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PROJECT REPORT ON COCA-COLA COMPANY
SUBMITTED BY: • • • • • • MUTHU KUMARAN (94) NIDA MAJEED (103) RAGHAV KUMAR (125) RAHUL KALIA (126) RAHUL NAGPAL (127) SIMRAN KAUR PAHUJA (192)
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
SU BMITTED TO: DR . KARTIK DAVE
EXECUTIVE SUMMARY - PAGE 2 CHAPTER 1 - PAGE 4-6 CHAPTER 2 - PAGE 7-11 CHAPTER 3 - PAGE 12-63
INTRODUCTION INDUSTRY PROFILE COMPANY PROFILE
COCA-COLA COMPANY - PAGE 13-17 GLOBAL MARKET SHARE OF COCA-COLA - PAGE 17-18 TRENDS AND FORCES - PAGE 19-22 POTER’S FIVE FORCES - PAGE 22-29
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
PESTLE ANALYSIS - PAGE 29-33 SWOT ANALYSIS - PAGE 33-40 COCA-COLA INDIA - PAGE 41-42 PRODUCTS IN INDIA - PAGE 42-46 MARKETING MIX - PAGE 49-58 PESTLE ANALYSIS - PAGE 58-62 SWOT ANALYSIS - PAGE 60-62 RESEARCH METHODOLOGY DATA ANALYSIS SUGGESTIONS AND CONCLUSION
CHAPTER 4 - PAGE 63-68 CHAPTER 5 - PAGE 69-79 CHAPTER 6 - PAGE 80-82 BIBLIOGRAPHY - PAGE 83 ANNEXURE - PAGE 84-85
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
This report has been prepared with a specific purpose in mind. It outlines the history and current scenario of the Coca-Cola Company globally and locally. The first part of the study takes us through the present state of affairs of the beverage industry and Coca-Cola Company globally. The report contains a brief introduction of Coca Cola Company and Coca-Cola India and a detailed view of the tasks, which have been undertaken to analyze the market of Coca-Cola i.e. we have performed Competitive, PESTLE and SWOT analysis of Coca-Cola Company and PESTLE and SWOT analysis of Coca-Cola India in order to identify areas of potential growth for Coca-Cola. We have also given a brief description of Trends and Forces that are affecting Coca-Cola Company globally. The main objective of this project report is to analyze and study in efficient way the current position of Coca- Cola Company. The study also aims to perform Market Analysis of Coca-Cola Company & find out different factors effecting the growth of Coca-Cola. Another objective of the study was to perform Competitive analysis between Coca-Cola and its competitors. Apart from these
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
objectives this study is also conducted to understand the Customer preferences towards various Coca-Cola products.
Let reason go before every enterprise, And counsel before every action Research is a human activity based on intellectual investigation and is aimed at discovering, interpreting, and revising human knowledge on different aspects of the world.
MARKETING RESEARCH:Marketing research is the function that links the consumer, customer and public to the marketer through information used to identify and define marketing
opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Marketing research specifies the information required to address these issues, designs the methods for collecting information, manages and implements the data collection process, analyzes and communicates the findings and their implications. -American Marketing Association Marketing research is about researching the whole company’s marketing process. -Palmer (2000)
INTRODUCTION TO COCA-COLA
Coca-Cola, the product that has given the world its best-known taste was born in Atlanta, Georgia, on May 8, 1886. Coca-Cola Company is the world’s leading manufacturer, marketer and distributor of non-alcoholic beverage concentrates and syrups, used to produce nearly 400 beverage brands. It sells beverage concentrates and syrups to bottling and canning operators, distributors, fountain retailers and fountain wholesalers. The Company’s beverage products comprises of bottled and canned soft drinks as well as concentrates, syrups and notready-to-drink powder products. In addition to this, it also produces and markets sports drinks, tea and coffee. The Coca- Cola Company began building its global network in the 1920s. Now operating in more than 200 countries and producing nearly 400 brands, the
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Coca-Cola system has successfully applied a simple formula on a global scale: “Provide a moment of refreshment for a small amount of money- a billion times a day.”
The Coca-Cola Company and its network of bottlers comprise the most sophisticated and pervasive production and distribution system in the world. More than anything, that system is dedicated to people working long and hard to sell the products manufactured by the Company. This unique worldwide system has made The Coca-Cola Company the world’s premier soft-drink enterprise. From Boston to Beijing, from Montreal to Moscow, CocaCola, more than any other consumer product, has brought pleasure to thirsty consumers around the globe. For more than 115 years, Coca-Cola has created a special moment of pleasure for hundreds of millions of people every day. The Company aims at increasing shareowner value over time. It accomplishes this by working with its business partners to deliver satisfaction and value to consumers through a worldwide system of superior brands and services, thus increasing brand equity on a global basis. They aim at managing their business well with people who are strongly committed to the Company values and culture and providing an appropriately controlled environment, to meet business goals and objectives. The associates of this Company jointly take responsibility to ensure compliance with the framework of policies and protect the Company’s assets and resources whilst limiting business risks.
