Corporate and acquisitions in non-carbonate drinks to
Corporate level strategy Coca-Cola Company is now the largest soft drink company in the world. Moreover, the company has become the largest manufacturer, distributor, and marketer of non-alcoholic beverage concentrates and syrups which operate in more than 200 countries. After years of globalization and brand building, Coca-Cola proudly pronounces its Mission Statement “At The Coca Cola Company we strive to refresh the world, inspire moments of optimism and happiness, create value and make a difference” (thecoca-colacompany.
om). And its goals: “The basic proposition of our business is simple, solid and timeless. When we bring refreshment, value, joy and fun to our stakeholders, then we successfully nurture and protect our brands, particularly Coca-Cola. That is the key to fulfilling our ultimate obligation to provide consistently attractive returns to the owners of our business (Annual Report, 2008, p. 33). ” Coca-Cola feels that it should offer a soft-drink to the entire global community, which is environmentally safe and accepted.
The company’s mission is directed towards its soft drink business and the strategy management changes that will be coming. Furthermore, Coca-Cola appeals to the long term interests of stakeholders particularly shareholders, employees and customers. Coca-Cola Company’s business is nonalcoholic beverages—principally sparkling beverages, but also a variety of still beverages. The company manufactures beverage concentrates and syrups, which it sells to bottling and canning operations, fountain wholesalers and some fountain retailers, as well as finished beverages, which it sells primarily to distributors.
Coke owns or licenses nearly 500 brands, including diet and light beverages, waters, enhanced waters, juices and juice drinks, teas, coffees, and energy and sports drinks. Coca-Cola has four of the world’s top five nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Sprite and Fanta. In addition, the company has ownership interests in numerous beverage joint ventures, bottling and canning operations, although most of these operations are independently owned and managed (thecoca-colacompany. com).The current key strategic objectives of the organization are driving the core carbonates business, strengthening alliance with anchor bottlers, tackling weakening purchasing power, and acquisitions in non-carbonate drinks to continue. In order to meet these objectives effectively, the best way is to acquire other beverage companies.
The Coca-Cola Company continues to invest heavily in the traditional popularity of its core carbonates brands such as Coca Cola Classic and this strategy is working in tandem with its “Three cola strategy”, focusing on the Coca-Cola, Diet Coke and Coca-Cola Zero brands.The successful global roll-out of Coca-Cola Zero means that consumers are responsive to wellbeing carbonates with the adequate marketing. The Coca-Cola Company has increasingly partnered with anchor bottlers in acquisition activities. However, increasing joint acquisitions and cross-equity ownership involving bottling partners can potentially add some extra complexity to the already complicated The Coca-Cola Company system. The recession in Western developed markets and the slowdown in major emerging markets have called for immediate strategy to handle the situation.
Generally, this is a challenge most beverage players faced. It may require a lot more patience to drive sales of core products, therefore, the introduction of non carbonate drinks can be an option. As consumers may trade down from the formal dining to fast food services, strengthening the alliance with quick-service food operators could be a smart method. With strong cash generated from its carbonates business, Coke has the full capability to make aggressive acquisitions in emerging markets to buy into certain categories and geographies.
For example, to develop its juice or juice drinks, Coke purchased the Minute Maid Company, producer of juice products, in 1960 to enter the juice market. And in addition, the company introduced a new line of Minute Maid soft drinks to the United States in 1987. In 2008, The Coca-Cola Company announced its purchase of a 40% stake of Honest Tea Inc at $43 million to acquire more resource into “venturing and emerging Brands” (VEB) business, and finalized the joint venture with Illycaffe, named Ilko Coffee International.The joint venture will introduce chilled RTD espresso-based coffees including a black cafe, a cappuccino and a latte macchiato, across 10 European markets. Since the soft drink industry is mature in the United States, The Coca-Cola Company chooses to concentrate on a single business. Because diversification into new businesses is highly risky, the way by which the organization seeks to minimize this risk is by pursuing diversification opportunities that can be implemented with existing resources and capabilities which means related diversification. Nowadays, consumers, public health and government fficials are becoming increasingly concerned about the public health consequences associated with obesity, particularly among young people.
