Coca-Cola faces challenges in today’s marketplace because of declining sales, regulatory issues, and overcoming their biggest challenge of changing consumer perception because of the growing concern for health and well-being. The rationale behind this project is to analyze Coca-Cola’s current business model, evaluate the internal and external strengths and weaknesses, and provide strategic recommendations that will reduce dependency on carbonated (sparkling) beverages and diversify its product portfolio into the non-carbonated (stills) sector to remain competitive.
Table of Contents
Click to expand Table of Contents
Section 1: Company Overview
1.1 The Past
1.2 The Present
1.3: Business Model
1.4: Business Strategy
1.5: Corporate Strategy
Section 2: Internal Strengths and Weaknesses Analysis
2.1b: Physical Capital
2.1c: Human Capital
2.1d: Brand Capital
Section 3: External Analysis
3.1: PEST Analysis
3.2: Porter’s Five Force Analysis
3.2a: Threat of New Entry
3.2b: Competitive Rivalry
3.2c: Threat of Substitution
3.2d: Buyer Power
3.2e: Supplier Power
Section 4: Ethical and Regulatory Issues that Impact Coca-Cola’s Business Decisions
4.1: Third Party Suppliers
4.2: Cyber Security
4.3: Marketing Misrepresentation – Health and Well Being
Section 5: Strategic Recommendations
5.1: Recommendation #1 – Organizational Growth
5.2: Recommendation #2 – Portfolio Diversification
5.3: Recommendation #3 – Leverage Marketing to Increase Sales and Product Awareness
5.4: Recommendation #4 – Leverage Social Media Presence to Increase Sales
5.5: Recommendation #5 – Leverage Social Media Presence to Increase Product Awareness
5.6: Recommendation #6 – Educate the Consumer
Section 6: Conclusion
Section 1: Company Overview
1.1 The Past
In Atlanta, Georgia, on May 8, 1886, Pharmacist Dr. John S. Pemberton originally intended to mix ingredients: kola nuts (caffeine), coca leaves (cocaine), and syrup, as a patent medicine. He created the mixture and at Jacobs’ Pharmacy the elixir was combined with carbonated water and he asked customers to try a free sample. To the customers delight they enjoyed the taste and Jacobs’ Pharmacy began selling the elixir for five cents a glass. “Frank M. Robinson, Mr. Pemberton’s partner and bookkeeper, is credited with naming the beverage ‘Coca-Cola’ as well as designing, the famous Spenserian script logo” (The Coca-Cola Company, p.4, 2011). The elixir became popular among customers and nine glasses were sold daily, Dr. Pemberton’s invention grossed $164.25 within the first year. The Coca-Cola Company, Inc. (henceforth Coca-Cola) has produced more than ten billion gallons of syrup worldwide (The Coca-Cola Company, 2017).
A savvy Atlanta businessman Asa Candler, acquired the rights to the business for $2300 in 1891; and as the company’s first president, his vision transformed Coca-Cola from an invention into a national brand (The Coca-Cola Company, 2017). Mr. Candler, registered the Coca-Cola logo as a trademark in 1893 and by 1895 it was being sold in every state and territory in the United States (The Coca-Cola Company, 2011). By 1906, Mr. Candler began franchised bottling operations for Coca-Cola began to expand internationally.
1.2 The Present
Coca-Cola has moved past the day of the elixir Dr. Pemberton created over 130 years ago, Coca-Cola started dominating the market in 1960 as a global icon. Coca-Cola, is the world’s #1 leader in the non-alcoholic beverage industry, operates in more than 200 countries and owns or licenses over 500 brands of sparkling and still beverages (The Coca-Cola Company, 2017). Coca-Cola has 100,300 associates worldwide including their bottling partners, they rank among the world’s top 10 private employers with more than 700,000 global employees. Statistics indicate that Coca-Cola sells approximately 1.9 billion products daily (The Coca-Cola Company, 2017). Their 2016 annual 10-K report shows more than $41.9 billion dollars in product brands including some of these popular brands: Coca-Cola, Diet Coke, Fanta, and Sprite just to name a few (The Coca-Cola Company, 2017).
1.3 Business Model
Coca-Cola’s mission is solid and clear: “To refresh the world, to inspire moments of optimism and happiness, and to create value and make a difference” (The Coca-Cola Company, 2017). The organization’s profit position serves as the guide to achieving sustainable quality growth:
- People: Be a great place to work where people are inspired to be the best they can be.
- Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people’s desires and needs.
- Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.
- Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.
- Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.
- Productivity: Be a highly effective, lean and fast-moving organization (The Coca-Cola Company, 2017).
Additionally, with a portfolio of ownership or licenses in over 500 brands of sparkling and still beverages, Coca-Cola manages six main operational groups which are diversified into the following segments:
- Europe, Middle East and Africa – Sales: 29% and Profit: 7.21%
- Asia Pacific – Sales: 28% and Profit: 4.92%
- North America – Sales: 23% and Profit: 4.30%
- Latin America – Sales: 20% and Profit: 3.78%
- Corporate – Sales: 14% and Profit: 0.07%
- Bottling Investments Operating Segment: – Sales: -16% and Profit: -3.70% (The Coca-Cola Company, 2017).
The North American operational segment creates the greater part of its income from the offer of completed refreshment products, while the other geographic areas get the vast majority of their business from the fabrication and dispersal of drink concentrates and syrups. Coca-Cola has more than 250 bottling partners that are located all over the world and across many nations (The Coca-Cola Company, 2017).
Most importantly, Coca-Cola’s portfolio includes 21 brands with over $1 billion dollars in annual sales including but not limited to: Coca-Cola, Diet Coke, Coke Zero, Sprite, Dasani, Fanta, Minute Maid, and Powerade just to name a few. (The Coca-Cola Company, 2017). This diverse product portfolio creates significant operational diversification. However, because of the growing concerns surrounding health effects of sparkling beverages high in sugar content, still beverages have become very popular among consumers.
While Coca-Cola’s value and profit proposition has proved to be successful in the past, but due to slow growth and declining sales, the beverage giant is in the middle of a re-franchising effort to sell off its US manufacturing and distribution operations (Esterl, 2016). “In 2015, Coca-Cola announced it was cutting at least 1,600 jobs globally by divesting its bottling operations to cut $3 billion dollars in costs” (Moye, 2017). As of now, the beverage firm has re-diversified operations for North America and China, and structural changes in Europe and Africa. Coca-Cola will likely re-franchise 66% of its bottling regions in North America before the finish of 2017 (Esterl, 2016). By changing the basic part of their business model, the organization will be able to focus on more opportunities within still market and control manufacturing and distribution.
1.4 Business Strategy
Corporations create their competitive advantage via their business strategy, the strategy aligns with each area of operation that they contend (Porter, 1987). Globally, the non-alcoholic beverage industry is highly competitive. Opportunities exist via globalization accessibility to potentially larger markets and broader production conveniences, i.e. raw material, labor, skilled manager, and technical professionals (Dess, Lumpkin, Eisner, & McNamara, 2012). The focus of Coca-Cola’s business strategy is differentiation, which encompasses five essential areas:
- Driving revenue and profit growth
- Investing in the brand and business
- Becoming more efficient
- Simplifying the organization
- Refocusing on our core business model (The Coca-Cola Company, 2017).
Furthermore, employees of the organization contribute extraordinarily to the Coca-Cola’s prosperity. To meet their long-term goals, Coca-Cola effectively develops an assorted workforce and builds up the business culture that cultivates learning, advancement, and value creation every day. With competitors, such as Dr. Pepper Snapple Group, Inc., KraftHeinz Foods Inc., Nestlé S.A., and main competitor PepsiCo Inc., Coca-Cola maintains its competitive advantage by focusing on their market, working smarter, acting like owners, and by inspiring passion, optimism and fun within the organization (Butler, 2017). Coca-Cola is committed to focusing on the needs of consumers, customers and franchise partners which promotes product innovation.
1.5 Corporate Strategy
There are two components that compose of the organizations corporate strategy and answers to main questions: what type of business and how will each business segment be managed (Porter, 1987). Coca-Cola understands diversification and has used it advantageously, this allows them to continuously be a leader in the sparkling beverage industry. Coca-Cola’s corporate strategy serves as the moral compass, which holds the organization accountable for their actions and business decisions:
- Leadership: The courage to shape a better future
- Collaboration: Leverage collective genius
- Integrity: Be real
- Accountability: If it is to be, it’s up to me
- Passion: Committed in heart and mind
- Diversity: As inclusive as our brands
- Quality: What we do, we do well (The Coca-Cola Company, 2017).
