coca-cola marketing plan
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Marketing plan for Coca Cola. I paid for it $5, and I am uploading it for free.TRANSCRIPT
Coca Cola Company
Company Report
2015
Contents
1. Introduction ................................................................................................................................. 1
2. SWOT Analysis ........................................................................................................................... 2
2.1 Strengths ................................................................................................................................ 2
2.2 Weaknesses ............................................................................................................................ 4
2.3 Opportunities ......................................................................................................................... 5
2.4 Threats ................................................................................................................................... 6
3. PESTEL Analysis ........................................................................................................................ 8
3.1 Political Factors ..................................................................................................................... 8
3.2 Economic Factors .................................................................................................................. 8
3.3 Social Factors ......................................................................................................................... 9
3.4 Technological Factors .......................................................................................................... 10
3.5 Environmental Factors ......................................................................................................... 10
3.6 Legal Factors ........................................................................................................................ 11
4. Marketing Strategy .................................................................................................................... 12
4.1 Advertising ........................................................................................................................... 13
4.2 Sales Promotion ................................................................................................................... 14
4.3 Events & Experiences .......................................................................................................... 14
4.4 Public Relations ................................................................................................................... 14
4.5 Direct Marketing .................................................................................................................. 15
4.6 Personal Selling ................................................................................................................... 15
5. Porter‟s Five Forces Analysis .................................................................................................... 16
6. Value-Chain Analysis ................................................................................................................ 19
6.1 Primary Activities ................................................................................................................ 19
6.2 Support Activities ................................................................................................................ 22
7. Corporate Social Responsibility (CSR) ..................................................................................... 24
7.1 CSR Programs and Initiatives .............................................................................................. 24
7.2 CSR Criticism ...................................................................................................................... 26
List of Figures
Figure 1 Carbonated soft drinks market share ................................................................................. 3
Figure 2 Beverage consumption in the US ...................................................................................... 9
Figure 3 One Brand" that unities four different brands ................................................................. 13
Figure 4 Porter's Five Forces ......................................................................................................... 16
Figure 5 Coca Cola spending on supplier diversity program (figures in millions) ....................... 18
Figure 6 Value Chain Analysis ...................................................................................................... 19
Figure 7 Distribution of Coca Cola CSR expenses ....................................................................... 24
List of Tables
Table 1 Coca Cola SWOT Analysis ................................................................................................ 2
Table 2 Coca Cola vs. PepsiCo main indicators .............................................................................. 4
Table 3 Major bottling partners and areas they serve .................................................................... 21
Table 4 Coca Cola CSR performance............................................................................................ 25
1
1. Introduction
The world‟s largest beverage company, The Coca Cola Company is owner or licenser of more
than 500 non-alcoholic beverage brands. The company sells a wide range of beverages that
include waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and
energy and sports drinks1. Products belonging to Coca-Cola Company are sold in more than 200
countries around the globe since its incorporation in 1886.
Incorporated in 1919, The Coca Cola Company offers well-known brands such as Coca-Cola,
Fanta, Sprite, Minute Maid, Powerade, Del Valle, Schweppers, Aquariues and others.In addition
to its core business of manufacturing and selling non-alcoholic drinks, Coca Cola Company is
also engaged in some other affiliated businesses such as distribution of Monster Energy beverage
drinks, products of DPSG brands and joint venture with Nestle S.A. to produce and distribute
Nestea products in Europe, Canada and Australia.
Coca Cola Company‟s 2020 Vision is based on its mission that consists of three parts: a) to
refresh the world, b) to inspire moments of optimism and happiness and c) to create value and
make difference. Recently the company initiated a new marketing campaign „One Brand‟ that
aims to unite four different brands – Coca Cola, Diet Coke, Coca Cola Zero and Coca Cola Life
under the umbrella of Coca Cola.
