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The Coca Cola Company: Its Future Prospects

20 Nov 2017Essay Samples

Coca Cola is the most recognizable brand name in the world. Not surprisingly, the Coca Cola company is also the largest beverage company in the world. In its opinion, and in that of most consumers, Coca Cola products are simply superior to those of their competitors. The company’s express objective has been to create value for its shareholders through a long-term commitment to its customers in terms of quality, satisfaction, and innovation. Looking to the company’s incredible success, it is clear that it has done this with a fervor. In the information provided on the company’s webpage it is stated that:

…in creating value, we succeed or fail based on our ability to perform as worthy stewards of several key assets: Coca-Cola, the world’s most recognized trademark, and other highly valuable trademarks; the world’s most effective and pervasive distribution system; satisfied customers, who make a good profit selling our products; our people, who are ultimately responsible for building this enterprise; our abundant resources, which must be intelligently allocated; and our strong global leadership in the beverage industry in particular and in the business world in general.

This sounds like a simple recipe for success, and in some ways it is; but implementing it on a global scale like Coca Cola has done is nothing short of a miraculous feat.

Though the company is 113 years old, it is difficult to fathom just how successful Coca Cola has been. Some of these following interesting facts might help to put it into perspective.

  • If all of the Coca-Cola ever produced were in regular-sized bottles laid end-to-end, they would reach the moon and back 1045 times. The 2.4 trillion bottles would wrap the Earth 11,863 times, or reach one-third of the way to Saturn.
  •  Over 8000 soft drinks from the Coca-Cola Company are consumed every second.
  • The contour bottle is recognized by 90 percent of the people on earth.
  • If all the Coca-Cola ever produced were put in a tremendous swimming pool with a depth of 6 feet, it would be 20 miles long and over 8 miles wide. Allowing 9 square feet of pool area, the pool could hold 512 million people at once.
  • One of every two colas and two of every three soft drinks consumed in America is a CocaCola product. 

Coca Cola has led the way in the soft drinks industry, which has been growing at an incredible pace the world over. This paper will take a detailed look at the soft drinks industry from a Canadian perspective, and then link the role that Coca Cola has played in guiding the growth of the industry. It will be clear at the end of the study that there are good reasons for Coca Cola being the industry leader. It is an innovative company that has found the secret to success: complete customer satisfaction. It has generated generations of loyal customers and ongoing growth will characterize its future.

The Soft Drink Industry

The invention of the ‘soft drinks’ was linked to the soda, or carbonated, water that was previously used for medicinal purposes in the 19th century and before.3 The novelty of the soft drink was that it had a pleasant flavour, and became popular as a tasty beverage. Today, the soft drink industry is defined by Statistics Canada as ‘those establishments primarily engaged in manufacturing non-alcoholic, carbonated beverages, mineral waters and concentrates and syrups for the manufacture of carbonated beverages.’ This represents a growing market in Canada and throughout the world. And it is an important industry that ranks amongst the most important in several countries. For the Canadian market, the following table makes this clear. 

Overall revenues have increased drastically over the past few years. The Canadian Soft Drink Association (CSDA) estimated that in 1997 per capita consumption of soft drinks in Canada was 111.5 litres. This is an increase of 17 % since 1989. Accordingly, with increases in exports, the Canadian soft drink industry has grown over 30% in the same time. In the domestic market, Western Canada has enjoyed the quickest growth rates. Consumption, however, was the strongest in Atlantic Canada (132.5 litres per capita).

The CSDA notes that “the type of soft drinks Canadians consume seems to be mirroring that of the US. Regular soft drinks in Canada held a 77.8% share in 1997. Diet soft drinks sales appear to have stabilized at 22.2 % of soft drink sales in 197, stemming a decline trend of recent years.” The increase/decrease in certain types of products can be seen for each region in Canada. It is clear to see that Ontario is by far the largest market. Ontario has over 30 % of the country’s population and accounts for roughly 40% of the country’s overall sales.

In sum, the Canadian soft drinks industry has grown rapidly over recent years. It has outpaced population growth, and the bottom line is that Canadians are simply drinking more soft drinks. There are several marketing opportunities in this thriving field. Need an academic paper on Coca-Cola? We will help.

