EXECUTIVE SUMMARY

Coca- Cola: a Soft drink which is not only refreshment, but an American symbol.

Coca-Cola has grown to one of the world’s biggest and most successful companies.

Such a success could only be achieved by a strong and outstanding Marketing

Management. Coca - Cola connects with its audience and customers in a way that
other companies don’t do.

This report provides information about Coca-Cola’s Marketing Strategy and analyzes
its communication, product and price policy.

THE COMPANY'S HISTORY AND BIRTH OF COCA-COLA

In May, 1886, Coca Cola was invented by Doctor John Pemberton a pharmacist from
Atlanta, Georgia. The name was a suggestion given by John Pemberton's bookkeeper
Frank Robinson. Being a bookkeeper, Frank Robinson also had excellent penmanship.
He was first who scripted "Coca Cola" into the flowing letters which has become the
famous logo of today.

The soft drink was first sold to the public at the soda fountain in Jacob's Pharmacy in
Atlanta on May 8, 1886. About nine servings of the soft drink were sold each day.
Sales for that first year added up to a total of about $50.

Until 1905, the soft drink, marketed as a tonic, contained extracts of cocaine as well
as the caffeine-rich kola nut.

In 1887, another Atlanta pharmacist and businessman, Asa Candler bought the
formula for Coca Cola from inventor John Pemberton for $2,300. By the late 1890s,
Coca Cola was one of America's most popular fountain drinks, mainly due to
Candler's aggressive marketing of the product. With Asa Candler, now at the helm,
the Coca Cola Company increased syrup sales by over 4000% between 1890 and
1900.

Advertising was an important factor in John Pemberton and Asa Candler's success
and by the turn of the century, the drink was sold across the United States and
Canada. Around the same time, the company began selling syrup to independent
bottling companies licensed to sell the drink. Even today, the US soft drink industry is
organized on this principle.

Today, products of the Coca Cola Company are consumed at the rate of more than
one billion drinks per day.[1]

“Coca-Cola’s mission is to

- Refresh the world...

- Inspire moments of optimism
- Create value and make a difference
[The company’s] vision serves as the framework for our Roadmap and guides every
aspect of our business by describing what we need to accomplish in order to continue
achieving sustainable, quality growth.

- People: Be a great place to work where people are inspired to be the best they can
be.
- Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate
and satisfy people's desires and needs.
- Partners: Nurture a winning network of customers and suppliers, together we create
mutual, enduring value.
- Planet: Be a responsible citizen that makes a difference by helping build and support
sustainable communities.
- Profit: Maximize long-term return to shareowners while being mindful of our overall
responsibilities.
- Productivity: Be a highly effective, lean and fast-moving organization.”[2]

COCA-COLA'S MARKETING STRATEGY

A Marketing Strategy consists of many elements, which are connected and correlate
with each other and integrate a company’s marketing goals. Coca-Cola is a prime
example for successful Marketing building up a brand that is known and liked all over
the world. The basis of a strong Marketing Strategy consists of a proper analysis
researching all relevant factors.

MARKET SEGMENTATION

A Market Segment defines a group of consumers who share the same or a similar set
of needs and wants. As a company you have to find out who your customers are in
order to target them equitable. Following you can see Coca-Cola’s relevant market
segments.

MASS MARKETING VS. TARGETED MARKETING

Coca-Cola takes every customer as a target, however its segmentation is mainly based
on “age, family size and income.”[3] The perfect segmentation was a main factor for
Coca-Cola’s success.

Age is one of the most important segments of Coca-Cola deviding it mainly into two
parts: Coca-Cola mainly addresses its product to a young customer base aged between
10-35.

That is why they often use well-known pop stars to promote their product. Also, the
company targets universities, schools, Colleges etc. in acquiring contracts.

However, the coca-Cola diet products also addresses an elderly segment considering
people with diabetic who are often 40 plus.[4]

Income is another important factor: the company offers its product in many different
sizes and packages at different price levels making it affordable also for students,
families, middle-class etc. This segment is also connected to family size, because of
the variation in bottle size and packaging.

GEOGRAPHICAL SEGMENTATION

The company sells its products in more than 200 countries. However, they pursue a
different strategy depending on the region, because the needs of potential customer
differ from each other due to climate, income, culture or custom.

An example would be America and China: In America the products of Coca-Cola

almost reached maturity level, whereas in China there is a high growth potential, but
the needs and habits differ.

In Asia people are more used to drink tea instead of soft drinks. Also, the Marketing
Channels, the advertisement, looks and taste of the drink can be totally different
adapting to people’s diverse tastes.

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Coca-Cola China - www.forbes.com

GENDER

In general, Coca-Cola targets both men and female, however there are some
differences in taste and preferences.

Coca-Cola light for example is quite popular among girls and women, whereas Coke
Zero and Thums up (available in India) has a stronger taste and is mainly preferred by
men.