1Annual Report (2014) Coca Cola Company
2
2. SWOT Analysis
SWOT is an acronym for strengths, weaknesses, opportunities and threats related to
organizations. The following table illustrates Coca Cola SWOT analysis:
Strengths
1. Ownership of leading brands in soft
drinks market segment
2. Brand value
3. Highly sophisticated distribution
channel
4. Solid financial position
Weaknesses
1. Lack of clear competitive advantage
over PepsiCo
2. Brand image is associated with „high
sugar‟ carbonates
3. Lack of product diversification
4. Negative publicity
Opportunities
1. Focusing on health & wellness
2. Engaging in product diversification and
brand extension
3. Packaging innovation
4. Engagement in acquisitions
Threats
1. Consumer avoidance from soft drinks
due to health considerations
2. Loss of market share to PepsiCo
3. Negative publicity due to water usage
patterns
4. Changes in currency exchange rates
Table 1 Coca Cola SWOT Analysis
2.1 Strengths
1. The company owns and markets four of the five leading brands in the market - Coca-
Cola, Diet Coke, Fanta and Sprite. As it is illustrated in Figure 1 below, in 2014, products
belonging to Coca Cola Company possessed 36.1% market share in carbonated soft
drinks segment in the USA. Significant market share is associated with a solid revenue
stream that can be channeled to new product development and marketing initiatives to
contribute to long-term growth prospects.
3
Figure 1 Carbonated soft drinks market share
2. Estimated at $81.6 billion, Coca Cola brand value is the 3rd
valuable brand in the world.
This position provides the company a set of substantial benefits in terms of customer
loyalty and bargaining power with suppliers. Moreover, a great brand value is a
confirmation of efficiency of competitive advantage and it also provides grounds to
increase profit margin.
3. Coca Cola Company has a highly sophisticated distribution channel that enables the sales
of more than 2 billion unit cases of products across 28 countries and three continents.
Coca Cola products are distributed via large distributors and many manual distribution
centers around the world.Coca Cola manual distribution program allows independent
entrepreneurs to set up distribution centers in behalf of the company. More than 2500
independent manual distribution businesses across Africa have created jobs for more than
4
11,000 people at the same time contributing more than $500 million in annual revenue2.
Moreover, thanks to its advanced distribution system in place, the company generates
additional revenues via distributing third-party brands, including DPSG brands, Nestea
products and others.
4. During the year of 2014 alone, Coca Cola has generated net operating revenues of $45.9
billion and the net income of $7.1 billion. Moreover, with the market capitalization of
$184.3 billion and 20 billion-dollar brands in its portfolio, The Coca Cola Company is in
a solid financial position which provides opportunities to further increase competitive
advantage via new product development, marketing and in many other ways.
2.2 Weaknesses
1. PepsiCo is the main competitor for Coca Cola and Coca Cola possesses no clear and
sustainable competitive advantage over PepsiCo. As illustrated in Table 2 below,
PepsiCo‟s market capitalization of $147 billion is close to Coca Cola‟s $184.3 billion and
there are no major differences between the key performance indicators of two companies.
Also, PepsiCo‟s also portfolio also possesses a range of global valuable brands such as
Gatorade, Tropicana, Lipton and Starbucks RTD beverages. The absence of clear
competitive advantage is associated with a constant risk of losing market share to
PepsiCo.
Performance indicators Coca Cola PepsiCo
Market capitalization $184.3 billion $147 billion
Number of billion-dollar brands in portfolio 20 22
Average annual growth rate 9% 9%
Dividend yield 2.9% 2.7%
Constant-currency adjusted earnings-per-share 7.9% 9%
Share price advance for last 12 months 13% 25%
Table 2 Coca Cola vs. PepsiCo main indicators3
2Clinton, B. (2009) Harvard Business Review, Available at: https://hbr.org/2009/09/creating-value-in-an-economic-
crisis 3The Street (2015) Available at: http://www.thestreet.com/story/13043245/1/pepsico-vs-coca-cola-which-stock-is-
the-better-choice-for-2015.html
5
2. Coca Cola brand image is closely associated with high sugar carbonates and this does not
resonate well with growing obesity and health concerns among increasing number of
population around the globe. Also the company has also developed low and zero calorie
drinks, it may take considerable amount of time and effort to disassociate Coca Cola
Company from high sugar carbonated drinks.
3. Unlike, PepsiCo that sells also comprises famous food brands such as Doritos, Quaker,
Cheetos and Walker‟s potato chips into its portfolio, Coca Cola sells only drinks and
beverages. The absence of diversity makes Coca Cola growth prospects vulnerable to
industry-specific crises and market disruptions.
4. The Coca Cola Company has attracted negative publicity on the grounds of negative
health implications of its products and inappropriate marketing campaigns. High amount
of sugar carbonates in Coca Cola products has proved to be a matter for heated debates
and discussions in the media and the company‟s use of sexism and discrimination in its
advertisements has met fierce criticism as well.
