonated soft drinks (Spelman Research 4).
To ensure that they remain competitive, Coca-Cola Company and PepsiCo have ventured into production of bottled water. The Coca-Cola Company has specialized in the production of Dasani while PepsiCo produces Aquafina (Spelman Research 4). Coca-Cola Company and PepsiCo have also ventured into production of juices and energy drinks as consumers shift to consumption of healthy beverages. As a result, there is a high probability of the functional market segment experiencing a significant growth.
This has significantly improved the firms’ market share at the expense of other players in this market segment such as Nestle. As a result of improvement in the firm’s marketing efforts, firms within the industry are shifting towards production of calorie free caffeinated beverages (Anderson 3). Due to the high degree of health consciousness amongst the consumers, the Coca-Cola Company and PepsiCo have considered removing fructose syrup as one of the ingredients and replaced it with sugar (Anderson 3).
Another trend which is evident in the industry relates to the high rate at which industry players are consolidating their bottling operations (Spelman Research 4). For example, in 2010, Coca-Cola Company and PepsiCo have made a decision to consolidate their bottling operations. The core objective of the consolidation was to give the firm’s an edge with regard to product placement and controlling distribution. One of the factors that made the firms to make such a decision relates to the increased reduction in consumption of soft drinks (Anderson 3).
According to Anderson (3), there has been a steady decline in per capita consumption of soft drinks over the decade. For example, from 2000 to 2010, per capita consumption of soft drink declined from 53 gallons to 46 gallons (Anderson 3). Despite this trend, companies which have developed a strong brand such as Coca-Cola have been able to maintain their profitability. One of the ways through which these firms have managed to achieve this is by increasing the price of their products. Additionally, the firms have adopted the concept of downsizing by reducing the size of their human capital and other overhead costs (Anderson 3).
Over the past three years, the cost of soft drink production has declined significantly. This has arisen from the reduction in the price of soft drink syrup concentrate. Syrup concentrate is one of the major components which make up the cost structure in the production of soft drink (Anderson 5). The resultant effect has been an improvement in the industry’s profitability.
Another element that increases the cost of soft drink production relates to the cost of bottling. Soft drink producers use plastic materials and resin to package the soft drink. From 2010 to 2015, industry analysts have projected that the cost of bottling will increase. This will arise from an increment in the price of plastic materials and resin. The increment will be stimulated by high energy prices and high aluminum costs that plastic producers will experience (Anderson 6). The graph below depicts the trend in the price of plastic and resin materials.
Marketing strategy
In its operation, Coca-Cola Company has adopted an effective marketing strategy. The firm has achieved this through integration of a number of marketing concepts. Some of these concepts include market segmentation, targeting and positioning. The firm has adopted demographic market segmentation in its product offering. Coca-Cola has achieved this by integrating age as is core market segmentation variable. The firm targets both the youth and the elderly in marketing its products.
Additionally, the firm has also incorporated the concept of geographic market segmentation. This is evidenced by the fact that it has established markets in all the continents. Additionally, the firm ensures that its products are well positioned at the point of purchase. One of the ways through which the firm has achieved this is by developing freezers which are used to store the soft drinks. With regard to positioning, the firm’s products are well positioned in the market as a result of their high quality.
3 year marketing strategy
Marketing goals:
- To increase the market share with 5% within a period of 3 years
- To increase the sales revenue with a margin of 10%.
- To increase the level of market awareness regarding the firms products on the global market.
- To increase accessibility of the firm’s products in the market.
Within a period of 3 years, Coca-Cola Company intends to increase its market share with a margin of 5%. In order to achieve this, the firm will incorporate the concept of continuous product improvement. The product improvement strategy will entail making the firm’s products to be of high value to the customers. In order to understand the necessary product improvement, the firm will undertake market research from time to time.
The research will be aimed at identifying the changes in customer tastes and preferences. In an effort to attract a large number of customers, Coca-Cola Company will also evaluate strategies being undertaken by its competitors. This will aid in gaining a high competitive edge with regard to the quality of its products.
To increase its sales revenue with a margin of 10%, the firm will adopt an effective pricing strategy. This will be attained by incorporating penetration pricing strategy which will entails setting the price of its products at a relatively low price point. The resultant effect is that the consumers will perceive the price of the firm’s products being fair.
To ensure that there is a sufficient market awareness regarding the firm’s products; Coca-Cola will adopt the concept of Integrated Marketing Communication. This will entail incorporating different methods of marketing communication. Some of the marketing communication techniques that the firm will adopt include advertising, sales promotion, public relations and direct marketing. In its advertising strategy, the firm will focus on conducting marketing communication through a number of mediums.
These include the print media such as newspapers and magazines. The firm will organize public relations campaigns in different areas where it operates. The campaigns will also be enhanced by issuing free samples of its products. This will aid in creating awareness to potential customers. The firm will also adopt outdoor advertising strategy by designing billboards that have a catchy message.
