I. Industry Analysis
Soft drink industry has been created since the 17th century when Compagnie de Limonadiers was created in Paris (Pietka & Korab, 2017). This industry kept on improving deliberately till the enhancement of manufacturing process which enables the firms to gain benefits from economies of scale. Then in 1886, John Pemberton established Coca Cola, the first cola drink that then become the world’s most famous soft drink company. This industry has been successful due to strong global recognition, intense and effective marketing, and product innovation.
Despite the fact that Coca Cola is in a highly competitive landscape because there are a lot of soft drink companies like Dr. Pepper Snapple group, Cott Corporation, National Beverage and others, PepsiCo is still Coca Cola’s primary competitor. The two companies have been in a very tense competition with one another for decades. Coca Cola owns more than 500 brands and operates in more than 200 countries (Coca Cola, 2018). Its gross profit was 35,410 million USD in 2017 (10k form, 2018). PepsiCo, Coca Cola’s core competitor, offers more than 350 soft drink brands across more than 200 countries (PEPSICO, 2018). Beverage contributes to 47% of PepsiCo’s net revenue which is equivalent to 31,736.75 million USD in 2017 (10k form, 2018).
In 2015, Coca Cola made up 42.5% of the overall soft drink markets followed by PepsiCo, 27%. Other soft drink company such as Dr Pepper Snapple Group has the market share of 17.3% whereas Cott Corporation was 4% and National Beverage was 3% (Statista, 2016). The Herfindahl Index of the soft drink market was 2,859.54 reflecting that the soft drink market was competitive; thereupon, Coca Cola must be vigilant over their rivals as well as the new entrance.
Examining Coca Cola’s financial statement illustrates that the sales in the company decreases by 15.51% from 2016 and 2017, albeit, the profit margin of the company is still stable, 60.5% and 60.66% in 2016 and 2017 respectively. The stability is driven by the decrease in cost of goods sold. Despite being stable in gross profit margin, the company experiences a decline in return on asset. In 2017, ROA was 1.42% whereas in 2016, ROA was 7.36%. This ratio indicates that Coca Cola did not use its assets effectively. On top of that, the company’s return on equity ratio also decreases; in 2017, Coca Cola’s ROE was 6.22% whereas in 2016, ROE was more than 25%. Interestingly, the earning before tax margin (EBT) decreases from 19.43% to 19.04% between 2016 and 2017 and the tax rate also increases dramatically from 19.49% to 82.47%. This leads to the significant declines in the net profit margin, from 15.59% to 3.52% in 2016 and 2017. These indicators really show that Coca Cola has now been shrinking.
Being in the maturity stage, having the ongoing decline in net profit margin as well as facing the shift of people consuming soda drink and healthy drink, the future of Coca Cola is uncertain, yet is more likely to be plummeted in the following year. Mark Ritson, the associate professor of marketing in Melbourne Business School, predicted that “Coke will always be the leading brand of cola until the end of time. But the value of that cola category is set to plummet over the next 20 years. It’s no good being a big fish in an ever-smaller pond. The days of Coke being the world’s biggest brand are over forever” (O’Reilly, 2015). The forecasted growth rate of the company for 2019 is 8.35% lower than 2018 which is 9.69%. The forecasted return on equity for 2019 is 20.36% lower than 2018 as well (Nasdaq, n.d.). Looking at the market trend, the success factors for the company can be shifted from soda drink to healthy drink and advocate the environmental issue to attracts the customer’s attention and let them think we care about the earth.
II. Macro-environmental factors
Coca Cola is known for its diverse culture. For Coca cola to be able to expand more, they would have to express their positive values of diversity. Coca cola tries to find a way to make their customers feel like they matter and could make a difference in the world. One of their objects are “Leverage the diverse ideas, talents, and capabilities of our organizations to create maximum value for our business and for our employees.” The company has a significant workplace strategy which involves their employees to learn the different backgrounds of customers.