2. INDUSTRY PROFILE
A BRIEF INSIGHT - THE FMCG INDUSTRY IN INDIA
Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods (CPG) are products that have a quick turnover and relatively low cost. Consumers generally put less thought into the purchase of FMCG than they do for other products.
The Indian FMCG industry witnessed significant changes through the 1990s. Many players had been facing severe problems on account of increased competition from small and regional players and from slow growth across its various product categories. As a result, most of the companies were forced to revamp their product, marketing, distribution and customer service strategies to strengthen their position in the market.
By the turn of the 20th century, the face of the Indian FMCG industry had changed significantly. With the liberalization and growth of the Indian economy, the Indian customer witnessed an increasing exposure to new domestic and foreign products through different
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” media, such as television and the Internet. Apart from this, social changes such as increase in the number of nuclear families and the growing number of working couples resulting in increased spending power also contributed to the increase in the Indian consumers' personal consumption. The realization of the customer's growing awareness and the need to meet changing requirements and preferences on account of changing lifestyles required the FMCG producing companies to formulate customer-centric strategies. These changes had a positive impact, leading to the rapid growth in the FMCG industry. Increased availability of retail space, rapid urbanization, and qualified manpower also boosted the growth of the organized retailing sector.
HLL led the way in revolutionizing the product, market, distribution and service formats of the FMCG industry by focusing on rural markets, direct distribution, creating new product, distribution and service formats. The FMCG sector also received a boost by government led initiatives in the 2003 budget such as the setting up of excise free zones in various parts of the country that witnessed firms moving away from outsourcing to manufacturing by investing in the zones. Though the absolute profit made on FMCG products is relatively small, they generally sell in large numbers and so the cumulative profit on such products can be large. Unlike some industries, such as automobiles, computers, and airlines, FMCG does not suffer from mass layoffs every time the economy starts to dip. A person may put off buying a car but he will not put off having his dinner.
Unlike other economy sectors, FMCG share float in a steady manner irrespective of global market dip, because they generally satisfy rather fundamental, as opposed to luxurious needs. The FMCG sector, which is growing at the rate of 9% is the fourth largest sector in the Indian Economy and is worth Rs.93000 cr. The main contributor, making up 32% of the sector, is the South Indian region. It is predicted that in the year 2010, the FMCG sector will
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” be worth Rs.143000 cr. The sector being one of the biggest sectors of the Indian Economy provides up to 4 million jobs. (Source: HCCBPL, Monthly Circular)
A BRIEF INSIGHT - BEVERAGE INDUSTRY IN INDIA
In India, beverages form an important part of the lives of people. It is an industry, in which the players constantly innovate, in order to come up with better products to gain more consumers and satisfy the existing consumers.
Fig 2.0 BEVERAGES IN INDIA The beverage industry is vast and there various ways of segmenting it, so as to cater the right product to the right person. The different ways of segmenting it are as follows: Alcoholic, non-alcoholic and sports beverages. Natural and Synthetic beverages. In-home consumption and out of home on premises consumption. Age wise segmentation i.e. beverages for kids, for adults and for senior citizens. Segmentation based on the amount of consumption i.e. high levels of consumption and low levels of consumption.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” If the behavioural patterns of consumers in India are closely noticed, it could be observed that consumers perceive beverages in two different ways i.e. beverages are a luxury and that beverages have to be consumed occasionally. These two perceptions are the biggest challenges faced by the beverage industry. In order to leverage the beverage industry, it is important to address this issue so as to encourage regular consumption as well as and to make the industry more affordable. Four strong strategic elements to increase consumption of the products of the beverage industry in India are: The quality and the consistency of beverages needs to be enhanced so that consumers are satisfied and they enjoy consuming beverages. The credibility and trust needs to be built so that there is a very strong and safe feeling that the consumers have while consuming the beverages. Consumer education is a must to bring out benefits of beverage consumption whether in terms of health, taste, relaxation, stimulation, refreshment, well-being or prestige relevant to the category. Communication should be relevant and trendy so that consumers are able to find an appeal to go out, purchase and consume. The beverage market has still to achieve greater penetration and also a wider spread of distribution. It is important to look at the entire beverage market, as a big opportunity, for brand and sales growth in turn to add up to the overall growth of the food and beverage industry in the economy.
3. COMPANY PROFILE
Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions. To refresh the world... To inspire moments of optimism and happiness... To create value and make a difference.
