Shaking Things Up:  

A Coca-Cola Case Study

By David Iskander Every Fortune 500 Company now operates at a multinational level and competes with foreign firms. Intrusively, they face competition from foreign competitors in the US market. Coca-Cola, with 127 years behind its name, and ranked number 3 on Interbrand’s Best Global Brands list at $79.2 billion – not million - brand names in the world, can highlight some interesting points about globalization in 2014. According to Coca-Cola, with over 1.9 billion services of the Coca-Cola Company beverages each day, the company is the world’s largest beverage company. In mid-2013, Coca-Cola inaugurated its first ever-bottling plant in Myanmar, a $200 million dollar investment. This highlights, Coca-Cola’s focus to be an industry leader in non-alcoholic beverages. Today, Coca-Cola has 17 billion dollar brands like Sprite, Diet Coke, and Fanta. The vivid numbers show that Coca-Cola is inspiring moments of happiness and refreshing the world.

Current Status In 2012, Coca-Cola recorded approximately $48 billion dollars in revenue with $9 billion in profit, an almost 20 percent profit margin. With nearly 4.5 billion shares outstanding and a share price average in March 2014 of $40, Coca-Cola’s market capitalization stands at over $160 billion. Also, in 2012, Coca-Cola’s dividend yield was almost 3 percent. [Warrant Buffett’s company, Berkshire Hathaway Inc., currently owns just about a 10 percent stake of the company. Resulting in ownership of 400 million shares at a sum valuation of roughly $15 billion. Buffett said, “I’m the kind of guy who likes to

2      bet on sure things,” at a recent Coca-Cola shareholders meeting. Creating moments of happiness appears to be worth investing heavily into.] Coca-Cola employees over 150,000 people globally. These employees serve to progress over 500 plus drink choices in 200 plus countries with 17 of those being billion dollar brands and 20 other megabrands generating more than $500 million in annual retail sales. Today, North America generates roughly 45 percent of their sales. Headquartered in Atlanta, Georgia, Coca-Cola’s CEO Muhtar Kent has held his position for almost five years. Since taking his position, the company has faced many issues that Kent addressing in a recent interview. In the interview with the Harvard Business Review in 2008, Kent gives us not-so-clear vision for the future. Mainly, Kent outlines priorities at CEO, branding, obesity, and sustainability issues.

2020 Vision “Establishing a long-term vision (2020 Vision) and restoring growth in North America” Kent emphasized as the priority to get Coca-Cola to reach new levels of success. He elicits turning things around for the company would be to go from a company-centric focus by using new forces to stabilize the company. These new forces consisted of bring in people from all around the world. As Kent describes this, he then loosely cultivates his own thoughts about the matter. He states that the people he brought in from all around the world were people from the company.

Case Analysis The first discussion of this case study was to analyze and evaluate Mr. Kent’s replies to the interviewer’s questions. The company has faced many hardships due to decreasing sales and becoming what some called too big. Addressing this issue was a concern about the company holding too many meeting with just Coke people. His response was to get people from all around the world. Dimly helpful, the people were Coke people. Further, the 2020 Vision, namely, has been set out to double revenues by the year 2020. It has a vision for profit, people, portfolio, partners, planet and productivity. Kent’s discussion about the vision and its potential is large. This global company is setting out to supersede benchmarks and towers of success. Under a closer analysis, the road to success seems very unclear. The company has guided its vision but has not made itself clear on its objectives. Peter Drucker, an Austrian-born American management consulter said it right that, “You cannot manage what you do not measure”. It seems that Mr. Kent’s large speech, vast vision, and on-track plan seem to be nothing more than a conversational topic. With that, analyzing the numbers shows revenues drop from 2012 fiscal year to 2013 fiscal year by almost $2 billion. The Wall Street Journal published an article on April 10 that Coke-Cola’s flagship soft drinks are getting a hard hit in their North American market. Further underling our discover that a goal without a plan is just a wish.

3      Brand Value Coca-Cola has over 500 different drink options and only one of those is titled Coca-Cola. That brand value has risen to extraordinary levels of valuation. When asked by the Harvard Business Review about applying the company’s name to other beverages Mr. Kent replied, “Because branding does not work that way”. Reflecting on this reply, evaluate McDonald’s McChicken, McFlurry, and McCafe. Also, Nike’s swoosh on all Nike products. Similarly, Apple puts its name and logo on each and every one of its products. This draws the conclusion that there may be deeper issues on why the 3rd most reputable brand value is not used on other Coke products. That is, Coke-Cola has issues with its Coke brand name that affect its other brands. For example, Coke products do not touch any shelf’s in supermarkets like Trader Joe’s, Sprouts, or Whole Foods, a set of supermarket chains that have taken a presumptuously large growth over the past couple years. Because these stores focus on health (Whole Foods), price (Sprouts), and uniqueness (Trader Joe’s) these companies dare not to put Coke on their shelves. Or do they? In any one the many Sprouts locations you can find Zico Premium Coconut water, a Coke brand. Similar in the other stores as well, this gives Coke a way to skip on the obesity issue and not trample on conflicting markets. A final analysis of Mr. Kent’s reply, without making any farfetched conclusions, indicates that there is a lot more to this story than just branding. This brings us back to the transparency of the article written by the WSJ on April 10. Coke has suffered immense pressure from around the world that their drinks are a main source of obesity with so many sugary, unhealthy beverages. Kent refers to this by initiatives of promoting education about health, sports, and activity. This issue has long due issue with how Coke will reach its 2020 Vision especially as its biggest market is now taking Coke out of the fridge.

Corporate Social Responsibility Sustainability or Corporate Social Responsibility (CSR) has held itself as bigger and bigger news as globalization grows and grows. With its large CSR initiatives, water sustainability is mandatory for the continued success of Coca-Cola on a global level. Today, over 350 billion liters of water a year is used for its business processes. Also, with the 2020 Vision, Mr. Kent said, “we’re committed to water neutrality by 2020”. A major feat indeed, ambitious in all respects, there are some issues. The World Wildlife Fund (WWF) both measures its water use and water conservation efforts. A conflict-of-interest to say at the least. The current amount used to produce one liter of Coke is 2.26 liters of water according to the WWF. One way Coke deals with this problem is by building wells in Africa. In hindsight, without disregarding the beauty of building wells in Africa for people in need, this does not sold the issue. For instance, if Coke uses 1 million gallons of water in a small city in India at one of its plant a year and brings neutrality by building enough wells to equal 1 million gallons in Africa, all this is does in make the numbers equal. Yet,

Sustainability: leaving mother earth at sundown the same way you found her at sunup. CSR: Extra-legal, social programs Both terms are used more and more in corporate boardrooms.

4      people in India are left in a greater demand for water. In final analysis, it is safe to conclude that Coca-Cola has a big water issue to deal with.

Conclusion Coca-Cola, moving into its second century, is a well-matured company that has had substantial growth through difficult times. Delivering moments of happiness bottled up in bubbly refreshment has seen a new day. That is, globalization has taken on its once well-to-do product to a realization that this could easily end up like the cigarette companies ridiculed, hated, and bad-mouthed on the news. CVS has made a commitment to take out all cigarettes from its stores. This move comes out as health concerns are pressing forward and unhealthy products are moving back. Processed sugars, and unhealthy drinks don’t seem to be on the rise but the decline. Maybe it as it was easy for Buffett to bet on sure things, it may be just as easy for him to change his bet on sure things, we will see. In all, globalization will have something to say about all this.