As globalization, has made business conditions more perplexing, dynamic, and aggressive, the capacity to function effectively is imperative. In order for organizations to overcome global challenges, leaders must be able to set attainable strategic goals. Coca-Cola achieves this by formulating a clear a compelling vision, system alignment, and by consistently communicating adversity and change within the organization.
In 2008, Muhtar Kent, became Coca-Cola’s Chief Executive Officer. During his time as CEO, he has received mixed assessments from investors particularly in recent years. In December 2015, amid the re-franchising efforts, it was announced that Mr. Kent, was stepping down as the CEO, but will remain Chairman of Coca-Cola’s Board of Directors in 2017. On May 1, 2017, former Chief Operating Officer, James Quincey took over leadership of the world’s largest beverage organization (The Associated Press, 2017). Mr. Quincey, has extensive knowledge of the firm’s operational difficulties, and in managing the re-franchising of Coca-Cola’s bottling operations, has vowed to continue to evolve Coca-Cola’s business strategy as a total beverage company
However, in April 2017, prior to the leadership transition, the unfortunate decision was made to eliminate 20% of their corporate staff (Maloney & Steele, 2017). Former CEO Kent and CEO Quincey are unremorseful for this strategy. Quincey emphasized, “The reductions will come from a global pool of about 5,500 employees, and by cutting 1,200 jobs we will allow the organization to run a more focused, lean corporate center” (Maloney & Steele, 2017). Mr. Quincey, wants to continue to maintain its stance in the marketplace, by focusing on building a portfolio of “consumer-centric brands” (The Coca-Cola Company, 2017). Coca-Cola hopes to accomplish this by being leaner and continuing divestment efforts.
While the fore-mentioned changes have been difficult for the firm, however, CEO Quincey understands the urgency to adjust Coca-Cola’s growth model to meet people’s changing tastes and preferences. Coca-Cola’s past, present and future commitment is to “to refresh the world, to inspire moments of optimism and happiness, and to create value and make a difference” (The Coca-Cola Company, 2017). Coca-Cola plans to accomplish this by concentrating on six center qualities: the consumer, branding, marketing, innovation, research and development, and efficiency. (The Coca-Cola Company, 2017). Per CEO Quincy,
Putting the consumer first, starts with rethinking some of the company’s beverage recipes to reduce sugar, and investing to make the next generation of zero-calorie sweeteners. The goal is to give people the low and no-sugar drinks they want without having to give up the great tastes they know and love (Moye, 2017).
This requires moving concentration from what the organization needs to pitch to what buyers need to purchase.
Section 2: Internal Strengths and Weaknesses Analysis
Competitive advantages evolve from the resources available to the organization. Resources are either tangible or intangible in nature. As leader of the non-alcoholic beverage industry Coca-Cola’s value chain utilizes multiple resources: finances and marketing, production and equipment, skills of individual employees, and product patents.
2.1a Financial Capital
Sparkling beverages are losing their popularity as consumers become more particular about the calories and sugar offered in the beverage market. This declining trend is most evident among Coca-Cola’s sparkling products, where revenue has declined. Outlined in the Figure 1 below, Coca-Cola’s net revenue has declined for the last three years and is expected to decline again in 2017 (Forbes, 2017). Net operating revenues were, $41.9 billion, $44.3 billion, and $46.0 billion in 2016, 2015, and 2014, respectively (The Coca-Cola Company, 2017).
Based on the financial results of the first quarter of 2017, net operating revenues was $9.11 billion, compared with $10.28 billion dollars in the prior year period, a decrease of 10%. While Coca-Cola financials are trending downward, stakeholders and investors need to look beyond Coca-Cola declining revenues. Chairman Kent, in efforts to reinsure investors, stated, “The first quarter performance is in line with our plan, and we remain on track to deliver our underlying revenue and profit targets for the full year” (The Coca-Cola Company, 2017). While earnings have declined 4.4% year over year due to higher costs associated with the organizations re-franchising efforts, Coca-Cola earnings have increased 4.1% since the March 2017 earnings report (The Coca-Cola Company, 2017).