After a period of consolidation that peaked in 1994, there are now more establishments in the industry. As new product brands and varieties have been accepted well by the market, the trend will likely be further segmentation and smaller producers entering the market for the next few years, and then another period of consolidation once brands are established. As new manufacturers enter the market with successful products, further consolidation is likely. For example, Canada’s Naya water, owned by Nora Beverages, was acquired by Coca Cola. As new products acquire similar success, acquisition by larger companies is often the case.

In addition to expanding product lines and the introduction of new brands altogether, most new product innovations are coming in terms of environmentally friendly packaging. All major soft drink manufacturers have committed themselves to the 3 Rs (reduce, reuse, recycle). As a result, cans, for the most part, are becoming less popular and relatively more expensive.

In terms of distribution, as established producers expand their product lines they are increasingly able to take advantage of economies of scope and scale. This gives them cost advantages over smaller competitors who are burdened with higher production and distribution costs.

The general conclusion from this is that the popularity of soft drinks is on the rise. In other words, it is a growth market. For companies like Coca Cola, the external environment is positive, and it is just a matter of giving the customer what they want. As will be shown below Coke has been more successful than other companies in this regard.

Corporate Profile of Coca Cola

As we know, Coke’s largest competitor is Pepsi Cola. These two competitors have been battling it out for years, and the lion’s share of the market is divided between these two firms. As a whole, however, the global soft drink industry is intensely competitive. “Producers compete not only for consumer acceptance, but also for shelf space in supermarkets and for maximum marketing efforts by multibrand licensed bottles. Competition may take the forms of pricing, packaging, the introduction of new products and advertising campaigns.6 While brand loyalty is reasonably high, consumers are not only price sensitive, but also sensitive to changes in brand image. Coca Cola, for instance, tried to update its image with a slightly different flavour with new packaging. While some segments of the market took to the changes, decreased market share forced Coca Cola to re-introduce its original product.

For this reason, Coca Cola has had to increase its product line along different brands that do not compete directly with their cola brand. Product differentiation has therefore become one of the pillars of the soft drink market, and has created several products that are aimed at niche markets. Aside from Coca Cola, the company has over 160 other Company soft-drink brands. This explains the increased segmentation noted above. Such an extensive product line is not a problem for a company like Coca Cola, since its distribution channels are well developed and it can take advantages of economies of scope. It is able to compete with players in every market around the world in every market segment.

The Coca-Cola Company and its subsidiaries operate in nearly 200 countries around the world. 70 percent of the company’s sales volume, and 80% of its profit, come from outside of the United States. “By contract with The Coca-Cola Company or its local subsidiaries, local businesses are authorized to bottle and sell Company soft drinks within certain territorial boundaries and under conditions that ensure the highest standards of quality and uniformity.” This gives Coca Cola a local presence, and obviously minimizes transportation costs. The company prides itself on being a global business that is still ‘local’. “Bottling and distribution operations are, with some exceptions, locally owned and operated by independent business people who are native to the nations in which they are located.”

Looking at the company’s operating management structure, there are five geographic groups plus The Minute Maid Company. The North America Group consists of the US and Canada. The Latin America Group includes operations across Central and South America, including Mexico. “The Company’s most populated operating group, the Middle and Far East Group, ranges from the Middle East to India, China, Japan and Australia. The Greater Europe Group stretches from Greenland to Russia’s Far East, including some of the most established markets in Western Europe and the rapidly growing nations of Eastern and Central Europe.

The Africa Group includes the Company’s business in 50 countries in sub-Saharan Africa.” In each of these markets, Coca Cola has dedicated itself to playing an active role in community life. It has aimed to be a good corporate citizen, and be philanthropic to a variety of good causes. “The Company's reputation for good corporate citizenship results from charitable donations, employee volunteerism, technical assistance and other demonstrations of support in thousands of communities worldwide. The Coca-Cola Company continues to activate sponsorships throughout the world, including associations with World Cup Soccer, the National Football League, NASCAR, the Tour de France, the Rugby World Cup, COPA America and numerous local sports teams. The Coca-Cola Company has sponsored the Olympic Games since 1928.”

In addition to this, the company is able to cater to local needs in the many markets it operates in. In the early 20th century, all that was available was Coca Cola either in a glass bottle or in a fountain glass. But today, with its 160 some brands and packages, there are a possible 4,500 brand/package configurations. As argued by Coca Cola CEO, Doug Ivestor, “we can customize our brand offerings for a local market, to the needs of the customer and the needs of the consumer in any given market. We’re focused on consumers and brands like no one else.”