Our vision serves as the framework for our Roadmap and guides every aspect of our business
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” 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
Profit: Maximize long-term return to shareowners while being mindful of our overall
Productivity: Be a highly effective, lean and fast-moving organization.
Our Winning Culture defines the attitudes and behaviours that will be required of us to make our 2020 Vision a reality.
LIVE OUR VALUES :
Our values serve as a compass for our actions and describe how we behave in the world.
Leadership: The courage to shape a better future. Collaboration: Leverage collective genius. Integrity: Be real. Accountability: If it is to be, it's up to me. Passion: Committed in heart and mind. Diversity: As inclusive as our brands. Quality: What we do, we do well.
FOCUS ON THE MARKET:
Focus on needs of our consumers, customers and franchise partners. Get out into the market and listen, observe and learn. Possess a world view.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
Focus on execution in the marketplace every day. Be insatiably curious.
Act with urgency. Remain responsive to change. Have the courage to change course when needed. Remain constructively discontent. Work efficiently.
ACT LIKE OWNERS:
Be accountable for our actions and inactions. Steward system assets and focus on building value. Reward our people for taking risks and finding better ways to solve problems. Learn from our outcomes -- what worked and what didn’t.
BE THE BRAND:
Inspire creativity, passion, optimism and fun.
HISTORY OF COCA-COLA
The prototype Coca-Cola recipe was formulated at the Eagle Drug and Chemical Company, a drugstore in Columbus, Georgia by John Pemberton, originally as a coca wine called Pemberton's French Wine Coca. He may have been inspired by the formidable success of Vin Mariani, a European cocawine. In 1886, when Atlanta and Fulton County passed prohibition legislation, Pemberton responded by developing Coca-Cola, essentially a non-alcoholic version of French Wine Coca. The first sales were at Jacob's Pharmacy in Atlanta, Georgia, on May 8, 1886. It was initially sold as a patent medicine for five cents a glass at soda fountains, which were popular in the United States at the time due to the belief that carbonated water was good for the
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” health. Pemberton claimed Coca-Cola cured many diseases, including morphine addiction, dyspepsia, neurasthenia, headache, and impotence. Pemberton ran the first advertisement for the beverage on May 29 of the same year in the Atlanta Journal. By 1888, three versions of Coca-Cola — sold by three separate businesses — were on the market. Asa Griggs Candler acquired a stake in Pemberton's company in 1887 and incorporated it as the Coca Cola Company in 1888. The same year, while suffering from an ongoing addiction to morphine, Pemberton sold the rights a second time to four more businessmen: J.C. Mayfield, A.O. Murphey, C.O. Mullahy and E.H. Bloodworth. Meanwhile, Pemberton's alcoholic son Charley Pemberton began selling his own version of the product.
John Pemberton declared that the name "Coca-Cola" belonged to Charley, but the other two manufacturers could continue to use the formula. So, in the summer of 1888, Candler sold his beverage under the names Yum Yum and Koke. After both failed to catch on, Candler set out to establish a legal claim to Coca-Cola in late 1888, in order to force his two competitors out of the business. Candler purchased exclusive rights to the formula from John Pemberton, Margaret Dozier and Woolfolk Walker. However, in 1914, Dozier came forward to claim her signature on the bill of sale had been forged, and subsequent analysis has indicated John Pemberton's signature was most likely a forgery as well. In 1892 Candler incorporated a second company, The Coca-Cola Company (the current corporation), and in 1910 Candler had the earliest records of the company burned, further obscuring its legal origins. By the time of its 50th anniversary, the drink had reached the status of a national icon in the USA. In 1935, it was certified kosher by Rabbi Tobias Geffen, after the company made minor changes in the sourcing of some ingredients. Coca-Cola was sold in bottles for the first time on March 12, 1894. The first outdoor wall advertisement was painted in the same year as well in Cartersville, Georgia. Cans of Coke first appeared in 1955. The first bottling of Coca-Cola occurred in Vicksburg, Mississippi, at the Biedenharn Candy Company in 1891. Its proprietor was Joseph A. Biedenharn. The
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” original bottles were Biedenharn bottles, very different from the much later hobble-skirt design that is now so familiar. Asa Candler was tentative about bottling the drink, but two entrepreneurs from Chattanooga, Tennessee, Benjamin F. Thomas and Joseph B. Whitehead, proposed the idea and were so persuasive that Candler signed a contract giving them control of the procedure for only one dollar. Candler never collected his dollar, but in 1899 Chattanooga became the site of the first Coca-Cola bottling company. The loosely termed contract proved to be problematic for the company for decades to come. Legal matters were not helped by the decision of the bottlers to subcontract to other companies, effectively becoming parent bottlers. Coke concentrate, or Coke syrup, was and is sold separately at pharmacies in small quantities, as an over-the-counter remedy for nausea or mildly upset stomach.