2.1b Physical Capital
Physical Capital pertains to Coca-Cola’s ownership including: manufacturing sites, distribution centers, and telecommunications infrastructure. The worldwide headquarters is located on a 35-acre office complex in Atlanta, GA. The complex includes a 670,000 square foot headquarters building and over 1.4 million square foot buildings including additional offices, manufacturing, technical, and engineering facilities (The Coca-Cola Company, 2017). Coca-Cola also owns and leases different offices for managerial operations, production, distribution, stockpiling, and warehousing all throughout the United States. As of December 2016, Coca-Cola own and operate 32 concentrate and syrup manufacturing plants; and 154 distribution and storage warehouses throughout the world. In addition, Coca-Cola owns 88 bottling and canning plants located outside of United States (The Coca- Company, 2017).
2.1c Human Capital
Human Capital incorporates every one of the employees who work for Coca-Cola, their abilities, experience, skill and reliability. As of December, 2016, company employed approximately 100,300 employees, compared to 123,200 at the end of 2015. The decrease in the total number of employees from 2015 to 2016 was primarily due to the re-franchising of bottling operations in Germany and South Africa. Approximately 51,000 company employees are in United States (The Coca-Cola Company, 2017).
2.1d Brand Capital
Coca-Cola’s brand capital incorporates the notable bottle itself. The corporate brand is one of an organization’s most valuable resources. It can be one of the best levers in building corporate esteem. The Coca-Cola brand it is the most recognizable and popular brand in the world (Shively, 2014). No other company can compare to Coca-Cola’s success, brand notoriety or popularity in the beverage industry.
Vertical scope is an essential segment of Coca-Cola’s methodology. Coca-Cola’s fundamental target is to create value and increase organic growth of the organization through better control over its operations. Coca-Cola’s central capabilities that effectively push the firm forward are established in organizational strategy, quality, innovation, and prevalent marketing skills (The Coca-Cola Company, 2015). To accomplish this objective Coca-Cola utilizes their prevalent promoting and marketing skills, consumer loyalty, and capacity to effectively build external partnerships. Likewise, marking and client dependability have been driving variables of Coca-Cola’s prosperity, be that as it may, CEO Quincey, has turned the organizations strategy to concentrate more on the lifeline of the organization…innovation and the consumer.
Section 3: External Analysis
Coca-Cola depends on branding, product modernization, and conveying worth and quality drinks to customers around the world. In any case, Coca-Cola has seen stale growth in profits. Coca-Cola can reexamine and rebuild its strategy by distinguishing external threats and weakness which is essential to cementing a business strategy to grow and move the organization forward. The purpose this PEST and Porter’s Five Forces analysis is to identify various external factors which serves as guide to make better strategic decisions.
3.1 PEST Analysis
Coca-Cola receives most of their revenue from international sales of their products. The political forces that affect Coca-Cola encompass the rules and regulations imposed by more than 200 governing and health officials. However, the United States government trade agreements could negatively impact the organization. According to the 2016 Annual 10-K report (2017),
U.S. trade sanctions against countries designated by the U.S. government as state sponsors of terrorism and/or financial institutions accepting transactions for commerce within such countries could increase significantly, which could make it impossible for us to continue to make sales to bottlers in such countries (The Coca-Cola Company, p.16).
The economic effects of the Coca-Cola System are essentially more noteworthy than the profits that the organization presents. Their global business fortifies job creation throughout their value cycle. The organization contributes to the economic stability by employing local people from each community, paying expenses to governments, paying suppliers for products, and by supporting local community programs. Per the Coca-Cola website, “Past independent studies on the economic impact of Coca-Cola business in Asia, Africa and Eastern Europe have consistently shown that for every job in the Coca-Cola system, an average of 10 more jobs are supported in local communities” (2017).
The medical community has seen in increase in diabetes and obesity among children and adults. When people begin to change their attitudes towards a healthier lifestyle this could have a serious impact on Coca-Cola. Negative publicity could exploit the unhealthy side of Coke’s products and could potentially threaten the status and success of sales (Tanner, 2013). The consumer’s quest for a healthier way of life coupled with well-being concerns towards obesity can be designated as the most vital social change that has immediate and significant impact on Coca-Cola’s financial condition and brad reputation. Specifically, as it is illustrated below in Figure 2, the amount of soft drink consumption in the US, has encountered a consistent decline during the last decade, simultaneously when the level of consumption of bottled water and sports drinks is considerably on the rise.