The company’s financial statement reflects this commitment. This can be viewed in the following chart. This is impressive growth for a company that is 113 years old, and by most all standards in its maturity. To show an 18% increase in net income is impressive, and to show a 27% increase in share value is even more remarkable. Coca Cola’s pledge to return value to its shareholders is very clear from these figures. But is it possible for this growth to be sustained into the future? Quite simply ‘yes’, as the next section will show.

The Future of Coca Cola

Today there are roughly 1 billion Coca Cola products sold every day. To put this into perspective, it took the company 22 years to sell its first billion products. Now this success is being achieved every day, and it is still growing. Coca Cola’s present distribution system can handle 15 billion cases of Coca Cola products each year. Its aim for the future is 30 billion cases. According to Ivestor, “never before has this Company been more perfectly poised for pioneering, with a global system far more capable and far stronger than just a few short years ago. This is a business in its infancy, a true growth company with true, incomparable growth opportunities all over this world. Just name another business with a more popular, affordable product, with a stronger foothold in more countries, yet with the opportunity to serve almost all of the world’s nearly 6 billion consumers morning, noon and night.”12 Clearly, there is not one. Coca Cola is the undisputable leader in its field, and maybe unique in any industry.

Despite this success Coca Cola argues that it is still discontented. It is not as concerned with the million products it has sold in any given day, but the 47 billion servings that other companies have been able to muster. This is to say that its perspective remains forward looking rather than on its extensive list of achievements. Looking at the situation this way, there does appear to be plenty of scope for future opportunities. “Worldwide, the average person drinks [Coca Cola} beverages about once a week. And 4 billion consumers live in countries where the average is even less. The reality is that countries with about 20 percent of the world’s population account for 80 percent of [Coca Cola’s] volume.” 

There are obvious opportunities to attract even more loyal customers. The great advantage that Coca Cola has over other global companies in other industries is that it sells a simple product that just about anybody can afford. But the company is not happy just to offer a product that people can buy. What it wants to do is provide real refreshment. Though it might be going too far, Coca Cola notes that “our products don’t just quench thirst; they provide a moment of physical and emotional replenishment that can happen anytime and anywhere. More and more, we’re learning how to make those simple moments of refreshment special for our consumers through our brands and promotions.” Looking to the future, the company has come up with a so-called 6 pack plan that revolves around its brands; its bottler system; its customers; information; people; and mindset.

Coca Cola knows that it has a successful core brand. Its aim is to increase its market share with its 160 other brands. If it really plans to increase the extent of its already huge market share, it needs to increase the efficiency and capacity of its distribution system, its bottler system. To sell this increased product line in the market, Coca Cola has committed to better understanding the needs of its customers, and to serving them better. Consistent with the information age, improving its technology and distribution of information is will be the link that binds Coca Cola to its customers, and it therefore plays a huge role in its marketing mix. Its commitment to its employees is also important, as motivated employees will be more productive and make the company more profitable.

All of these elements will be tuned to Coca Cola’s future mindset: stronger leadership. This involves a focus on the long term, and remaining flexible to suit the increasingly discriminating and individual needs of customers. For a large company like Coca Cola, rigidity can set into place. And as a leader, innovation is often more difficult. To Coca Cola’s advantage, its local presence despite its global reach keeps it in touch with local shifts in taste and demand. Its financial reserves allow it to remain competitive in each market it operates in, and to look at profit in the longer term. In the past, other competitors have not been able to match Coca Cola in this capacity, and there seems even less likelihood of it in the future.

References

  • Enrico, Roger. 1986. The Other Guy Blinked: How Pepsi Won the Cola Wars, Bantam: New York
  • Higgins, Richard S., David P. Kaplan, Robert D. Tollison. 1985. Competition and Concentration: The Economics of the Carbonated Soft Drink Industry, Toronto: Lexington Books
  • Oliver, Thomas. 1986. The Real Coke: The Real Story, Random House: New York
  • Riley, John. 1972. A History of the American Soft Drink Industry New York: Arno Press
  • Sanders, Roland. 1986. Papa Coke: Sixty Five Years Selling Coca Cola, Bright Mountain Books: Ashville
  • The Coca Cola Company. 1999. http://www.thecoca-colacompany.com

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