2.3 Opportunities
1. There is an opportunity for Coca Cola to further increase its brand value by focusing on
improving health implications of its beverages in order to address media-fuelled health-
related concerns among the target customer segment. Accordingly, the company needs to
introduce a new range of drinks and beverages that are low in sugar and calories.
2. Engaging in product diversification and brand extension is an attractive opportunity that
needs to be pursued by Coca Cola Company. Specifically, the company needs to extend
its portfolio to include certain types of foods products and thus, decrease the level of
dependence of its long-term growth prospects on drinks and beverages only.
3. Taking into account rapid and dramatic developments in manufacturing and other types
of technologies, there is a good opportunity for Coca Cola Company to introduce
6
innovative features to the current packaging practices or even develop innovative
packaging concepts.
4. Coca Cola made a set of important acquisitions and engaged in strategic partnerships
recently. The company entered into a 10-year global strategic agreement with Green
Mountain Coffee Roasters, Inc., currently known as Keurig Green Mountain, Inc.
(“Keurig”) in order to use Keurig‟s advanced beverage system. In total Coca-Cola‟s
acquisitions for 2014, 2013 and 2012 totaled to $389 million, $353 million and $1.486
million respectively4. Nevertheless, opportunities in this direction are far from being fully
utilized and the company needs to explore new opportunities for acquisitions and
strategic partnerships with an increased level of aggressiveness.
2.4 Threats
1. There is a threat of consumer avoidance from soft drinks due to increasing health
considerations with negative implications on Coca Cola‟s long term growth prospects.
This is because the majority of beverages in Coca Cola‟s portfolio are high in sugar
carbonates and this contradicts with the global tendency for healthy lifestyle and
increasing health concerns among the target customer segment.
2. Taking into account the abseAnnual Report (2014) Coca Cola Company nce of clear and
sustainable competitive advantage over PepsiCo as discussed above, Coca Cola is faced
with a constant threat of losing market share to PepsiCo. Coca Cola needs to address this
threat by exploring new sustainable sources of competitive advantage.
3. Coca Cola has attracted negative publicity due to water usage patterns in India and other
parts of the world. Water is the most important resource for the company and the global
depletion of water resources may impose new threats for the business involving negative
publicity with damaging impact on the brand image.
4Annual Report (2014) Coca Cola Company
7
4. Coca Cola is in the position of being disadvantaged due to the changes in currency
exchange rates.In 2014, Coca Cola Company “used 70 functional currencies in addition
to the U.S. dollar and derived $26.2 billion of net operating revenues from operations
outside the United States”5. Thus, there is a constant threat of damage to revenues due to
fluctuations in exchange rates.
5Annual Report (2014) Coca Cola Company
8
3. PESTEL Analysis
3.1 Political Factors
Coca Cola is impacted by a set of political factors, both, in the US and abroad. These include,
but not limited to the level of political stability in the country, impact of international pressure
groups and domestic market lobbying groups and the government attitude towards the industry
and the company.
There are few specific instances that illustrate the impact of political factors on Coca Cola
performance. “One Day without Coca Cola” campaign launched by University organizations of
the Social Nicaraguan Movement was a protest against the US-led invasion of Iraq with an
inevitably negative impact on Coca Cola revenues in respective markets6. Similarly, Israeli
attacks on Gaza in 2014 have caused some of the businesses in Turkey and more than 100 hotels
in Mumbai stop selling products of Coca Cola Company7.
3.2 Economic Factors
Coca Cola sales are impacted by a set of economicfactors that beyond of company‟s control.
These factors include the level of economic growth in the country and in the industry, tax rates
and currency exchange rates, interest rates, labor costs and others. The global economic and
financial crisis of 2007 – 2009 is a relevant example of an economic factor that greatly impacted
the majority of businesses around the globe. However, the crisis has impacted Coca Cola to a
lesser extent compared to many other businesses. Its operating margin remained at industry-front
22% despite the crisis, although dividend yield was reduced to 2.6%8.
Arguably, fluctuations in exchange rate is the most significant economic factor that has
adversely impacted Coca Cola performance in recent years. For example, due to severe currency
6Xinhua News Agency (2003), Available at: http://china.org.cn/english/features/60932.htm
7Timmons, H. (2014) Quarts, Available at: http://qz.com/239722/israels-attacks-on-gaza-are-causing-coca-cola-
boycotts/ 8Louth, N. (2012) Moneywise, Available at: http://www.moneywise.co.uk/investing/stocks-and-shares/10-global-
companies-who-can-beat-the-economic-crisis
9
devaluation in Venezuela, Coca Cola‟s reported profits in this market has to be reduced by 55%
in the fourth quarter of 2014 and there are similar instances in other parts of the world9.