Retail stores, supermarkets and vending machines at mall food courts are important distribution channels for Coca-Cola. The company is already struggling to grow sales as consumers shift preferences towards healthier beverages. In a recent interview with Bloomberg, Coca-Cola’s CEO stated, “As increasing number of consumers order groceries online, picking up a bottle of Coca-Cola is often ‘forgotten’” (The Associated Press, 2017). E-Commerce growth can negatively impact Coca-Cola performance as consumers move away from shopping at brick and mortar stores. The consumer of today, prefers the convenience of shopping online, this adversely impacts Coca-Cola’s ability to reach the loyal consumer.
3.2 Porter’s Five Force Analysis
3.2a Threat of New Entry
Coca-Cola dominates more than three-fourths of the non-alcoholic beverage market and the remainder of the market is dominated by Pepsi , therefore Coca-Cola is an oligopoly. An oligopoly is where two firms dominate, and it would be hard for new non-alcoholic beverage manufacturer to break into the global market (Levitt, 1983). Coca-Cola’s level of customer loyalty in the beverage industry is unprecedented and for any brand to build customer loyalty it will take some time.
3.2b Competitive Rivalry
When thinking about Coca-Cola and its competitors, Pepsi is likely one of the primary organizations that to come to mind. The two companies have been in competition with each other for more than a century. They have very similar ingredients in their flagship beverage products: Coke and Pepsi. The two companies also have similar still beverage interests, such as milk, orange juice and bottled water. Most importantly, if trends continue to decline within the sparkling beverage market, Pepsi has the ability to leverage its other product lines (Strom, 2014). Coca-Cola does not have the same opportunity because of heave dependency on the carbonated beverage industry and lack of diversification efforts into other industries. Coca-Cola could be left vulnerable.
3.2c Threat of Substitution
The threat of substitution is high for Coca-Cola, there are a multitude of organizations in the United States and internationally that offer substitute products such as carbonated drinks, fruit juices, milk, coffee, and teas. Furthermore, there are low costs involved for consumers if they chose to purchase alternative beverages offered in the market place. Consequently, the quality of the substitute products is comparable to Coca-Cola (Butler, 2017).
3.2d Buyer Power
With regards to the commercial beverage industry, buyers have an advantage of bargaining power, and this affects Coca-Cola’s profitability directly. Coca-Cola does not sell directly to its consumers. Coca-Cola depends on the sales of concentrates and syrups to independent bottling partners (The Coca-Company, 2017). Coca-Cola’s success depends on the financial condition and profitability of distribution organization such as fast food chains, vending machine companies, and grocery stores. Ultimately, Coca-Cola must sell its product to distribution networks and other customers at prices low enough that they can sell to the consumer that results in profitability and customer loyalty.
3.2e Supplier Power
Lastly, the final competitive force of the analysis is: Coca-Cola’s suppliers. By forming strategic partnerships and agreements with suppliers, Coca-Cola strives to standardize pricing. However, Coca-Cola’s usage of commodities in manufacturing such as orange and fruit juice concentrates, sugar, and additional derivatives prices can fluctuate. Per Coca-Cola’s 10-K report, “Increases in the prices of our finished products resulting from a higher cost of ingredients, other raw materials and packaging materials could affect affordability in some markets and reduce Coca-Cola system sales” (The Coca-Cola Company, p.14, 2017). If substantial increases in pricing for raw materials occur, Coca- Cola does not have the ability to pass the change to their customers. Thus, increased supplier pricing increases operational costs which could reduce Coca-Cola’s profitability and adversely affect bargaining power with suppliers.
Section 4: Ethical and Regulatory Issues that Impact Coca-Cola’s Business Decisions
The ideal behind the development of a code of ethics is independent in light of the fact that as it considers all workers and leaders are held to a set standard. Coca-Cola has experienced its fair share of ethical and regulatory issues because of the scale and extent of their business. Coca-Cola faces possible ethical and regulatory issues including but not limited to issues with third party suppliers, cyber security, and legal issues.
4.1 Third Party Suppliers
Coca-Cola depends on third-party partnerships, from suppliers, wholesalers, temporary workers, and independent operations. On the off chance that Coca-Cola cannot viably oversee and control third-party operations this will negatively impact profits and the ability to enter new markets (The Coca-Cola Company, 2017).
