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Coca Cola Analysis, Research Paper Example

Pages: 2

Words: 663

Research Paper

The non-alcoholic, ready-to-drink (NARDT) market in the U.S. closer to the oligopolistic market structure in which there are two major players Coke and Pepsi while DPS is a distant third. Even though mega brands control 66 percent of the sparkling beverages market, the competition among them especially Pepsi and Coke is extremely intensive which explains why Coke was forced to spend $2.9 billion in advertising in 2010 alone. Now, still beverages are gaining market share at the expense of sparkling drinks and once again, Pepsi and Coke are battling against each other through their respective brands Gatorade and Powerade among others. Making the matters worse is the rising competition from private labels and other small competitors that have shown their capability to grow, especially during struggling economic times when consumers are more price-sensitive.

There are four main stakeholders in the NARDT market which are concentrate producers, bottlers, suppliers, and distributors. The trend in the industry is to reduce the number of players in the entire value chain in order to achieve cost efficiencies and improve profit margins which is why both Coke and Pepsi have regained control of their previously spun-off bottling operations. The greater control over the supply chain network would also give Pepsi and Coke more negotiation power against distributors such as superstores and convenience stores. Coke has also been encouraged to regain control over its bottling and distribution operations to avoid the complexities of contracts with numerous players in the value chain who often follow different strategies and fail to improve their plant efficiencies through investments for fear of lower profit margins. The pressure has also been growing on Coke and Pepsi to be more responsive to changing market conditions and greater control over bottling operations will enable the companies to become more efficient at responding to evolving market circumstances.

Coke’s vision is to become the world’s leading NARDT company. The company’s mission is to make NARDT affordable and accessible to everyone. The company’s long-term objective is to build a leading position in still beverages such as sports drinks and juices as well because they are expected to gain market share at the expense of sparkling drinks due to health concerns and changing consumption patterns. Coke’s management realizes that it needs greater control over bottlers which is why it acquired CCE. The management’s plan is to improve capacity utilization at bottling plants, reduce the complexity of supply chain network in order to improve negotiation power with distributors, and allocate more resources to still beverages.

While Coke’s management believes in integrating bottling into existing operating to increase efficiency, profit margins, and responsiveness to changing market conditions, the management also wants to understand individual markets better. This is why some management officials want to maintain relations with some of the independent bottlers because they believe it will become difficult for the company to monitor all of its markets as well as local franchise bottlers. Coke may be a global company, it is shifting greater management focus on North American operations while transferring some control of global operations to franchise bottlers. This is because personal per capita expenditure is expected to be the highest in the U.S. at $34,000 by 2020.

Coke’s current portfolio is well balanced because most of its products compete in the NARDT market and allow Coke to offer several options to its targeted market segments. Some of the consumers are switching to still beverages but sparkling drinks still contribute the most to the company’s bottom-line profitability due to volume advantage even though their profit margins are lower than still beverages. Coke’s current product portfolio ensures that even if some consumers switch to still beverages, they may still find numerous options in Coke’s product line. There are signs that the strategy has been working because CCE acquisition has already generated savings of $150 million in 2011 alone. In addition, Coke was struggling in Philadelphia but Coke has not only turnedPhiladelphia into a profitable market but has also taken over Pepsi’s lead in sparkling drinks.

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