3.3 Social Factors
The pursuit of healthy lifestyle and increasing level of consumer health concerns towards obesity
fuelled by sugar and carbonated drinks can be specified as the most important social change that
has direct and significant effect on Coca Cola performance. Specifically, as it is illustrated in
Figure 2 below, the amount of soft drinks consumption in the US has experienced a steady
decline during the past 15 years, at the same time when the level of consumption of bottled water
and the sports drinks has increased substantially.
Figure 2 Beverage consumption in the US10
9McGrath, M. (2015) Forbes, Available at: http://www.forbes.com/sites/maggiemcgrath/2015/02/10/foreign-
exchange-takes-the-air-out-of-coca-cola-fourth-quarter-profit/ 10
The New York Times (2014) Available at: http://www.nytimes.com/2014/03/01/business/challenges-for-coke-to-stay-on-top.html?_r=0
10
Coca Colais also greatly impacted by additional range of social factors such as demographic
changes, changing family values and family patterns, media perception of the brand and health
and welfare of target customer segment.
3.4 Technological Factors
Generally, prominent technological factors that impact Coca Cola include industry-specific
technological innovations and breakthroughs, decreasing life cycle of technology, changes in
energy consumption practices, shifts in manufacturing maturity and capacity and others.
Coca Cola has proved to be proactive in terms of taking advantage of technology to gain
competitive advantage in the marketplace via introducing internet-connected vending machines
that reports sales, inventory and service issues to the nearest distribution center, granting the
possibility of paying vending machines with mobile wallets and equipping Coca Cola vending
machines with interactive features.11
3.5 Environmental Factors
Water depletion can be specified as an environmental factor with the biggest impact on Coca
Cola business operations since water is the main resource for the company beverages.
Performance of Coca Cola can also be indirectly impacted by a set of ecological factors such as
global warming, air pollution, thickening of ozone layer and others. Moreover, the impact of
environmental factors on Coca Cola performance can be direct as well in cases of environmental
disasters such as earthquakes, flooding, tornados etc.
Any corporation of a size of Coca Cola is expected by stakeholders in general, general public
and non-governmental organization in particular to behave in a socially responsible manner and
to illustrate commitment in dealing with a wide range of environmental issues. Neglecting this
expectation may result in damage to the brand image via negative online and offline press
coverage. Coca Cola addresses this issue according to its CSR policy that aims to deal with the
11
Coke Solutions (2015) Available at: http://www.cokesolutions.com/Vending/Pages/Site%20Pages/DetailedPage.aspx?ArticleURL=/Vending/Pages/Articles/Vending%20News/DigitalTechnologyDrivesVendingInnovation.aspx&
11
problems of excessive energy and water consumption, labor and human rights, depletion of
natural resources in general and water in particular and others.
3.6 Legal Factors
There is a wide range of rules and regulations relating to employee health and safety, consumer
protection laws, employment laws, and competitive rules and regulations that need to be adhered
fully adhered by Coca Cola. Changes in these rules and regulations are most likely to impact
Coca Colaperformance in direct and indirect manner and in ways that are difficult to predict.
Due to its size and scope of operations, Coca Cola has to deal with legal issues in a regular
manner. The current and the most recent legal problems Coca Cola had to deal with relate to
false advertising and labelling issues associated with Cola‟s „original formula‟12
, the closure of
plant in Varanasi, India according to local government‟s order due to perceived inappropriate
water usage practices13
and others.
12
Legal Newsline (2014) Available at: http://legalnewsline.com/stories/510517268-coca-cola-facing-class-action-over-advertising-labeling 13
Russia Today (2014) Available at: http://rt.com/news/167012-coca-cola-factory-closed-india/
12
4. Marketing Strategy
Effective marketing strategy has played a critical role for Coca Cola‟s success in the global
marketplace. The company has declared its total compliance with the following 4 principles of
Responsible Marketing Policy:
1. Choice – providing a great range of product options, so that customers can choose
according to balanced diets and active lifestyles.
2. Balance – encouraging the consumption of beverages in sensible manners and moderated
amounts.
3. Honesty –adhering to the principles of honesty and transparency in all marketing and
sales activities.
4. No marketing to children – marketing of any products should not be aimed at children
under the age of 12.