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This, you could see in the Design and in the commercials: The etiquette for Coke Zero
is in black and red and looks more masculine as Cola Light’s. Also the message in the
advertising differs: Coke Light shows a handsome man how he should fuse women’s
hearts. Whereas in the Coke Zero commercial appears a young man who abseils out
the window and impresses a young girl being so brave.[5]

PEST-ANALYSIS

The PEST-Analysis deals with Political, Economic, Social and Technological factors
that influence a company’s strategy in its environment in which it operates and
identifies its changes.

POLITICAL FACTORS

Non-alcoholic beverages in the U.S. are controlled by the FDA, the Food and Drug
Administration. That includes that the government has control over the production
procedure of these products.[6] Changes in Law and Regulations also have a very
strong influence as they also affect for example tax rate changes etc.

The number of regulations increased in the last few years in the US due to the higher
desire for healthy food consumption. Moreover, many schools and universities banned
the unhealthy carbonated soft drinks on their campuses.

Coca-Cola’s production is also influenced by the different government systems: here,

the question arises whether it is liberal or has strict regulations influencing the
production or employment of the company.

Big companies like Coca-Cola often practice lobbying: A few years ago a debate
arised about a traffic signal system in the food industry in Europe. Healthy products
would get a green light, fat and unhealthy ones a red light. Coca-Cola and some other
big companies wanted to advert this project and started lobbying - successfully.[7]

Political stability in different countries plays a very important role regarding the
relocation of capital across borders. Coca-Cola as a huge employer has to mind the
distinct Employment laws in the different nations.

Environmental regulations and trade restrictions and tariffs are other crucial Political
Factors Coca-Cola has to conform to.

ECONOMIC FACTORS

Consider Economic growth, Interest rates, Exchange rates and Inflation rate. Low
interest and exchange rates for example attract manufacturers like Coca-Cola
advancing borrowing money and investing, whereas a high inflation rate alienates it to
invest and produce in a country. It also has an influence on Coca-Cola’s research on
new products and technology affecting its cost effectiveness.

Another point is the market in which Coca-Cola operates in: Is it strong or is there lots
of room for improvement. Moreover, wages influence the company’s production
costs: In countries like the UK they are quite high, whereas in Asian countries the
salaries are low.

Also, the US market is one of the most important markets for the company. However,
in recent years, “decreased consumer spending in Coke's large North American
market compounds the challenge of rising costs and a weak economic environment.
[8] ”

SOCIAL FACTORS

The growing importance of Health Consciousness affected Coca-Cola’s product

portfolio by offering drinks tailored to the new customer needs, such as Diet Coke.

Moreover, the whole Non-alcohol market has increased as many people switched over
from beer or other alcoholic beverages and it definitely will increase further.
The population growth rate has also a strong influence on the market as it differs
strongly between countries. The company has to adapt its production to it and
consider it in their strategy and further planning.

Age distribution plays also an important role: as it was discussed earlier, Coca-Cola
mainly concentrates on the young generation. So a country with a young population
would be a more interesting market for the company than a country dominated by an
elderly generation.

Income distribution and career attitudes are other factors that influence Coca-Cola’s
decision making processes.

Furthermore, Coca-Cola is an iconic American product: so in some countries the sales

volume depends on how open the people are towards America or American products.

TECHNOLOGY

Some advances in technology have pushed Coca-Cola’s sales volume tremendously,

for example the introduction of cans and plastic bottles in the past. Now, people could
carry and bin them. Advancement in communication technologies like television or
the Internet had a significant influence on Coca-Cola’s communication policy and
Marketing strategy.

Advances in media help the company make their product attractive to the customer
continuously supporting Coca-Cola’s promotion activities.

However, it is important always to be aware of changes: what worked out a few years
ago, may be wrong in the present. For example: Coca-Cola had a tremendous success
with its TV commercials in the 90s. Now, the Internet is displacing it more and more.
That requires a new strategy in its communication and Marketing.

The improvement in production machineries increased the sales volume of Coca-

Cola. Also R&D activity always plays a crucial role in the effectiveness of
production.

CCE (Coca Cola Enterprises) has six modem factories in Britain using the latest
technology in order to ensure the best possible quality standard and quick delivery.
“High-tech machinery at Wakefield enables cans to be produced faster than the eye
can see [and] CCE Wakefield boasts the fastest 2l bottle production line in the
world.”[9]

In autumn 2011 Coca-Cola opened a new and modern production facility in the
Rostov region in Russia supplying the upcoming 2014 Winter Olympics in Sochi.[10]

PORTER'S FIVE FORCES

Michael Porter introduced a model that defines five forces that influence an industry.
It’s a strategic business tool to analyze your competitive environment and it improves
the understanding of your business and the industry context in which a company
operates in. According to Porter, the five forces are the threat of new entrants, threat
of substitutes, supplier power, rivalry and buyer power.

THE THREAT OF NEW ENTRANTS

In the soft drink industry huge amounts of money are spent for advertising and
marketing campaigns. As a result, that makes it very hard for a new entrant to
compete in this market. Moreover, because of this continuous investment Coca-Cola -
and also Pepsi- have very loyal customer base and high brand equity.