4.2 Cyber Security
Cyber criminals continue to focus on improving capabilities to deliver technological viruses and attacks that are focused on deceiving individuals into allowing access to systems and vital information. Per Coca-Cola’s 2016 10-K Form, “If we are unable to protect out information systems against service interruption, misappropriations of data or breaches of security our operations could be disrupted and out reputation may be damaged” (The Coca-Cola Company, p. 15, 2017). Coca-Cola could potentially encounter security issues such as: compromising customer and consumer privacy (Vinjamuri, 2011). This global trend is relevant to Coca-Cola because a breach in cyber security becomes a liability. Coca-Cola’s responsibility is to ensure that a data breach will not and cannot occur.
4.3 Marketing Misrepresentation – Health and Well Being
According to a lawsuit filed on January 17, 2017 against Coca-Cola and the American Beverage Association (ABA), the nonprofit organization Praxis Project accuses Coca-Cola and the ABA of deliberately misleading consumers over the health effects of the soda. Per Praxis Project, “the carbonated beverage is just as dangerous to your health as a cigarette” (Kell, p.1, 2017). Furthermore, the marketing tactics utilized by Coca-Cola confuses consumers about the science of linking sugary drinks with obesity, and Type II Diabetes. Both Coca-Cola and the ABA refute the allegations.
Coke, in an e-mailed statement, called the lawsuit “legally and factually meritless. We take our consumers and their health very seriously and have been on a journey to become a more credible and helpful partner in helping consumers manage their sugar consumption”(Kell, p.1, 2017). Interestingly, the lawsuit fails to mention Coca-Cola’s top competitors in the lawsuit. There is danger in this legal attack on Coca-Cola because of the implications for the rest of the food and beverage industry. Individual retailers may find themselves on the receiving end of endless lawsuits for not doing all they could to protect consumers from themselves. This case is currently unresolved.
Section 5: Strategic Recommendations
The fore mentioned challenges could negatively impact organizational growth, revenue and Coca-Cola’s global market share. Therefore, the following recommendations have been identified as strategic opportunities for the organization.
5.1 Recommendation #1 – Organizational Growth
Coca-Cola should acquire other companies in a concerted effort to increase sales and promote organic growth. Coca-Cola is an organization that continuously seeks outside growth by partnering with businesses in key categories. In 2015, Coca-Cola joined forces with Keurig to offer new hot and cold teas to the still beverage market (Bailey, 2016). Furthermore, Coca-Cola solidified a partnership with the energy drink organization, Monster. This is a deal is beneficial to both firms because it gives Monster access to Coca-Cola’s extensive distribution network, and gives Coca-Cola a stake in Monster’s world class energy soda brand. Coca-Cola has had minimal success within the energy drink market. Partnering with Monster will prove to be a profitable venture and Coca-Cola will be able to cement their position in the rapidly developing energy beverage industry (Bailey, 2016).
5.2 Recommendation #2 – Portfolio Diversification
Coca-Cola’s existing stills portfolio is substantial with fourteen still products that generate more than $1 billion in annual sales, however Coca-Cola has only 18.1% of market share (Maloney& Steele, 2017). Another driver of sales for Coca-Cola’s stills portfolio is the growth of the overall stills market. The still market has encountered considerable growth, growing from 16% in 2000 to 36% in 2016 (Maloney & Steele, 2017). Simply put, still beverages are growing to the point that it dominates the overall beverage market. Combining Coca-Cola’s diversified product portfolio with the rapid growth of the overall stills market and it is almost certain that Coca-Cola’s stills segment will be an important part of their growth moving forward.
5.3 Recommendation #3 – Leverage Marketing to Increase Sales and Product Awareness
In addition, Coca-Cola should increase marketing spending. The Coca-Cola Company’s annual advertising spending was $4.004 billion, $3.976 billion and $3.499 billion in 2016, 2015 and 2014, respectively (The Coca-Cola Company, 2017). Coca-Cola’s advertising expenses represented in Table 1 below, has accounted for 6.9% of total revenues each year. Only PepsiCo uses its marketing budget more effectively, spending just $4.2 billion to generate $62.80 billion (Coca-Cola’s Growth Potential & Dividend Analysis, 2017).
Globally, Coca-Cola has one of the largest marketing budgets in the beverage industry and if it is used very effectively, Coca-Cola will gain a competitive advantage in key areas:
- Successfully introduce new products to the market
- Promoting the brand
- Increase knowledge and education of consumers
- Increase overall profit and growth (Moye,2017).