In addition to its own marketing initiatives, Coca Cola provides promotional and marketing
services to distributors, bottlers and resellers on a discretionary basis. In 2014 marketing
expenses of this category amounted to $7 billion respectively14
.
The company has announced „One Brand‟ marketing campaign that is aimed to unite four
different brands – Coca Cola, Diet Coke, Coca Cola Zero and Coca Cola Life under the umbrella
of Coca Cola. The level of marketing spending to advertise lower sugar, no sugar and no calorie
beverages has been doubled in 201515
.
14
Annual Report (2014) Coca Cola Company 15
Coca Cola Company (2014) Available at: http://www.coca-cola.co.uk/stories/health/choice-and-information/coca-cola-one-brand-marketing-strategy/
13
Figure 3 One Brand" that unities four different brands
4.1 Advertising
Coca Cola advertising strategy is boldly experiential with innovative design of posters and print
and media advertising. The company is announced that media advertising investments will
increase by $1 billion by 201616
.According to “One Brand” marketing campaign Coca Cola
advertising via various channels will feature all four different brands of Coca Cola as illustrated
in Figure 2 above.
Viral marketing is accepted as an important element of the advertising mix by the company and
it is extensively applied to promote specific marketing initiatives such as „Sharing a Can,
personalization of Cola cans and bottles by printing names, as well as, “Sing For Me” campaign,
an initiative that involved a vending machine to dispose a free Coke if a customer sings a short
Christmas carol.
16
The New York Times (2014) Available at: http://www.nytimes.com/2014/03/01/business/challenges-for-coke-to-stay-on-top.html?_r=0
14
4.2 Sales Promotion
Coca Cola applies sales promotion marketing in various formats. Instances of sales promotion
applied by the company include but not limited to the offer of a free cooler bag if a customer
commits to a specific amount of a minimum purchase, offer of a seasonal Christmas Caravan
Pack that comprises Coca Cola glass and other souvenirs, “Buy 2 for the Price of 1” sales
promotion during football seasons and others. Moreover, many global restaurant chains such as
McDonand‟s, KFC and Subway around the globe offer Coca Cola free of charge as a part of
their own sales promotion campaign.
4.3 Events & Experiences
Events and experiences are initiated by Coca Cola for marketing purposes extensively around the
globe. Each event is designed taking into account unique aspects of local culture and appeals to
needs and aspirations of local consumers. The most noteworthy recent Coca Cola events and
experiences include „Your Summer, Your Choice”, a fully customisable music event will visit
towns and cities across the country, „The Happiness Project‟, an initiative that encourages people
to share #choosehappiness pictures, videos and texts with the world, Coke eSports unique
experience to gaming enthusiasts, Coca Cola Zero bikes sharing scheme and others.
4.4 Public Relations
Coca Cola Company maintains public relations via regular online press releases, annual reports,
speeches, seminars and others. During the past few years Coca Cola PR has been tasked with
disassociating brand image from sugar carbonates and linking Coca Cola to healthy eating via
shifting consumer attention to low-sugar, low-calorie, no-sugar, no-calorie beverages sold by the
brand.
Coca Cola engages in sponsorship of major events as an integral part of its public relations
strategy. Sponsorship of Sochi 2014 Winter Olympics and and Olympic Torch Relay has
contributed to revenue growth of beverages and Dobriy and Rich juice brands by 7% and 24%
respectively.
15
4.5 Direct Marketing
Direct marketing can be defined as “as a marketing strategy to build stronger, more personal
relationships between the buyer and selected customers directly”17
. In other words, in direct
marketing there are no intermediaries between the buyer and the seller in terms of promotion and
distribution. Coca Cola does not use direct marketing due to the nature of its products.
4.6 Personal Selling
Personal selling is “person-to-person communication with a prospective customer in order to
develop a relationship, identify customer needs, match goods/services with those needs,
communicate benefits to customers, and gain commitment to purchase goods/services that satisfy
customer needs”18
. Personal selling is an element of marketing communication mix is not
currently used by Coca Cola to market its products.
17
Moore, K. & Pareek, N. (2010) “Marketing: The Basics” 2nd
edition, Taylor & Francis, p.168 18
Siguaw, J.A. & Bojanic, D.C. (2004) “Hospitality Sales: Selling Smarter” Cengage Learning, p.2
16
5. Porter’s Five Forces Analysis
Porter‟s Five Forces analytical framework developed by Michael Porter (1979)19
represents five
individual forces that shape the overall extent of competition in the industry. These forces are
represented in Figure 4 below:
Figure 4 Porter's Five Forces
Threat of new entrantsin the industry is insignificant. This is because the global market of
carbonated drinks is highly saturated and new entrants cannot benefits from the economies of
scale extensively exploited by existing market players. Moreover, there is a substantial
knowledge barrier in terms of being able to develop soft drinks that could successfully compete
with industry leaders such as Coca Cola and Pepsi and the relevance of technological barrier can
be assessed as substantial as well.