In addition, some researchers, health advocates and dietary guidelines are encouraging consumers to reduce consumption of certain types of beverages, especially sugar-sweetened beverages (Thecoca-colacompany. com). Increasing public concern about these issues and labeling or availability of Coke’s beverages may reduce demand for soft drinks, which could affect the company’s profitability. In 2008, The Coca-Cola Company acquired two Scandinavian water brands from Carlsberg.The mineral water brands include: Kildeveld and Kurvand in Denmark and the soft drink brand Hyvaa Paivaa in Finland. The sale will net Carlsberg US$225m. The two companies have entered into a license agreement regarding Ramlosa in Denmark and energy drink brand Battery in Finland (Thecoca-colacompany.
com). Furthermore, The Coca-Cola Company’s proposed acquisition of the largest Chinese juice maker Hui Yuan, which is likely to complete in the first half of 2009, will give it an even sharper competitive edge for future growth of juice market.The Coca-Cola Company believes that it is important to give something back to the communities in which it does business. This philosophy has become the key part of the corporate culture.
Coca-Cola has a strong commitment to the wider community through every aspect of the way the company operates. For instance, Coca-Cola sponsors sporting activities such as the Olympic Games, football’s World Cup. Moreover, on September 11, 2001, thousands of Coca-Cola bottling partners used their trucks and distribution centers to deliver whatever was needed to help people in New York City and Washington, D.C.
, after terrorists attacked the World Trade Center and the Pentagon. Another example is that in 2001, The Coca-Cola Company develops reading programs in local communities as a marketing partner with Warner Brothers Pictures. The programs build on interest in reading inspired by Harry Potter books and movies.
Coca-Cola’s marketing strategy has become a reality, the product most representative of this process is Coke. Robert Woodruff, former chairman of the Coca-Cola Company stated in 1923 that Coca-Cola should always be “within and arm’s reach of desire”.The Coca-Cola has always been able to create the most appropriate marketing mix. Coca-Cola has built its business using a universal strategy based on three major principles- acceptability, affordability, and availability. This strategy ensures that Coca-Cola brands are an integral part of consumer’s daily lives, widely available and products are value for money. Coca-Cola can use these few areas to improve their strategy execution and build a more capable organization. Coca-Cola posses a number of recognizable brands which go beyond the familiar taste of its product when compare with other products.
Coca-Cola benefits from its registered trade mark, its classic shapes of bottles, and the highly familiar red and white Coca-Cola can. Advertising is the most effective way in gaining social acceptance for Coca-Cola’s products. The Coca-Cola Company created advertising slogans which are very memorable until today, like 1886-Delicious and refreshing; 1993-Always Coca-Cola. Coca-Cola’s powerful brand personality can become a vehicle for promotion in its own right. Based on above analysis, it is clear that the corporate level strategies The Coca Cola Company pursues are related diversification and international expansion.To portray corporate growth strategies, the company focuses on its present and potential products and markets. To implement the related diversification, Coke uses four methods which are expanding product lines within the current business, offering new products within the existing brands, increasing market share of its existing products by using advertising, and developing new products other than soft drinks.
The Coca-Cola Company uses expanding product lines within the current business by offering over 50 different brands of soft drinks worldwide. In 1960, Coca-Cola added its first new product line in the United States, Fanta.Fanta products, which come in a variety of fruit flavors such as orange and grape, have been sold in other countries for many years.
It still ranks as one of the world’s top five soft drinks. The company added Sprite to its lineup a year latter. The name “Sprit” came from an earlier advertisement which Coke used a little man with a big smile in its advertisement.
He had white hair and wore a bottle cap for a hat, and eventually he became known as the Sprite Boy. When Coca-Cola developed its citrus-flavored drink, the company leaders thought the short, spunky name of the Sprite Boy fit the product well.Another drink company was using the name, but Coke was able to buy the rights back (Lonnie Bell 21. ). In 1982, Coke introduced diet Coke, or Coca-Cola light, as it is known in some countries. Diet Coke quickly became the most popular low-calorie drink in the world. The company introduced Coca-Cola Zero in 2004.