On April 23, 1985, Coca-Cola, amid much publicity, attempted to change the formula of the drink with "New Coke". Follow-up taste tests revealed that most consumers preferred the taste of New Coke to both Coke and Pepsi, but Coca-Cola management was unprepared for the public's nostalgia for the old drink, leading to a backlash. The company gave in to protests and returned to a variation of the old formula, under the name Coca-Cola Classic on July 10, 1985. On February 7, 2005, the Coca-Cola Company announced that in the second quarter of 2005 they planned to launch a Diet Coke product sweetened with the artificial sweetener sucralose, the same sweetener currently used in Pepsi One. On March 21, 2005, it announced another diet product, Coca-Cola Zero, sweetened partly with a blend of aspartame and acesulfame potassium. In 2007, Coca-Cola began to sell a new "healthy soda": Diet Coke with vitamins B6, B12, magnesium, niacin, and zinc, marketed as "Diet Coke Plus”. On July 5, 2005, it was revealed that Coca-Cola would resume operations in Iraq for the first time since the Arab League boycotted the company in 1968. In April 2007, in Canada, the name "Coca-Cola Classic" was changed back to "Coca-Cola."
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” The word "Classic" was truncated because "New Coke" was no longer in production, eliminating the need to differentiate between the two. The formula remained unchanged. In January 2009, Coca-Cola stopped printing the word "Classic" on the labels of 16-ounce bottles sold in parts of the southeastern United States. The change is part of a larger strategy to rejuvenate the product's image. In November 2009, due to a dispute over wholesale prices of Coca-Cola products, Costco stopped restocking its shelves with Coke and Diet Coke.
GLOBAL MARKET SHARE OF COCA-COLA
In 2009, the company generated revenues of $31 billion with $6.8 billion net income. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks (abbreviated as CSD), which constitutes 78% of KO’s sales. KO’s profits are also vulnerable to the volatile costs for the raw materials used to make drinks - such as the corn syrup used as a sweetener, the aluminium used in cans, and the plastic used in bottles. Furthermore, slowing consumer spending in Coke's large North American market compounds the challenge of increasing costs and a weak economic environment. Finally, Coca-Cola earns approximately 75% of revenue from international sales, exposing it to currency fluctuations, which are particularly adverse with a stronger U.S. Dollar (USD). Despite these challenges, Coca-Cola has remained profitable. Though the non-CSD market is growing quickly, the traditional CSD market is still large in terms of both revenues and volume and highly lucrative. The size and variety of KO’s offerings in the CSD category, coupled with the unparalleled brand equity of the Coca-Cola trademark, has allowed KO to maintain its share of this important market. KO has also responded to consumers’ changing tastes with new, non-CSD product launches and acquisitions such as that of Glaceau in 2007. Strong international growth has also more than offset a weak domestic market. On February 25, Coca-Cola Company announced its plan to buy Coca-Cola Enterprises (CCE) for $12.3 million. Since spinning of Coca-Cola Enterprises (CCE) 24 years ago, the soft drink market has changed dramatically with consumers buying fewer soft drinks and more non-carbonated beverages, such as Powerade and Dasani water. Under the new deal,
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Coca-Cola Company will take control of the bottler's North America operations, giving the company control over 90% of the total North America volume. In return, Coca-Cola Enterprises will take over Coke's bottling operations in Norway and Sweden, becoming a European-focused producer and distributor. In March 2010, Coca-Cola Company entered into discussions to buy the Russian juice company, OAO Nidan Juices. The company is 75% owned by a private equity firm in London and 25% by its Russian founders and controls 14.5% of the Russian juice market. If successful, the purchase would add to Coca-Cola's 20.5% market share, passing Pepsi's 30% market share. The Russian juice market is estimated to be $3.2 billion dollars, and estimates of Nidan's purchase price are between $560-$620 million. In April 2010, Coca-Cola Company purchased a majority share of Innocent, the British fruit smoothie maker. Last year the company bought an 18% share of the company for more than $45 million, and recent purchases of additional shares increased Coke's stake to 58%. In June 2010, Coca-Cola Company agreed to pay Dr Pepper Snapple Group (DPS) $715 million for the continued right to sell their products following the company's acquisition of Coca-Cola Enterprises (CCE). The deal covers the next 20 years with an option to renew for an additional 20 years.
TRENDS AND FORCES
The Global Economic Recession Threatens Overall Demand:
In 2008 and 2009, the global economy has fallen into a recession. Not just the United States but countries from all over the world have felt the impacts of the 2008 Financial Crisis. This may be a problem for Coke, which derives approximately 75% of its sales from outside North America. Still, the company has positioned itself well in international markets both organically and through acquisitions, such as that of Chinese juice maker Huiyuan for $2.4 billion. However the company was unsuccessful with its purchase of Huiyuan as it broke
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” antitrust laws in China. On March 5, 2010, Coke's CEO said that emerging markets are bouncing back quicker than more developed markets.