19 Porter, M. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review
Rivalry among existing
firms
Threat of new entrants
Bargaining power of
buyers
Bargaining power of suppliers
Threat of substitute
products or services
17
Bargaining power of buyers is great and this power is fuelled by the availability of great choice
of cola beverages. Moreover, there is no switching costs for customers and the price elasticity of
products further increases buyer purchasing power. At the same time, the issue of Coca Cola
addiction has surfaced in the media a number of times, addiction of Peter Lawrie, a professional
golfer being a noteworthy exampe20
. Accordingly, it can be argued that bargaining power of
small segment of buyers who can be classified as „Coke addicts‟ is not significant.
Bargaining power of suppliersvaries according to the type of supplier. There are few suppliers
with great bargaining power such as Ajinomoto Co., Inc. and SinoSweet Co., Ltd suppliers of
spartame, a non-nutritive sweetener and Nutrinova Nutrition Specialties & Food Ingredients
GmbH, supplier of acesulfame potassium. Coca Cola operates Supplier Diversity Program that
promotes diversity among suppliers for reportedly noble reasons, at the same time decreasing the
bargaining power of each individual supplier. As it is illustrated in Figure 5 below, the volume of
investment on supplier diversity has been consistently increasing for the last four years.
20
Wallop, H. (2015) The Telegraph, Available at: http://www.telegraph.co.uk/foodanddrink/11420170/Are-you-addicted-to-Coca-Cola.html
18
Figure 5 Coca Cola spending on supplier diversity program (figures in millions)21
Threat of substitute products is substantial. Energy drinks represent the most popular
substitution for Coca Cola products and this is followed by juices. Moreover, taking into account
increasing popularity of pursuing healthy lifestyle fuelled by the media and blogosphere, pure
bottled drinking water is emerging as a healthy substitute for beverages sold by Coca Cola
Company.
Rivalry among existing firms is fierce. There are numerous nonalcoholic sparkling beverages;
various water products, including packaged, flavored and enhanced waters; juices and nectars;
fruit drinks and dilutables that compete with products within Coca Cola portfolio.Beverages
belonging to Coca Cola Company account for 1.9 billion or approximately 3.3% of an estimated
57 billion beverages servings around the globe every day.PepsiCo. Inc is a major competitor for
Coca Cola and other significant competitors include, but are not limited to, Nestle, DPSG,
Groupe Danone, Mondele-z International, Inc. (“Mondele - z”), Kraft Foods Group, Inc.
(“Kraft”), Suntory Beverage & Food Limited (“Suntory”) and the Unilever Group (“Unilever”).
21
Supplier Diversity (2015) Coca Cola Company, Available at: http://www.coca-colacompany.com/our-company/suppliers/supplier-diversity
19
6. Value-Chain Analysis
Value-chain analysis is an analytical framework that assists in identifying business activities that
can create value and competitive advantage to the business. Figure 6 below illustrates the
essence of value chain analysis.
Figure 6 Value Chain Analysis
6.1 Primary Activities
Inbound logistics. Water is the main ingredient for all products manufactured by Coca Cola
Company and the company occasionally faces significant challenges in accessing this particular
raw material. Coca Cola uses high fructose corn syrup (HFCS) extensively and this raw material
is purchased from US-based suppliers and delivered via trucks. There are also some ingredients
that have to be sourced internationally. For example, orange juice and orange juice concentrate is
sourced from Florida and Southern Hemisphere, particularly Brazil. For international purchases
inbound logistics are facilitated via ships and trucks. Coca Cola values diversity among its
suppliers. In 2013, $952 million were spent on diverse suppliers, an increase of 14.8% compared
to the previous year.
20
Operations.Coca-Cola operating segments are divided into the following 7 groups:
1. Eurasia and Africa
2. Europe
3. Latin America
4. North America
5. Asia Pacific
6. Bottling Investments
7. Corporate
The Coca Cola system is not a single entity from legal and managerial points of view. Coca Cola
manufactures and sells concentrates, beverage bases and syrups to its bottling partners, maintains
ownership of the brand and develops and applies marketing strategy. Bottling partners, entities
that do not belong to Coca Cola, do manufacturing, packaging, merchandising and they
distribute the final product to customers and vending partners.