Also, the margins for retailers are quite high; therefore many retailers don’t want to
carry a new product.[11] Coca-Cola has many exclusive contracts with distributors that
forbid them to sell similar products. All in all, it is hard to get in this market as a new
entrant.

RIVALRY

As the threat of new entrants is quite low in this specific industry, the rivalry between
the two existing companies Coca-Cola and PepsiCo is even higher. Here, you can
identify a Duopoly.

“Usually, a duopoly trying to maximize profits will produce more than a monopolist
but less than a competitive industry.”[12] The two big players have the majority of the
market share.

THE THREAT OF SUBSTITUTES

There is quite a large number of substitutes for the soft drink-market like Water,
Smoothies, Coffee, tea etc. However, none of these producers had spent such a strong
effort in advertising making their product as popular as Coca-Cola is. Moreover, there
are often not as accessible as Coca-Cola’s drinks are having a huge distribution
network almost everywhere.

The switching costs on the other hand are very low for the customer, so it would be
easy for the customer to turn to the new product. Also, the value in the Soft drink
Industry is low because many products are comparable and differ mainly in their
promotional activities. Coca-Cola as an iconic brand stands out.

BARGAINING POWER OF BUYERS

There are five main channels through which Coca-Cola sells its product to the
customer: food stores, convenience and gas, fountain, vending and mass
merchandisers.[13] Supermarkets have a little control over the soft drink profitability
due to the power of control over the premium shelf spaces.

But mass supermarket chains such as Wal-Mart have quite a high bargaining power
because they serve both Coca-Cola and Pepsi, so they could negotiate effectively.
Therefore, they mass merchandise channel is not very profitable for Coca-Cola.

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www.lesen.net

Fountain sales were the least profitable ones; the company also called it “paid
sampling”.[14] The reason for this was because buyers at large fast food chains only
needed the product of one single manufacturer, therefore they had a great negotiation
power.

However, Coca-Cola regarded it as an important channel to communicate with their

customers. Vending machines are very profitable for the company because there are
no buyers to bargain with. The property owner got a commission on the sold drinks
and prices remained high.

In summary, the threat of the buyers is quite low: the customers have a very strong
brand loyalty and will continue to purchase the product.

THE BARGAINING POWER OF SUPPLIERS

Because of the simple ingredients and their easy availability the suppliers don’t have a
strong bargaining power. Coca-Cola can simply switch over to another one as the
switching costs are low.

Moreover the supplier depend on such huge Soft Drink producers like Coca-Cola
because they order and produce in large amounts.

SWOT-ANALYSIS

The SWOT-analysis is a framework of a company’s strengths, weaknesses,

opportunities and threats. The strengths and weakness deal with internal issues,
whereas the opportunities and threats are applied to external factors.

STRENGTHS

One of the most important strengths of Coca-Cola is definitely its brand name as a
draft horse. The company has existed for a long time continuously developing and
improving its relationship to the customer and became the best known brand name in
the world.

Coca-Cola’s outstanding Marketing strategy brought the company to its success and
created a very strong brand awareness. Using famous singers or actors as their
producers they influenced people through the whole country and in the world. Also,
the songs, slogans, advertisement and TV spots became very popular throughout the
population. Moreover, Coca-Cola influenced the modern image of Santa Claus
making Christmas commercials every year, bonding even more to the customer.

With its secret formula Coca-Cola has created a unique taste McDonald’s which so
far couldn’t be copied. The company uses this also as a Marketing tool by
communicating to their customers that only they have the real Coke.
As a big player Coca-Cola has many exclusive contracts with big restaurants like
McDonalds; so it’s connected with it and even more people buy the product. www.
popsop. com

Also, they often cooperate with McDonalds regarding their promotion activities, as
for example the typical Coca Cola glasses that you could get ordering a special meal.

An important strength of Coca-Cola is that it is developing continuously; there is no

downtime. They improve their production facilities, use new strategies and introduce
new products to the market like Coffee (“Café Zu”).[15]

Moreover, with their high number of different products they have the ability to attract
many different customers in the 200 countries they operate in meeting their diverse
tastes.

Being such a big company, Coca-Cola has the possibility to operate in large scale.

WEAKNESSES

Coca-Cola’s products aren’t healthy. As a result people may be alienated by that and
avoid to buy the product, especially for their kids. That is why many products have
already been banned from the campuses. People’s desire for healthy food
consumption will rise even more, so Coca-Cola has to adapt to this new development
even faster.

Being an iconic American company it may cause problems in some countries as

people refuse to purchase the products due to America’s image in the world.

Coca-Cola had to face some negative publicity in the past. The center of science and
environment (CSE) of India accused the company for using pesticide residue in the
products that they sell in India. It can cause cancer, damage nervous system and
reduce bone minerals.

OPPORTUNITIES

There is high potential for the company to introduce more healthy drinks since people
pay more attention to that. Being the biggest producer in the Soft Drinks Industry
people like the brand and would probably purchase the product.

In the last few years the company has grown even more through Acquisitions. The
company acquired the controlling shares of Kerry Beverages (KBL), one of its joint
venture with Kerry group during 2006 in Hong Kong. This strategy strengthens the
company’s operations internationally.