Demographics factor plays a significant role in Coca Cola as it determines who and how they can market to. Coca Cola has different demographics strategy. Different flavors and different advertising strategies are created in different countries that Coca Cola operates to satisfy the needs of the customers. Age is one of the most important demographic factors for Coca Cola as it creates the constraints to marketing people. Because most of Coca Cola products are sugary and unhealthy, the company could not advertise for the children whose age is under 12 (Staff, 2015).
Social factor has a hug impact on Coca Cola. People nowadays think about the nutrient consumption. They prefer healthy lifestyle; thereupon, the market trend shifts from soda drink to healthy beverage. This makes Coca Cola’s popularities shrink. As the result, Coca Cola tries to come up with either new Coke flavor or new products such as Diet Coke, Honest Tea, Odwalla, Peace Tea, Vitamin Water and the like (Sarich, 2015).
Technology also has a major impact on Coca Cola. As a global company, producing, storing, packaging, distribution and everything depends upon technology. Technology provides economies of scale as well as competitive edge to Coca Cola as it enables the companies to produce a lot more products in the lower price and distribute the products to a lot of places. In 2017, the CEO of Coca Cola, James Quincey, said Coca Cola could know the flavor that the people like or could come up with the new flavor because the company uses the vending machine that allow people to mix-and-match the flavor that they want (Purdy, 2017). Coca Cola also uses technology such as social media to improve sales and connect with their customers as well.
In term of economic aspect, Coke is a normal good for customers. Thereupon, their consumption depends upon their income and their preference. If the customers’ income goes up, Coke consumption would go well. Therefore, during the economic downturn, financial crisis, Coca Cola lost a huge profit because people lost their job; they did not have enough money to buy anything rather than their necessity. Coca Cola’s profit declined by 15% during the economic crisis (BBC, 2013).
As a beverage company, Coca Cola is surrounded by a lot of law such as Food and Drug administration, Food Safety Modernization Act, Federal Trade Commission and the like (HG.org, n.d.). Not only that it has law related to beverage company, but business law also has business law as well. Due to tax regulation, in 2017, effective tax rate that Coca Cola needed to pay to the government increase to 82.5% leading to the decline of the company earnings after tax and interest (Coca Cola, 2018). Coca Cola was also a target for water consumption lawsuit. Back to the 2014, Coca Cola company in Varanasi, India was ordered to shut down because it violated the operating license and used excessive amount of water from the ground. It was not the first time the company was sued by the local people because back in 2004, in Kerala, Indian, Coca Cola was also sued for unstainable water usage and was fined $47 million as the damage (Hansia, 2014). To improve the brand’s image, Coca Cola works hard to be an environmental friendly company. It has been working with the governments of which countries it operates, they have put in place social projects such as Project Rain and have pledged to work with countries in East Africa, and Haiti to help rebuild, and strengthen their economies through Fair Trade, and continued support through jobs, and humanitarian efforts (Rain, n.d.).
III. SWOT Analysis for Coca Cola
| Internal Strength –
● Brand Awareness – one of the most widely recognized drink across the globe. ● Distribution Network – Coca-Cola makes its products available to individuals in more than 200 countries. ● Marketing – Celebrity Endorsements and sponsors of world events such as super bowl. |
Internal Weakness – ● Water Management – The main ingredient is water which is a limited resource. It is overexploited. ● Sustainability- The packaging is not environmentally friendly. ● Health Issues- sugar amount on drinks creates many health issues. And, law-suits.
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| External Opportunity –
● New Business Connections – with e- commerce we can have more sales. ● Re-Branding – opportunity for the organization to consider in the future is a new business model focused on the circular economy. ● Buy out competition – to expand the customer base |
External Threats –
● E-Commerce – Its competition Pepsi is currently working on prioritizing its e-commerce presence. ● Indirect competition- Starbucks and dunking are a dent in the company market share. ● Boycott from health-conscious people
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IV. Target Market
Coca-Cola targets market is everyone, meaning that Coca-Cola during all quarters of the fiscal year will utilize specific venues and resources to maintain their broad target markets, each ad directly solicits each of the target markets. More specifically Coca-Cola will run specific ad campaigns when they find a segment group has reached a plateau or a decline stage, which if the segment was unable to be recaptured could lead to the slow demise of the entire company one segment at a time. For that reason, Coca-Cola tends to leave its classic red on the coke classic, while every other coke product is varying in color and design. The Coke zero can is black with red highlights and a gentle white whisper across the can, while the Coca-Cola classic is a ruby red can which is now synonymous with the full flavor of Coca-Cola.