Outbound logistics.Coca Cola Company sells its products in more than 200 countries and
understandably claims to operate the world‟s largest beverage distribution system22
. Distribution
channels utilized by Coca-Cola consists of distribution operations operated or controlled by the
company, independent bottling partners, distributors, wholesalers and retailers. The five major
bottling partners listed in Table 3 accounted for 33% of the total unit case volume sales in 2014.
Moreover, outbound logistics are organized via manual distribution across Africa with more than
2500 independent manual distribution businesses employing more than 11,000 people23
.
22
Annual Report (2014) Coca-Cola Company 23
Clinton, B. (2009) Harvard Business Review, Available at: https://hbr.org/2009/09/creating-value-in-an-economic-crisis
21
Independent bottling partner Areas covered
Coca-Cola FEMSA, S.A.B. de
C.V. (“Coca-Cola FEMSA”)
Northeast parts of Mexico, Brazil, Guatemala, Colombia, Costa
Rica, Nicaragua, Panama, Venezuela, western Argentina and
Philippines
Coca-Cola HBC AG (“Coca-
Cola Hellenic”)
Armenia, Austria, Belarus,
Bosnia-Herzegovina, Bulgaria, Croatia, Cyprus, the Czech
Republic, Estonia, the Former Yugoslav Republic of
Macedonia,
Greece, Hungary, Italy, Latvia, Lithuania, Moldova,
Montenegro, Nigeria, Northern Ireland, Poland, Republic of
Ireland,
Romania, Russia, Serbia, Slovakia, Slovenia, Switzerland and
Ukraine
Arca Continental, S.A.B. de
C.V
Western Mexico, Ecuador and northern Argentina
New CCE Belgium, continental France, Great Britain, Luxembourg,
Monaco,
the Netherlands, Norway and Sweden
Swire Beverages (“Swire”) Hong Kong, Taiwan, seven provinces in mainland
China and territories in 11 states in the western United States
Table 3 Major bottling partners and areas they serve24
Marketing and sales. Sales of beverages belonging to Coca-Cola portfolio amounted to 28.6
billion, 28.2 billion and 27.7 billion unit cases in 2014, 2013 and 2012, respectively. The volume
of sales in the home country US accounted for 19% to the total volume of sales in 201425
. 31%
of total sales outside of the US occurred in Mexico, China, Brazil and Japan.
Coca Cola applies integrated marketing strategy using advertising, sales promotions, events and
experiences and public relations elements of the marketing mix in a combined manner. The
brand marketing message is associated with being happy, enjoying life and leading an active
lifestyle. Coca Cola‟s the latest marketing efforts have been directed at combining four popular
drinks - Coca Cola, Diet Coke, Coca Cola Zero and Coca Cola Life into the concept of „One
Brand‟, thus providing wider choice to the target customer segment.
Service. Coca Cola maintains its customer service practices via online chat with a virtual agent
in official website of the company dedicated customer service phone. Coca Cola website has a
24
Annual Report (2014) Coca-Cola Company 25
Annual Report (2014) Coca Cola Company
22
comprehensive FAQ that covers the most aspects of their products in a detailed manner and the
website also addresses a wide range of rumors related to the brand direct and indirect ways.
6.2 Support Activities
Infrastructure. Coca Cola‟s infrastructure its wide range of support systems and functions such
as finance, planning, quality control and general senior management. Muhtar Kent is a well-
known and charismatic leaders of the company holding the titles of Chairman of the Board of
Directors, Chief Executive Officer and President. He is aided by 5 Executive Vice Presidents, 5
Senior Vice Presidents and 20 Vice Presidents.
Human Resource Management. As of December 31, 2014 and 2013, Coca Cola employed
129,000 and 130,600 people respectively26
. Numbers of US-based amounted to 65,300 and
66,800 as of December 31, 2014 and 2015 respectively. As of December 31, 2014
“approximately 18,000 employees, excluding seasonal hires, in North America were covered by
collective bargaining agreements”27
.
