Coca-Cola's marketing strategies in the evolving soft drink industry

Coca Cola Marketing Strategies

In recent years the soft drink industry has exploded, raising competitive awareness among soft drink manufacturers, investors, and consumers alike. Historically, this highly competitive $64 billion soft drink industry was dominated by "regular" soda, however, recently the market has been evolving, and competitors are scrambling to take the lead in catering to consumers desires. Coca-Cola currently holds the strongest position as a long-standing top competitor in the soft drink industry market, and is forecasted to remain on top of the bubble. This paper will provide an overview of the background of the Coca-Cola Company, its' marketing strategies and positioning through product, price and promotion, and will conclude with recommendations for improvements in its' marketing. The driving forces behind the lucrative soft drink industry are changing, as retailers consolidate businesses, placing growing demands on manufacturers to provide greater efficacy and value (PepsiCo 2004 Annual Report, at 6). Consumer preferences change overnight and there is a growing interest in a wider variety of products (PepsiCo 2004 Annual Report, at 6).

Research indicates that the key factors for success in this industry are the ability to meet demands quickly, seamless systems to secure the necessary raw materials, and the manufacture of the appropriate amount of products along with efficient method and manner of distribution.

Currently, there are market trends in the soft drink industry that companies must keep up with. For example, regular soft drinks will no longer be the driving force behind competitors. This is due to the fact that diet's share of the market has grown steadily since the mid-1990s. Research also indicates that bottled water, tea, sports and fruits drinks also are up, further siphoning regular soda sales, lending support to the theory that one of the best chances for growth are diet soft drinks (Coca-Cola 2004 Annual Report, at Form 10K). 10-year industry analysis reports indicate that since calorie consciousness is vital, more and more consumers want low- and no-calorie soft drinks (Coca-Cola 2004 Annual Report, at Form 10K). This awareness also extends to retailers, who hope to attract dieters' business by giving more, and more prominent, space to low-cal beverages. New sweeteners also have broadened the appeal of diet sodas, as competitors now offer soft drinks with a blend of sugar and no-calorie sweetener, claiming the taste is similar to regular but with half the calories (Coca-Cola 2004 Annual Report, at Form 10K). As a result, there is a distinct new trend in the soft drink industry that main competitor Coca-Cola must keep up with.

The Coca-Cola Company's Background

The Coca-Cola Company (Coca-Cola), incorporated in September 1919, manufactures, distributes and markets non-alcoholic beverage concentrates and syrups around the world. The Company manufactures and sells non-alcoholic beverages, primarily carbonated soft drinks and a variety of non-carbonated beverages. Coca-Cola also manufactures and distributes juices and juice drinks and certain water products, and also has ownership interests in numerous bottling and canning operations (Reuters at (http://www.investor.reuters.com/business/).Coca-Cola has strategic business units in North America, Africa, Asia, Latin America, and Europe, Eurasia and the Middle East, selling beverage products in more than 200 countries worldwide. For its fountain products in the United States, the Company manufactures fountain syrups and sells them to authorized fountain wholesalers and some fountain retailers (Reuters at (http://www.investor.reuters.com/business/).Its' beverage products include Coca-Cola, Coca-Cola classic, caffeine free Coca-Cola, Fanta brand soft drinks, Sprite, Mr. Pibb, Mello Yello, TAB, Minute Maid flavors, and many others.

Coca-Cola's Marketing Strategies & Evaluation - Strategy Level

At the strategy level, Coca-Cola's marketing strategy involves a thorough examination of the company's market segmentation, targeting, and positioning. Overall, Coca-Cola boasts impressive statistics, including 50,000 employees; a total debt of only $7,003.0 million; cash balance of $6,707.0 million; and revenues for 2004 of $22,150.0 million, which has steadily increased since 2001 (Reuters at (http://www.investor.reuters.com/business/).Currently, the United States is the company's largest market. However, only 20% of Coca-Cola's operating income comes from the United States, where the company sells over 3 billion unit cases a year to capture 41% of the entire United States soft drink market (Research Reports at (http://www.ascensio.com/Reports/CokeClassicCC.aspx).This is an example of the strength of Coca-Cola's market segmentation, because essentially half of the United States soft drink market belongs to Coca-Cola. Even in a developed market such as the United States case sales have grown at 3% per year over the past five years (Research Reports at (http://www.ascensio.com/Reports/CokeClassicCC.aspx).