Coke has recently fell into a slum with the millennial market, Millennials are seemingly purchasing more health consciously and have created a slump in the industry that Coca-Cola is attempting to recapture but creating a new look and rebrand for potentially health conscious diet coke fans, the changes will include new flavors and a sleek silver can with a corresponding color stripe for each. This rebrand has already sparked new interest in the United Kingdom and will be rolled out in 2018 in the north American market where the youth has also staggered to energy drinks and fruit drinks. “Most importantly, we wanted to stay true to the essence of Diet Coke while recasting the brand for a new generation” (Moye,2018).
Coca-Cola utilizes various avenues of marketing to reach their broad target market. Recently in the United Kingdom Coca-Cola had spent a substantial sum of 10 million dollars for a rebrand/ reimage of Diet Coke and the various flavors thereof, following the success of this campaign the Coca-Cola company is now continuing the rebrand of Diet Coke into the North American market. The new imagine includes a slimmer sleeker 12oz can, that gives a lighter appearance than the classic stub 12 oz.
Not all campaigns have been so favorable for Coca-Cola. In the early years of Coke, it was known as a White drink while PepsiCo was a liberal/not white drink, “Few realize that Coke marketed assiduously to whites, while Pepsi hired a “negro markets” department. Put more bluntly, Coke was made for white people. Pepsi was made for black people” (Estes,2013) although these exclusions are no longer obviously relevant if at all perhaps that says something about the oppressive republican party in the 1950’s and 1960’s the assembled masses at the Lincoln memorial protesting the Vietnam War were drinking PepsiCo, not coke. This was realized and in 1971 the “Hilltop” commercial was released featuring young people from all across the world singing together in unison about peace and harmony, this is the first example of Coca-cola’s advertising targeting a specific target market, the youth. PepsiCo now owns a significant market of snack foods, Coca-Cola has fell behind on these complimentary markets. Opportunities for Overall growth for Coca-Cola would be expansion into complimentary markets including but not limited to well liked established snack brands.
V. Strategy for each of the 4 P’s
- Positioning Statement
Coca-Cola has been everyone’s accompanies for decades. It positions itself in the market as everyone’s joy, energy, and entertainment. We tailor the needs of happiness for family, friends, and everyone. We care about the next generation; we care about our mother earth. We always subsidize our money to renovate the manufacturing plants, distribution fleet, and cold drink equipment, so that we can reduce the amount of carbon footprint we produce. We always tell our customers, we care about you and we will protect you.
2. Pricing Strategies
Coca-Cola ensures customers with best price possible. We focus on drive up sales by increasing the volume and improving the efficiency of our technology, not our price. We will as well provide fixed and standardized price for our customers, so that retailers could not cheat on them.
For our business partner, cash-and-equity would be accepted. However, in pursue of doing that we will need to have a legitimate contract and agreement between the two companies to determine on the amount of equity stake.
3. Distribution Strategies
As Coca-Cola is globalized, the distribution strategies need to be well-planned and sophisticated. We have more than 39 plants operating in 12 different countries for Bottling Investment Group (BIG) and 12 plants for BIG strategic investment bottlers in 5 different countries (Coca-Cola, n.d.). We will try to expand to other location to ensure the efficient service for our direct and indirect distribution.
4. Promotion Strategies
Having a lot of partners with schools, universities, institutes and others, we will provide innovative vending machine for low price to all our partner. They can contact us 24/7 in case there are anything wrong with the machine and we will come and fix it with full force. To improve our public relation, we will as well try to expend our relationship with other companies and institutes. Advertising on social media, TV, radio, sport event, concerts and others will be used to improved sales. Sales promotion like seasonal promotion and special occasion sales promotion will always offer each year. As we care about our customers, for every one dollar they spend on our product, one cent will go to Natural Forest Foundation.