5.4 Recommendation #4 – Leverage Social Media Presence to Increase Sales
Companies use social media for advertising and to reach out to the customer and the community. Michael Donnelly, Coca-Cola’s Group Director of Worldwide Interactive Marketing states, “Social media is where our consumers are at the moment. Within the social media marketing realm, our approach is to be a strong member of the community that’s enabling consumers to celebrate manifestations of the brand” (Fredricksen, 2009). Socially, Cola-Cola has taken steps beyond social networking sites and has incorporated social media into the most recognizable symbol of their brand…their bottle. Per, Marketing Weekly News (2014), “Coca-Cola’s ‘Share a Coke’ campaign has been the most successful campaign to date” (p.111). The success of the 2014 ‘Share a Coke’ campaign energized Coca-Cola’s revenue and growth. In 2015, the re-launch or 2.0 version of ‘Share a Coke’ has made new waves across social media. There are viral videos shared all over the world of personalized bottles of Coke; sharing important life events such as a baby’s gender, birthdays, anniversaries and even marriage proposals.
5.5 Recommendation #5 – Leverage Social Media Presence to Increase Product Awareness
Coca-Cola should utilize social media to engage the health conscientious consumers and increase product awareness of their healthier still beverage products. Consumers are unaware that Coca-Cola owns, manufactures, and distributes still beverages such as Simple and Minute Maid juices, PowerAde, Gold Peak and Honest Teas, Evian and Dasani water. These beverages are known by majority of consumers, yet the normal individual is uninformed they are created by Coca-Cola. Per Mike Esterl of the Wall Street Journal, “The success of the campaign lies in offering an affordable personalized product that exists in the real and virtual world” (2014). Coca-Cola has the potential to see a massive upsurge in popularity growth via social media. The company will be able to enhance consumer knowledge of unfamiliar and healthier brand products, develop a new consumer base of product loyalty, create partnerships with other business markets, and increase profit.
5.6 Recommendation #6 – Educate the Consumer
Lastly, Consumers managing diabetes look to food and beverage for solutions. In the U.S., a new case of diabetes is diagnosed every 30 seconds; more than 1.9 million people are diagnosed each year (Forbes, 2017). Consumers are avoiding ingredients such as sweeteners, sodium, trans fat and cholesterol. Growing health concerns have prompted customers to reduce their consumption of high sugar and calorie-filled beverages. Per the World Health Organization (W.H.O.), “People should limit their intake of added sugar to no more than 10% of their total daily calorie/energy intake” (The Coca-Cola Company, p.2, 2017). Coca-Cola needs to reduce the amount of sugar in the some of their beverage recipes to offer consumers low to no sugar drinks with the same Coca-Cola taste. In addition, Coca-Cola should provide clear and accessible calorie information so consumers can make informed decisions.
Section 6: Conclusion
Taking everything into account, Coca-Cola is broadly viewed as the world pioneer of the commercial beverage industry because of its very developed reputation. The organization itself is one of the longest surviving brands surpassing 130 years of business and their intentions are to continue to maintain their stance in the market. By reinventing and reestablishing their business strategy geared towards innovation; consumers needs are of the upmost importance. Coca-Cola understands that the organization’s survival depends on their connection with the consumer.
Coca-Cola’s past, present and future commitment is to “To refresh the world; to inspire moments of optimism and happiness; to create value and make a difference” (The Coca-Cola Company, 2017). Coca-Cola plans to achieve this by focusing on five key initiatives: “driving revenue and profit growth, invest in our brand and business, become more efficient, simplify our company, and refocus on our core business model” (The Coca-Cola Company, 2017). As the organization concentrates on its strategy for the future, the goal is to understand trends, address key challenges, and prepare for the organization for future growth and success.
The organizations’ vision for 2020 is to create long-term goals and provide a course of action that will propel the organization ahead of its competitors. To enhance Coca-Cola’s brand and profits for the future, by implementing the fore mentioned recommendations, the organization will be able to enhance consumer knowledge of unfamiliar and healthier brand products, develop a new consumer base of product loyalty, and create partnerships with other business by utilizing their substantial presence and marketing strategies as the platform. By doing this, not only will they have a competitive edge, but competitors could essentially become non-existent.
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