New Aversion to Soda Threatens Main Business:
74% of the Coca Cola Company's products are classified as carbonated soft drinks, making it particularly sensitive to changes in demand for CSD. Consumer demand for CSD has been negatively affected by concerns about health and wellness. This is true across most of KO's markets. There has been an increase in the number of regulations regarding CSD in the United States in response to the heightened desire for healthy food consumption. In 2006, many state public school systems banned the sale of soft drinks on their campuses. The Centre for Science and Public Interest proposed that a warning label be placed on all beverages containing more than 13g of sugar per 12-oz serving. This proposal would affect all non-diet, full calorie drinks produced by KO. These factors have driven a shift in consumption away from CSD to healthier alternatives, such as tea, juices, and water. Within the CSD segment consumers have been moving away from sugared drinks, opting instead for diet beverages, which do not generally contain any sugar or calories. Though KO has been somewhat slow to respond to this shift in consumer preferences, it has recently begun to increase its development of both diet CSD and non-CSD beverages. KO is faced with the task of balancing the risk of new innovations with the low growth rates of established brands, a predicament for manufactures throughout the beverage industry.
Integrated Bottler Strategy Increases Flexibility:
After CEO Neville Isdell was brought out of retirement in 2004 to revive the then flagging beverage maker, one of the first areas that he targeted for improvement was KO's frayed relations with its extensive network of bottlers. Since consolidating all company-owned bottlers into the Bottling Investments division, Isdell has continued to increase KO's interest in its bottlers through stake purchases or outright buyouts. This strategy represents a
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” weakening of the division between KO's production and distribution operations. Isdell believes that by combining production and distribution operations the company will have enhanced its ability to quickly respond to changing market conditions. In KO's 2007 Q3 Analyst call, Isdell credited the outright purchase of Coca-Cola Bottlers Philippines (CCBPI) for double-digit volume growth in that country. Additionally, KO has signed new agreements with many of its bottlers which allow them to distribute drinks produced by other companies. For example, Coca-Cola Enterprises (CCE) now distributes Arizona, a ready-to-drink tea made by Ferolito, Vultaggio & Sons, an American iced-tea company. Isdell sees these agreements as another way of taking advantage of the rapidly growing non-CSD market.
Bottled Water Falling Out of Favour:
In Q3 2009, Dasani bottled water's revenues fell by double digits; this decrease is emblematic of the bottled water industry as a whole. In August 2009, the Wall Street Journal reported that sales of bottled water had fallen for the first time in five years. The combination of the recession and upper class consumers' increased environmental consciousness has lead many customers to cut back on bottled water in favour of tap water and reusable containers. Follow ing this trend, at least one town in Washington state and one in Australia have outlawed the selling of bottled water within their city limits. In 2008, bottled water was the third most popular beverage (behind soda and milk), but compared to 2007, Americans consumption declined for the first time, down to 8.7 billion gallons from 8.8 billion gallons. Although this is a seemingly small decrease, industry experts don't expect bottled water to bounce back anytime soon.
Dollar Affects International Performance:
Another trend affecting Coca-Cola is the relative strength of the U.S. Dollar (USD). Although the company is based in the US, KO derives about 75% of its operating income from outside
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” United States. Because of this, the company is very sensitive to the strength of the dollar. As foreign currencies weaken relative to the dollar, goods sold in foreign markets are suddenly worth fewer dollars back in the US, lowering earnings. Thus, if the dollar strengthens (as it did in the second half of 2008 and 2009), it has a negative effect on KO's earnings. CocaCola executives expect currency fluctuations to adversely affect 3Q09 operating income by 10-12% and 4Q09 operating income by high single digits. KO has broad exposure to foreign currencies and actively hedges a large portion of these to avoid wide swings in earnings from currency fluctuations. Although this hedging insulates from the potential downside of a strengthening dollar, it also limits larger gains from drastic downswings in the dollar's value.
Commodity Cost Fluctuations Affect Margins:
The Coca-Cola Company’s profitability can be affected both directly and indirectly by the costs of various production inputs. KO itself is responsible for purchasing the raw materials used to make its concentrates and syrups. Variations in the prices for these goods can affect the company’s total cost of production as well as its profit margins. Changes in the production costs of bottlers can also impact KO’s profitability, though in a more indirect way. If the raw materials necessary for bottling become more expensive, the bottler may be forced to drastically raise prices to compensate. S uch a price increase would likely hurt KO, given the competitive nature of the non-alcoholic beverage industry, and provide a possible incentive for consumers to switch to other companies’ beverages. Aluminium, corn, and PET resin are three examples of such production goods used by bottlers that could have significant bearing on the Coca-Cola Company’s profit margins. In 2007, the prices of these commodities rose drastically with general commodities bubble and dramatically pressured margins. They receded in 2008, but the possibility of another
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” significant rise in Commodities represents a constant threat to profits.