VI. Project Implementation and Measurement Plan
- Activities and Schedule
To implement and achieve our marketing, we would conduct a marketing campaign called “Refresh the freshness”. The campaign would run for one and a half year. A lot of marketing activities would be included in the campaign.
Firstly, different advertisement related to on “Refresh the freshness” would be launch on TV and other social media site in every three months. Secondly, we have guerrilla marketing in which the image of Coca Cola’s can would be display inside and outside of the mall’s elevator. When you arrive on your destiny, the sound “Ahh” followed by “Refresh the freshness” would be on. In the mall and school, there would be a vending machine called “Smooch Me”. With “Smooch Me”, the vending machine would give free coke for people who hug it and make a smooch sound. “Smooch me” vending machine will be mobilized to different places in every two days. This activity will last for only 3 months. We also launch a selfie on snapchat. Funny meme of people will be created on the apps, so people can just take a photo with Coca-Cola meme. On top of that, the project proposal regarding to raise awareness of people on global warming will be conducted as well. The requirement for the project proposal will be posted on Coca-Cola’s social media website; only university students are allowed to apply and send the proposal. The three wining proposal proposals from each country that Coca Cola’s operate will receive 1,500 USD as the fund to conduct their proposal. Each project proposal winning team will need to work with Coca-Cola’s youth representative or HR team to conduct the project, take the video and post it on Coca-Cola’s social media sites. There will be hashtag like #CokeTheEnvironment written beneath the post. Selfie with the frame of the trees and Coca Cola’s can in the middle along with edited funny face will be on snapchat, Facebook and Instagram as well. Coca Cola also advertise on major sport events as well such as AFC Asian Cup, Handball World Championship, Tennis Australia Open, Extreme Sport Winter X Games, Super Bowl, and the like.
2. Measurement for Budget Allocation
In the fiscal year of 2017, Coca Cola spent 3,958 million USD for advertising. With the business plan above, we are hoping to achieve lower expense yet reach out more customers.
Considered advertising on TV during the Super Bowl, the cost of expense in 2017 was 5 million for a 30 second spot (Michaels, 2018). Assuming the cost increases and Coca Cola ad is under 1 minute, the estimated cost would be 12 million USD. As for FIFA World Cup, the advertisement cost was around 40 million in 2010 for a 30 seconds spot (Steinberg, 2014). Estimated cost for FIFA World Cup would be approximately 120 million. Average cost to advertise on NBA is 50 million USD (Statista, n.d.). Hence, the estimated cost would be 70 million USD. For other sport events, estimating the cost of advertising 1,000 million USD making it 1202 million USD for advertising during sport events.
Coca Cola also uses snapchat and other social media to advertise the products. Assuming Snapchat, Facebook and other social media sites agree on letting Coca Cola put filter and meme on its photo feature, the estimated advertising expenditure on doing so is 75 million USD.
Project proposal is a core advertising for Coca Cola as it aims to raise awareness of global warming that is linked to Coca Cola’s market position. Coca Cola products are found in every country except Cuba and North Korea due to US trade embargo (BBC, 2012). As there are 195 countries around the world (Worldometers, n.d.) and only two are not on Coca Cola’s list, therefore it makes it 193 countries that can sell Coca Cola. The maximum funds given to three winners for every country would be 9,000 USD making the total fund 579 hundred USD.
Estimated the cost for the sensible “Smooch Me” vending machine is 7,000 USD and there are 500 vending machines needed. Therefore, the estimated maximum cost would be around 350 million USD.
Elevator guerrilla marketing and advertising on TV would cost around 100 million USD and 200 million USD respectively. Advertising on TV is expensive because we use the prime time to advertise. Other advertising activities are around 500 million USD.
The total advertising expenditure is approximately 2082.237 USD lower than 2017 advertising expenditure.
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Leaksmy Heng 