It is marketed as having zero sugar. Coke Zero is Coca-Cola’s biggest product launch in 22 years. It is primarily marketed towards young adult males and has even been nicknamed “Bloke Coke”. Coca-Cola Zero has been one of the most successful product launches in the company’s history.In 2007, The Coca-Cola Company sold nearly 450 million cases globally. To successfully implement the corporate strategy, The Coca Cola Company also offers new products within the existing brands.
In 1985, the company introduced Cherry Coke, the first flavored Coke. In 2001, recognizing that consumers often enjoyed diet Coke with a slice of lemon, the company introduced diet Coke with Lemon flavor added in North America. A year later, Coca-Cola introduced Vanilla Coke. The new flavor is based on a simple recipe that customers have used for years-vanilla flavoring added to Coke.It was the first major flavor extension of the Coca-Cola Classic line in 16 years. The company also introduced Coca-Cola with Lime in 2005 and Coca-Cola Black Cherry Vanilla in 2006.
Market penetration means a firm seeks to achieve growth with existing products in their current market segment, aiming to increase its market share. To market a product means to come up with a plan that will convince and attract consumers to buy it. In the beginning, Coca-Cola was only sold syrup that had to be mixed with water at soda fountains. Mr.Candler was no interest in putting the drink into bottles because bottling was a slow and awkward task at the time.
To convince customers, The Coca-Cola Company came up with the idea of independent bottlers. They signed contracts with people who wanted to bottle Coke. The independent bottlers provided the employees, factories, bottles, and machinery. The Coca-Cola Company provided the Coca-Cola syrup and helped the bottlers with training and advertising. Using this bottling method, Coca-Cola could sell its soft drink across the country-and eventually around the world (Lonnie Bell 12).Advertising is one important mechanism for marketing Coca-Cola.
After Coke began to be bottled and sold nationwide, The Coca-Cola Company hired famous artist such as Norman Rockwell to paint heart-warming images of families enjoying Coca-Cola. It used the artwork in magazine and newspaper ads, calendars, and posters. The company also continued to add catchy new slogans to its early trademark, “Delicious and Refreshing. ” “It’s the Real Thing,” was first used in the 1940s and was reintroduced in the late 1960s.
“Coke Is It! ” was the choice for the 1980s.The Coca Cola Company’s beverage portfolio comprises more than 400 brands consisting of over 2,8oo beverage products. Its brand strategy in recent years has been focus predominantly on wellbeing, with health-led innovation a key theme. Not only has the company developed its soft drinks label along such lines, it has invested in the expansion of its non-carbonates portfolio, while at the same time launching variants of these non-sparkling beverages.
For instance, the company launches Jianchi in Milan, a drink made with fruit juices and plant extracts and available in three flavors.Jianchi products are now available in more than 100 pharmacies and herbal shops in Milan (Thecoca-colacompany. com). Another example is the Winnie the Pooh Roo Juice. Coke has identified the product is an opportunity to offer mothers a new product that suitable for children aged 2-5 years. The product and its packaging appeal both to mothers and children, offering diluted pure juice with no added sugar, colorings or preservatives combined with well-loved characters.
In addition, the company has launched its own RTD tea brands by using the long-term business partnership with Nestle through the joint venture.To increase the market share, the company has to expand its products globally, although selling new products to other countries can be a challenge. People from other counties may speak different languages and have different tastes. The Coca Cola Company works hard to find out what customers in different countries wanted. It creates products based on what customers asked for. In Chile, parents said they wanted healthier drinks, so Coca-Cola introduced Bibo, a brand of snack drinks fortified with vitamins. Burn, a high-energy drink, was developed for young people in Australia who wanted something to drink on their nights out.
When the company introduced a health drink called Qoo, it quickly became the number-one selling juice in Japan. And Chinese consumers like flavored teas. On the other hand, reaching new Coke drinkers requires special advertising suited to each country, so Coca-Cola uses many different agencies to design commercials and advertisements for radio, television, newspapers, magazines, and billboards around the world. The company has to target populated growth markets in Asia. The Coca-Cola Company has managed to grow its leading share in soft drinks since 2005.The successful launch of Minutes Maid juice and strong marketing activities positively contributed to the increase in market share.