Coca-Cola's targeting and positioning are also a key marketing strategy for the company, and these marketing aspects can best be described as working together. Coca-Cola's goal is to use the company's assets, such as brands, financial strength, distribution system and strong commitment of management and employees, to become more competitive and accelerate growth in a manner that creates shareholder value (Coca-Cola 2004 Annual Report, at 1). Over the next five years the company plans to enter into new distribution agreements at fast food restaurants that give free refills and sell larger volume soft drinks or "value meals." For example, Wal-Mart stores now carry Coca-Cola products and many of the largest food chains have changed over to Coke. Placing Coca-Cola in this position enables the fountain sales in countries such as the United States to account for approximately 33% of the company's revenue. Additionally, operating affiances gained from joint actions with bottlers have added roughly about 1% per year to earnings (Research Reports at (http://www.ascensio.com/Reports/CokeClassicCC.aspx).

Coca-Cola's Marketing Strategies & Evaluation - Tactical Level

Coca-Cola's tactical marketing strategies consist of its' product, price, distribution, and promotion of its' products. Coca-Cola attributes its success to an ability to connect with consumers by providing a wide variety of choices to meet consumers desires, needs and lifestyle choices (Coca Cola 2004 Annual Report, at 1). One of its' marketing strategies consists of repeatedly marketing the signature brand, regular Coke. The company has wisely and strongly protected the red-colored and design pattern can and bottles, and have aggressively pursued infringers of their very famous and easily recognizable trademark. The consistent marketing and advertising of their main brand has enabled the company to rise over the competitor's, as far as label recognition and flavor are concerned. One of the key elements of the promotion of Coca-Cola's product the Coca-Cola name has unsurpassed brand recognition and appeal worldwide.

Coca-Cola's distribution is also key - the company has been operating for over 100 years and manufactures and distributes products in over 195 countries (Research Reports at (http://www.ascensio.com/Reports/CokeClassicCC.aspx).In addition to their "main" product, Coca-Cola has also introduced a variety of new brands, brand extensions and products.

For example, in 2004, the company introduced Diet Coke with Lime, Coca-Cola C2, Sprite Icy Mint, Fanta Citrell, Fanta Free, Fanta Naranja Chamoy and Aqua Shot, in addition to the acquisition of ownership or license rights for a number of brands (Coca-Cola Annual Report at Form 10K). Furthermore, the company is trying alternative methods to keep up with the competition. For example, also in 2004, Coca-Cola launched Nativa, a soft drink in Argentina flavored with the country's traditional yerba mate herbal tea (Herzog, at 1). News reports such as this reveals that Coca-Cola continues to attempt to innovate to local taste preferences.

Coca-Cola has remained competitive in the area concerning the pricing of its' products, while continuing to launch new products at the same or similar prices. For the last couple of years, some of Coca-Cola's most successful launches have come from the company trying to cater to local tastes like Georgia Coffee, Qoo and Vanilla Coke (Herzog, at 1). Additional efforts by Coca Cola include the possible changing of the name of Diet Sprite to Sprite Zero. A positive result of a name change such as this could be an attempt to reinvigorate Diet Sprite, which has enjoyed moderate growth in 2003, but is still trending below overall diet CSD volume growth (Herzog, at 1). In another plan to increase consumer revenues, Coca-Cola, added citrus flavor to its Diet Coke beverage range with the debut of Diet Coke with Lime. This came as the result of consumer research indicating a preference for lime as the next Diet Coke flavor. The packaging graphics for Diet Coke with Lemon were designed to harmonize with Diet Coke with Lime. Therefore, the tactical marketing strategies of the company can be easily attributed to its' success.

Industry Analysis

Market reports indicate that the consumer lies at the heart of true competitor advantage. Soft drink companies must have the capability to competitively collect better strategic, behavioral and marketing insights to boost growth and sales. Pricing is important to consumers as well, and as a result, companies can no longer depend on price increases for revenue growth. Technology also plays a role in competitiveness. Companies can improve their revenues through more responsive financial data systems and processes operated by a single, real-time accessible database that spans across the company's divisions (PepsiCo 2004 Annual Report, at 6). Furthermore, research indicates that through linking employees, internal data and operations, companies will be able to respond faster and share necessary internal information more rapidly.

As a result of these emerging trends, consumers can expect numerous new choices in the coming years, including the arrival of more reduced-calorie sugar-sweetener blend beverages. For nutritionists, who continue to issue dire warnings about the obesity epidemic, a diet soda surge is good news, although the soda industry discounts the link. The shift to diet is being felt across the industry, including the many small regional soda companies. Coca-Cola operates in a highly saturated industry, as there are many, many competitors for cola products. Some companies manufacture highly competitive goods, such as PepsiCo, which manufactures markets and sells a variety of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages, and foods. PepsiCo's North American divisions operate in the United States and Canada, with international divisions operate in over 200 countries, with its largest operations in Mexico and the United Kingdom. Pepsi's customers include franchise bottlers, and independent distributors and retailers (Reuters at (http://www.investor.reuters.com/business/).