POTER’S FIVE FORCES
RIVALRY AMONG EXISTING FIRMS:
The greatest competition that Coca-cola faces is from the rival sellers within the industry. Coca-Cola, Pepsi Co, and Cadbury Schweppes are among the largest competitors in this
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” industry, and they are all globally established which creates a great amount of competition. Aside from these major players, smaller companies such as Cott Corporation and National Beverage Company make up the remaining market share. All five of these companies make a portion of their profits outside of the United States. Though Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite), it had lower sales in 2005 than did PepsiCo (Murray, 2006c). However, CocaCola has higher sales in the global market than PepsiCo, PepsiCo is the main competitor for Coca-Cola and these two brands have been in a power struggle for years (Murray, 2006c). Coke has been more dominant with a 53% of market share as in 1999 compared to Pepsi with a market share of 21%.
According to Beverage Digest's 2008 report on carbonated soft drinks, PepsiCo's U.S. market share has increased to 30.8%, while the Coca-Cola Company's has decreased to 42.7% due to Pepsi marketing schemes still the higher large gap between the market share can be attributed to the fact that Coca-Cola took advantage of Pepsi entering the market late and has set up its bottler's and distribution network especially in developed markets. "The Coca-Cola Company" is the largest soft drink company in the world. Every year 800,000,000 servings of just "Coca-Cola" are sold in the United States alone. Bottling plants
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” with some exceptions are locally owned and operated by independent business people who are native to the nations in which they are located. Coca-Cola manufactures, distributes and markets non-alcoholic beverage concentrates and syrups, including fountain syrups. It supplies concentrates and beverage bases used to make the products and provides management assistance to help it's bottler's ensure the profitable growth of their business. This has put Pepsi at a significant disadvantage compared to US market. Overall, Coca-Cola continues to outsell Pepsi in almost all areas of the world. However, exceptions include India, Saudi Arabia and Pakistan. By most accounts, Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered, The Coca-Cola Company to turn over its secret formula for Coke and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1988, PepsiCo gained entry to India by creating a joint venture with the Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture marketed and sold Lehar Pepsi until 1991 when the use of foreign brands was allowed. PepsiCo bought out its partners and ended the joint venture in 1994. In 1993, The Coca-Cola Company returned in pursuance of India's Liberalization policy. In 2005, The Coca-Cola Company and PepsiCo together held 95% market share of soft-drink sales in India. Coca-Cola India's market share was 52.5%. In Russia, Pepsi initially had a larger market share than Coke but it was undercut once the Cold War ended. In 1972, Pepsi Co Company struck a barter agreement with the government of the Soviet Union, in which Pepsi Co was granted exportation and Western marketing rights to Stolichnaya vodka in exchange for importation and Soviet marketing of Pepsi-Cola. This exchange led to Pepsi-Cola being the first foreign product sanctioned for sale in the
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” U.S.S.R. Pepsi, as one of the first American products in the Soviet Union, became a symbol of that relationship and the Soviet policy. Brand name loyalty is another competitive pressure. The Brand Keys Customer Loyalty Leaders Survey (2004) shows the brands with the greatest customer loyalty in all industries. Diet Pepsi ranked 17th and Diet Coke ranked 36th as having the most loyal customers to their brands. The new competition between rival sellers is to create new varieties of soft drinks, such as vanilla and cherry, in order to increase sales and getting new customers.
Pepsi is however trying to counter this by competing more aggressively in the emerging economies where the dominance of Coke is not as pronounced, with the growth in emerging markets significantly expected to exceed the developed markets, rivalry in international market is going to be more pronounced. Pepsi advertisements often focused on celebrities, choosing Pepsi over Coke, supporting Pepsi's positioning as "The Choice of a New Generation." In 1975, Pepsi began showing people doing blind taste tests called Pepsi Challenge in which they preferred one product over the other. Pepsi started hiring more popular spokespersons to promote their products. In the late 1990s, Pepsi launched its most successful long-term strategy of the Cola Wars, Pepsi Stuff. Consumers were invited to "Drink Pepsi, Get Stuff" and collect Pepsi Points on billions of packages and cups. They could redeem the points for free Pepsi lifestyle merchandise. After researching and testing the program for over two years to ensure that it resonated with consumers, Pepsi launched Pepsi Stuff, which was an instant success. Tens of millions consumers participated. Pepsi outperformed Coke during the summer of the Atlanta Olympics, held at Coke's hometown where Coke was the lead sponsor for the Games. Due to its success, the program was expanded to include Mountain Dew into Pepsi's international markets worldwide. The company continued to run the program for many years, continually innovating with new features each year.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Coca-Cola and Pepsi engaged in a "cyber-war" with the re-introduction of Pepsi Stuff in 2005 & Coca-Cola retaliated with Coke Rewards. This cola war has now concluded, with Pepsi Stuff ending its services and Coke Rewards still offering prizes on their website. Both were loyalty programs that give away prizes and product to consumers after collecting bottle caps and 12 or 24 pack box tops, then submitting codes online for a certain number of points. However, Pepsi's online partnership with Amazon allowed consumers to buy various products with their "Pepsi Points", such as mp3 downloads. Both Coca-Cola and coke previously had a partnership with the iTunes Store.