Technology Development. A critical role of technology development in ensuring long-term
growth prospects of the business is duly understood by Coca Cola management. The company
has introduced a range of technological innovations in various aspects of the business. These
include introducing internet-connected vending machines that reports sales, inventory and
service issues to the nearest distribution center, granting the possibility of paying vending
machines with mobile wallets and equipping Coca Cola vending machines with interactive
features.28
Procurement activity within Coca Cola‟s chain of support operations relates to the ways
resources are acquired for the business. Due to its massive size and more than 120 years of
26
Annual Report (2014) Coca-Cola Company 27
Annual Report (2014) Coca-Cola Company 28
Coke Solutions (2015) Available at: http://www.cokesolutions.com/Vending/Pages/Site%20Pages/DetailedPage.aspx?ArticleURL=/Vending/Pages/Articles/Vending%20News/DigitalTechnologyDrivesVendingInnovation.aspx&
23
operations, Coca Cola Company has a sophisticated procurement system in place. This system
involves gaining access to local resources in general and water in particular and cooperating with
the local government and relevant private sector organizations to initiative and maintain business
operations.
24
7. Corporate Social Responsibility (CSR)
7.1 CSR Programs and Initiatives
Coca Cola releases Sustainability Report that comprises the details of CSR programs and
initiatives engaged by the company. Coca Cola aims to give back at least 1% of its annual
income for charitable causes annually. Figure 7 below illustrates the pattern of distribution of
this fund in 2013.
Figure 7 Distribution of Coca Cola CSR expenses
According to the latest Coca Cola Sustainability Report for 2013/2014 the major CSR programs
and engagements initiated by the company include the following:
Categories of CSR
activities
Coca ColaPerformance
Educating and
empowering workers
During the period of 2012-2013 Coca Cola is mentioned in 26 lists,
including the World‟s 25 Best Multinational Workplaces 2013 compiled
by the
Great Place to Work® Institute.
Labor and human
rights
Company‟s EthicsLine channel provides stakeholders an opportunity to
inform perceived violations of Code of Business Conduct, Workplace
25
Rights or any other violations in a secure and anonymous manner.
In 2013, 44% of workforce in the US was multicultural and 1010
military veterans were hired during the year.
Health and safety 100 out of 400 new beverage products introduced in 2013 are reduced-,
low-, or no calorie
94% of company-owned facilities comply with Coca Cola Workplace
Rights Policy
The rate of lost-time incident decreased in 2013, dropping to a low of
1.9
Environment
a) energy
consumption
b) water consumption
Energy efficiency improved by 20% compared to 2004
100 service vans in the US have been converted into efficient hybrid-
electric vehicles
Coca Cola has announced a program to reduce carbon footprint by 25%
by 2020
Coca Cola has announced its commitment to balance its water usage by
2020. In 2013 the company has replenished an estimated 68% of the
volume of its finished beverages and returned about 108.5 billion liters
of water to communities and the nature.
Efficiency of water usage is improved for 11th
year in a row, totaling to
8% improvement since 2010
Other initiatives The company helped economically empower more than 865,000 women
within the scope of 5by20 program in 2014. The program aims to
achieve economic empowerment of 5 million women by the year of
2020.
Coca Cola has supported more than 290 physical activity programs in
nearly 125 countries and territories it operates.
PlantBottle packaging is developed as an ambitious initiative to develop
plastic bottles made partially from plants.
In the scope of its attempt to engage in responsible marketing Coca Cola
does not advertise its products to children younger than 12 years old.
Accordingly, the company does not buy advertising that directly targets
the audience that is more than 35% children under 12.
Table 4 Coca Cola CSR performance
Figures taken from Coca Cola 2013/2014 Sustainability Report
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7.2 CSR Criticism
Along with CSR initiatives and programs as illustrated above, Coca Cola is faced with criticism
on the grounds of causing water depletion and environmental pollution. For example in Nigeria,
Coca Cola has been accused of “polluting a lagoon by pumping untreated waste into the water
and killing fish”29
, and the company has been also accused of ignoring labor abuses in Colombia.
Additional instances include allegations of union-busting in Pakistan, Guatemala and Nicaragua,
and exhausting water resources in El Salvador30
. Moreover, although the Coca Cola Company
made a public pledge to source 25% of PET plastic from recycle or renewable material by 2015,
to date the company has reached only 6%.31
29
Teather, D. (2006) The Guardian, Available at: http://www.theguardian.com/media/2006/aug/18/marketingandpr.business 30
Teather, D. (2006) The Guardian, Available at: http://www.theguardian.com/media/2006/aug/18/marketingandpr.business 31
Coca Cola 2013/2014 Sustainability Report