Other industry competitors are the less known generic "cola" producers; competitor Cadbury Schweppes Americas Beverages launched a new offering to broaden the choice for dieters wary of sugar but yearning for flavor (Cosgrove, at 1). Cadbury Schweppes also launched a fortified 7 UP Plus, a berry flavored, Splenda and ace-k sweetened line extension to traditional 7 UP that was fortified with calcium, vitamin C and real fruit juice. Other industry trends appear to be limited-edition and seasonal soft drinks. Due to overwhelming demand, Pepsi brought back its seasonal Mountain Dew LiveWire from March through August 2004 (Cosgrove, at 1). The flavor-amped Mountain Dew variety proved popular in 2003, adding a 10% volume swing to the Mountain Dew trademark (Cosgrove, at 1). Similarly, in March of 2004, Coca-Cola also released Sprite ReMix Berryclear, a mixed berry version of the popular Sprite brand that built on the success of 2003's Sprite ReMix Tropical. Packaging graphics for Sprite ReMix Berryclear feature a new purple and silver-accented treatment of the Tropical ReMix logo. Dr. Pepper, another competitor, also announced its plans to rollout Cherry Vanilla Dr. Pepper and Diet Cherry Vanilla Dr. Pepper. As indicated above, an industry analysis of the soft drink industry illustrates how innovative and creative a company must be to remain competitive.

SWOT Analysis

SWOT analysis of the Coca-Cola company focuses on its' strengths and weaknesses, which are internal elements tend to be the areas of business that can usually be controlled. Opportunities and threats are external elements and that in most cases the company will not have control over, but must be kept in mind for a successful business. The Coca-Cola company excels in its products, and the company continually works toward launching new products and joint agreements to further the amount and area of product distribution. The soft drink industry is very large and constantly grows, and Coca-Cola holds a 45% market share of this market worldwide. The remaining 55% of the soft drink market is not held by a single competitor, but by a large number of them. Furthermore, Coca-Cola is thought to be one of the best organized, best financed and most aggressive competitor in the industry (Research Reports at (http://www.ascensio.com/Reports/CokeClassicCC.aspx).Additionally, by investing internationally the company has greatly expanded the potential size of the soft drink market, and management is entirely focused on realizing this potential (Research Reports at (http://www.ascensio.com/Reports/CokeClassicCC.aspx).

Coca-Cola, just as any other company, also has weakness. However, unlike its' competitors, the company has been able to successfully analyze the weaknesses and look for ways to turn them into strengths. For example, the company has continued to introduce new products, even when some products have failed or have not produced very favorable results in the larger markets. Coca-Cola continues to introduce new products such as PowerAde and Nestea, which have higher margins but are still only a small part of the United States market.

It is in this way that the company builds on available opportunities, and when an opportunity arises the company is able to react quickly and capitalize on it. The other main competitor in the soft drink industry, PepsiCo, is Coca-Cola's largest threat. Research indicates that for years, the Coca-Cola had the most recognized package in the world, the six-ounce swirling bottle design. Pepsi decided to attack Cokes strength its package and distribution method, by coming out with the twelve-ounce bottle at the price, and as a result, Coke sales slumped across the country. Faced with twice as much product for the same price people chose Pepsi. Thus, Coca-Cola not only had to enlarge their distinctive bottles and meet Pepsi's price but also retool all their vending machines that were only designed to carry the smaller bottles. Finally, the outcome of the company's SWOT analysis still places the company ahead of any competitors.

Conclusion

Soft drinks have been part of the American and now international landscape for more than 100 years, with no indication of disappearing in popularity or desire. They are a simple refreshment beverage that make no nutritional claims, but that also are not directly linked to any health problems as part of a balanced diet (Pierni, at (http://www.mattonigranddrink.com/indepth3.php?year=20018&month=12).A growing body of scientific evidence by governmental and academic researchers, looking specifically at soft drink consumption, shows there is no connection between soft drink consumption and health problems, including obesity, tooth decay and bone health (Pierni, at (http://www.mattonigranddrink.com/indepth3.php?year=20018&month=12).This is a positive outcome for Coca-Cola, because research indicates that Americans drink more soft drinks than ever before; soft drinks account for more than 25% of all drinks consumed in the United States. The international market for soft drink products is increasingly growing, and statistics in this area are comparable to those in the United States.

Finally, it appears that Coca-Cola has positioned itself in the marketplace for supplies and equipment for soft drinks in a positive position. Although its basic business model is similar to those of other competitors, Coca-Cola has performed well in the industry, and has met the expectations of key investors. Some recommendation for the company would be not to stray from its well recognized packing in any new product initiatives, and to strengthen management as a result of the losses suffered in 2004. Stockholders should also be advised that although there are competitors, the revenues generated by such competitors should not be a harsh reflection against the Coca-Cola company's business strategies. In summary, the future of Coca-Cola is more than just a lot of fizz.