POTENTIAL ENTRANTS: New entrants are not a strong competitive pressure for the soft drink industry. Coca-Cola and Pepsi Co dominate the industry with their strong brand name and great distribution channels. In addition, the soft-drink industry is fully saturated and growth is small. This makes it very difficult for new, unknown entrants to start competing against the existing firms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labour, and economies of scale. New entrants cannot compete in price without economies of scale. These high capital requirements and market saturation make it extremely difficult for companies to enter the soft drink industry therefore new entrants are not a strong competitive force. Capital requirements for producing, promoting, and establishing a new soft drink traditionally have been viewed as extremely high. According to industry experts, this makes the likelihood of potential entry by new players quite low, except perhaps in much localized situations that matter little to Coke or Pepsi. Yet, while this view may reflect conventional wisdom, some industry observers question whether a new time is coming, with 'new age' beverages selling to well-informed and health-informed and health-conscious consumers. This issue was beginning to grab the attention of both Coke and Pepsi in the summer of 1992, when they both were not able to explain a drop in their June 1992 sales.
Numerous beverages are available as substitutes for soft drinks. Citrus beverages and fruit juices are the more popular substitutes. Availability of shelf space in retail stores as well as advertising and promotion traditionally has had a significant effect on beverage purchasing behaviour. Overall total liquid consumption in the United States in 1991 included CocaCola's 10% share of all liquid consumption. “For years the story in the non-alcoholic sector centred on the power struggle between Coke and Pepsi. But as the pop fight has topped out, the industry's giants have begun relying on new product flavours and looking to noncarbonated beverages for growth.” Substitute products are those competitors that are not in the soft drink industry. Such substitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea, juices etc. Bottled water and sports drinks are increasingly popular with the trend to be a more health conscious consumer. There are progressively more varieties in the water and sports drinks that appeal to different consumer's tastes, but also appear healthier than soft drinks. In addition, coffee and tea are competitive substitutes because they provide caffeine. The consumers who purchase a lot of soft drinks may substitute coffee if they want to keep the caffeine and lose the sugar and carbonation. Blended coffees are also becoming popular with the increasing number of Starbucks, Barista and CCD stores that offer many different flavours to appeal to all consumer markets. It is also cheap for consumers to switch to these substitutes making the threat of substitute products very strong (Datamonitor, 2005). The growth rate has been recently criticized due to the market saturation of soft drinks. Datamonitor (2005) stated, “Looking ahead, despite solid growth in consumption, the global
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” soft drinks market is expected to slightly decelerate, reflecting stagnation of market prices.” The change attributed to the other growing sectors of the non-alcoholic industry including tea & coffee is 11.8% and bottled water is 9.3%. Sports drinks and energy drinks are also expected to increase in growth as competitors start adopting new product lines. Profitability in the soft drink industry will remain rather solid, but market saturation has caused analysts to suspect a slight deceleration of growth in the industry (2005). Because of this, soft drink leaders are establishing themselves in alternative markets such as the snack, confections, bottled water, and sports drinks industries. In order for soft drink companies to continue to grow and increase profits they will need to diversify their product offerings. So in order to compete with the substitutes industry, cocacola has diversified from just carbonated drink industry to other substitute and so have other brands like Pepsi, Dr pepper/Snapple.