To increase its sales revenue, Coca-Cola Company will also ensure that it products are easily accessible in the market. This will be attained by establishing more distribution outlets in different parts of the world. Coca-Cola Company will also adopt the use of distribution agents. This strategy will be used when venturing into emerging markets.
5 year marketing strategy
Marketing goals:
- To increase the customer base with a margin of 15%.
- To increase sales revenue with 20%.
- To increase market share by 10%
- To improve brand loyalty amongst the consumers.
- To increase the extent of market penetration both in the domestic and the foreign market.
To achieve the above goals, the firm will improve its marketing mix strategies. To increase its customer base, the firm will incorporate the concept of product line extension in its product strategy. Coca-Cola Company will develop new varieties of the products which it already offers. In its product line extension strategy, the firm will focus on all its market segments which include carbonate, juices and juice drinks, soft drinks, ready-to-drink coffee and tea and energy drinks. The firm will undertake product line extension by improving the ingredients used in making the beverages. This will enable the firm meet the changes in consumer taste and preferences.
To ensure that the new products developed contribute towards improvement in the firm’s market share and increment in its sales revenue, Coca-Cola Company will adopt product line pricing strategy. This strategy will enable the firm to set the price of the various varieties of beverages at a point that takes into consideration the product features. The resultant effect is that the firm will be able to incorporate the concept of price discrimination hence maximizing its profit.
In order to create customer loyalty, Coca-Cola Company will ensure that its products have a positive image. One of the ways through which the firm will attain this is by creating awareness regarding the firm’s products. Coca-Cola Company will ensure that the customers have a comprehensive understanding of the product which they are consuming. This will be attained by providing product information for example the ingredients used in making the soft drinks.
Additionally, the firm will ensure that the soft drinks have a health value to the customers. Coca-Cola Company will also adopt the concept of Integrated Marketing Communication. This will entail adoption of traditional and emerging market communication techniques. To reach a large number of potential customers, the firm will enhance its sports sponsorship strategy. This will be attained by incorporating more sports in its sports sponsorship. Coca-Cola Company will also identify celebrities who will endorse the firm’s products. This will aid in inducing the consumers to purchase its products.
To increase its market penetration, The Coca-Cola Company will adopt the concept of franchising which will be implemented in different countries. The franchising strategy will be implemented in the process of establishing distributors. This will enable the firm’s products to reach a large segment of the market.
10 year marketing strategy
Marketing goals:
- To become the global market leader within the beverages and soft drink industry.
- To increase the sales revenue with a margin of 30%.
- To ensure sufficient market awareness regarding the new product developed by the firm.
- To create brand loyalty with regard to the new product.
To remain competitive, the firm will incorporate the concept of new product development. In the new product development strategy, the firm will consider venturing into new product categories. The Coca-Cola Company will identify new business ideas from the business environment. This will be achieved by conducting a comprehensive environmental scan. Coca-Cola Company will mainly focus on the functional drink. This is due to the fact that consumers are increasingly shifting to consumption of functional drinks.
Considering the effort put in the development of the new products, the firm will use premium pricing strategy in setting the price of the soft drink. Premium pricing will enable the firm to depict the exclusive nature of the new product developed.
Coca-Cola Company will adopt advertising, sales promotion, public relations and sponsoring events in an effort to attain sufficient market awareness. Different mediums will be used in creating market awareness. Some of these mediums include television, use of print media, and emerging marketing communication tools such as Face Book and You Tube. To appeal the customers, Coca-Cola Company will develop effective commercials which will be posted on these mediums.
Coca-Cola Company will adopt both direct and indirect channels of distribution. One of the ways through which the firm will achieve this is by entering into contract with convenience stores such as supermarkets, hypermarkets and chain stores to stock its products. This will increase the effectiveness with which its products are accessible in the market.
Conclusion
Coca-Cola Company has been effective in its product offering. This is evidenced by the fact that the firm has been successful in offering a wide variety of products. Coca-Cola Company has achieved this by incorporating the concept of product diversification. Over the years it has been in operation, the firm has established a number of product lines such as carbonates, juices and juice drinks, bottled water and energy drinks amongst others.
The report has also revealed the nature of the beverages and soft drink industry. This has been achieved through incorporation of the Porter’s five forces. The SWOT analysis has evaluated the market potential and threats that firms within the industry face. Through the market analysis conducted, the major trends that characterize the industry are illustrated.
From the analysis, it is evident that the major players such as Coca-Cola have a high market potential. This arises from the fact that they have been able to establish their competitive advantage. For example, the firm has established a strong distribution channel around the world which is a core factor in the success of firms in different economic sectors.
Recommendations
- To survive in the long run, it is paramount for the management team of Coca-Cola Company to consider the following.
- Incorporate the concept of continuous product improvement. This can be achieved by conducting continuous market research.
- The firm should also consider incorporating the concept of new product development. This will enable the firm to venture into new market niches.
- Coca-Cola Company should establish an effective marketing strategy by focusing in the long term.
Works Cited
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