China in the world’s largest RTD tea volume market and strong growth is forecast over the next five years. Coke has a minor brand Modern Tea Workshop available in some major cities. Coke has great opportunities for sparkling beverages in Middle East and Africa. Middle East and Africa is the fastest growing of the developing regions, meaning good potential growth opportunities for the market leader The Coca Cola Company.All businesses operate under two broad environments, the external environment where entrepreneurs have no control over it, and the industry environment.
The external environmental forces exist in every part of Coca-Cola’s Global business, and exert influence on Coca-Cola’s business strategy and operation. The economic crisis in the United States has been hit hard the sales and consumption of Coca-Cola soft drinks. The Coca Cola Company recorded a decline of 2% in off-trade volume sales of soft drinks in 2007-2008 and carbonates were the most affected, with a contraction of 4%.
Hence, the company has been working very hard to expand its presence in the fasting growing economies, such as China, India and Middle East Countries. Within the political/legal environment, Coca-Cola has faced difficulty in gaining vast market share in India, as consumers are skeptical of the health effects of its products. The company also faces U. S.
government foreign policy constrain where it is not allowed to operate in Israel (Wikipedia). The torn-down of Iraq urged Coca-Cola to make a come-back after 37 years. During the international sanctions against Iraq period, Coke products were traded unofficially.Now Coca-Cola has officially arrangement with the local Iraqi bottlers. The social or culture changes also affect Coke’s strategy and operation. In recent years, there have been voices of anti-Coca-Cola being aroused in the world marketplace. One case is the call for Coca-Cola to stop its sponsorship of Live8 in India.
Such negative sentiment is due to severe water shortages and underground water pollution caused by Coca-Cola production activities, and distribution of its toxic waste to local farmers as fertilizer (Indymedia UK).The worldwide environmental protectionism has called for the company to use recyclable products in Coca-Cola production, bottling and packaging. Recyclable polyethylene terephthalate (PET) bottles have been used for its drinks, and Coca-Cola is introducing PlantBottle which made from up to 30% plant-based material. PlantBottle packaging is a natural step toward the bottle of the future and is a 100% recyclable bottle like traditional PET plastic (The Coca-Cola Company). Coke is a strong cash generator which means its cash flow provides strong acquisition capability and funds for marketing.Strong cash flow is crucial for expansion and retaining consumers’ loyalty especially during difficult times. Another strength the company has is its strong global position.
As the number one in global soft drinks, The Coca Cola Company has established infrastructures in major markets, which help new products roll-out globally. Although Coke has recent heavy invested in non-carbonates, it still remains over-dependent on carbonates in terms of its global soft drinks revenue. Fortunately, selective emerging markets will continue to provide some positive growth regardless of the slowdown of the local economy.One opportunity is the company’s RTD beverages. Coke has expanded its investment in RTD beverages including beefing up the research and development in Chinese herbal drinks and gradual global roll-out of illycafe. Coca-Cola bought Brazilian RTD tea producer Leao Junior in 2007 to develop its tea drinks. At the same year, The Coca-Cola Co.
and Illycaffe signs a global joint venture focusing on the RTD coffee category. For long-term benefit, the company should build its own mega brands, but not only depends on joint venture. The Coca-Cola is a symbol of America. Brand recognition is the significant factor affecting Coke competitive position.With its strong portfolio, customer banes and powerful strategies, Coke has been able to attract other globally renowned companies to use its products. For example, Coke currently provides Burger King and McDonald with soft drinks, and renews its contract with fastfood restaurant operator CKE Restaurants, signing a multi-year contract.
This has provided Coke with a strong opportunity to boost consumer awareness and the circulation of its products internationally. The carbonates beverages of the company contribute the most revenue. Works Cited http://www. thecoca-colacompany. com/ Lonnie Bell, 2004.
“The Story of Coca-Cola”: P. 10-12, 23, 33.