Coca-Cola Enterprises Strategic Alliances Industry Overview the

Coca-Cola Enterprises Strategic Alliances Industry Overview The carbonated beverage industry is one of the oldest and more complicated industries in existence. This industry is heavily dependent on its customer loyalty that it has developed historically and its reliance on marketing and innovation to grow new revenue streams. There are a growing number of potential threats that are present in the carbonated beverage industry. One trend that is emerging in many of the markets in the developed countries is that the consumers are becoming more health conscious.

As a result the demand for drinks containing high fructose corn syrup is diminishing relatively rapidly in some segments. Coca-Cola has had to innovate to diversify their product mix to offer products that appeal to these demographics. Another threat is that younger generations are seeking new types of drinks and new product brands. For example, the energy drink industry has grown rapidly. "Globally, the energy drink industry has gone from a $3.8-billion business in 1999, to a $27.5-billion business last year, according to data from market research firm Euromonitor.

That's a more than 620% jump (Foeger, 2014)." Demand in new market niches has led Coca-Cola to find innovative ways and partnerships to meet the emerging demand. Monster Energy Drinks Coca-Cola has recently entered into a long-term strategic partnership with Monster Energy Drinks. The Coca-Cola Company announced that they have entered into definitive agreements for a long-term strategic partnership that is expected to accelerate growth for both companies in the fast-growing, global energy drink category (Coca-Cola Company, 2014).

The new, innovative partnership leverages the respective strengths of The Coca-Cola Company and Monster to create compelling value for both companies and their shareowners. Value Creation This partnership adds value to Coca-Cola's product mix through the addition of a strong brand in the energy drink niche.

As consumers shift preferences from carbonated soft drinks s to alternatives such as sports and energy drinks, bottled water and ready-to-drink (RTD) teas, Coca-Cola needed to strengthen its portfolio in these fast growing segments in order to maintain its share in the overall beverage market. Although Coca-Cola has established itself in the global bottled water and sports drinks markets with popular brands Dasani and Powerade respectively, the company has negligible presence in energy drinks, which is the fastest growing beverage category (Trefis, 2014).

The addition of Monster to Coca-Cola helps fill this void for the company and its investors by positioning itself in the growing market niche. Improving Market Access Monster will improve their market access through Coca-Cola's global supply chain and distribution system. Rodney C. Sacks, Chairman and Chief Executive Officer of Monster explained the partnership like this (Coca-Cola Company, 2014): "We gain enhanced access to The Coca-Cola Company's distribution system, the most powerful and extensive system in the world.

At the same time, we become The Coca-Cola Company's exclusive energy play, with a robust portfolio led by our Monster Energy line and The Coca-Cola Company's energy brands. Our business will be bolstered by The Coca-Cola Company energy brands we will acquire, providing us with complementary energy product offerings in many geographies, as well as access to new channels, including vending and specialty accounts," Sacks said. Monster will improve its market access both horizontally in emerging markets but also through new distribution channels such as vending machines.

Enhancing Strategic Growth The deal between Coca-Cola and Monster was far more complex than the normal strategic partnership and there was an exchange of brand portfolios. Both companies are exchanging portions of their brand portfolios with each other, setting the stage for a long-term global strategic relationship; as part of the agreement, Coca-Cola is transferring its 12 energy drink brands to Monster, while Monster is transferring its non-energy drink segment (such as Hansen's, Blue Sky, and Peace Tea) to Coca-Cola (Kretzmann, 2014).

Figure 1 - Portfolio Transfers (Kretzmann, 2014) Building Financial Strength Monster is building financial strength from the strategic partnership immediately. Monster is gaining energy drink brands NOS and Full Throttle, along with 10 other international brands available in nearly 30 countries which represent Coca-Cola's energy drink segment and brought in about $330 million in total sales in 2013 (Kretzmann, 2014). Monster will see an immediate sales boost and expanded international presence as a result of this brands transfer. Coca-Cola will not see the same increases in sales but is in a better strategic position.

Third Party Distribution Coca-Cola is arguably the world's best logistics system. An amazing 1.8 billion servings of Coca-Cola products are sold around the world every day, according to Steve Buffington, vice president of supply chain development and director of supply chain, Bottling Investments Group for The Coca-Cola Company (Jumenez-Lutter, 2014). There are around sixteen million retail outlets around the world that sell.