BARGANING POWER OF BUYERS:
Individual consumers are the ultimate buyers of soft drinks. However, Coke and Pepsi's real 'buyers' have been local bottlers who are franchised -or are owned, especially in the case of Coke- to bottle the companies' products and to whom each company sells its patented syrups or concentrates. While Coke and Pepsi issue their franchise, these bottlers are in effect the 'conduit' through which these international cola brands get to local consumers Through the early 1980's, Coke's domestic bottlers were typically independent family businesses deriving from franchises issued early in the century. Pepsi had a collection of similar franchises, plus a few large franchisees that owned many locations. Until 1980, Coke and Pepsi were somewhat restricted in owning bottling facilities, which was viewed as a restraint of free trade. Jimmy Carter, a Coke fan, changed that by signing legislation to allow soft-drink companies to own bottling companies or territories, plus upholding the territorial integrity of soft-drink franchises, shortly before he left office.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Also, the three most important channels for soft drinks are supermarkets, fountain sales, and vending. In 1987, supermarkets accounted for about 40% of total U.S. soft drink industry sales, fountain sales represented about 25%, and vending accounted for approximately 13%. Other retailers represent the remaining percentage. While both Coca-Cola and Pepsi distribute their bottled soft drinks through a network of bottling companies, Coca-Cola uses its own network of wholesalers for their fountain syrup distribution, and Pepsi distributes its fountain syrup through its bottlers.
BARGANING POWER SUPPLIERS:
The principal raw material used by the soft-drink industry in the United States is high fructose corn syrup, a form of sugar, which is available from numerous domestic sources. The principal raw material used by the soft-drink industry outside the United States is sucrose. It likewise is available from numerous sources. Another raw material increasingly used by the soft-drink industry is aspartame, a sweetening agent used in low-calorie soft-drink products. Until January 1993, aspartame was available from just one source -the NutraSweet Company, a subsidiary of the Monsanto Company- in the United States due to its patent, which expired at the end of 1992. Coke managers have long held 'power' over sugar suppliers. They view the recently expired aspartame patents as only enhancing their power relative to suppliers.
PESTEL ANALYSIS OF COCA- COLA
PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental. It is a tool that helps the organisations for making strategies and to know the EXTERNAL environment in which the organisation is working and is going to work in the future. Coca-Cola beverage, which is the leading manufacturer and distributor of non-alcoholic drinks also need to undergo this PESTLE analysis to know about the external environment (especially their competitors and the opportunities available) in order to keep pace with the
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” fast growing economy.
Political factors are how far a government intervenes in the operations of the company. The political factors may include tax policy, trade restrictions, environmental policy, laws imposed on the recruiting labours, amount of permitted goods by the government and the service provided by the government. Globally, Coca-Cola beverages being a non-alcoholic industry falls under the FDA (Food and Drug Administration), it is an agency in the United States Department of Health and Human Services. Its headquarters is in USA and it has started opening offices in foreign countries as well. The job of the FDA is to check and certify whether the ingredients used in the manufacturing of Coca-Cola products in the particular country is meeting to the standards or not. In Coca-Cola the company takes all the necessary steps to analyze thoroughly before introducing any ingredients in its products and get prior approval from the FDA. The company also has to take into consideration of the regulation imposed by FDA on plastic bottled products. Apart from FDA the other political factors includes tax policies and accounting standards. The accounting standards used by the company changes from time to time which have a significant role in the reported results. The company also is subjected to income tax policies according to the jurisdiction of various countries. In addition to this, the company is also subjected to import and excise duties for distribution of the products in the countries where it does not have the outsourcing units. Moreover, if there is any unrest or changes in the government and any kind of protest by the political activists may decline the demand for the products. Also the situations like the unsure conditions prevailing in Iraq and escalation of the terrorist activities in these areas could affect the international market of our product. It creates an inability for the company to
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” penetrate in the markets of such countries.
The economic factors analyze the potential areas where the firm can grow and expand. It includes the economic growth of the country, interest rates, exchange rates, inflation rates, wage rates and unemployment in the country. The company first analyzes the economic condition of the country before venturing into that country. When there is an economic growth in the country, the purchasing power among people increases. It gives the company or the marketer a good chance to market the product. Coca-Cola, in the past identified this correctly and rightly started its distribution across various countries. The net operating profits for the company outside US stands at around 72%. Along with this the company uses 63 various types of currencies other than US Dollar. Hence there is a definite impact in the revenues due to the fluctuating foreign currency exchange rates. A strong and weak currency tends to affect the exporting of the products globally. Interest rates are the rate which is imposed on the company for the money they have borrowed from government. When there is an increase in the interest rates, it may deter the company in further investment as the cost for borrowing is higher. Coca-Cola uses derivative financial instruments to cope up with the fluctuating interest rates. Inflation and wage rate go hand in hand, when there is an increase in the inflation the employee demand for a higher wage rate to cope up with the cost of living. This comes as additional cost for the company which cannot be reflected in the price of the final product as the competition and risk in this segment is higher. This is a threat in the external environment faced by the company. From the above explanation it is clearly seen that the economic factors involves a major impact in the behaviour of the company during various economic situations.
Social factors are mainly the culture aspects and attitude, health consciousness among people, population growth with age distribution, emphasis on safety. The company cannot change the social factors but the company has to adjust itself to the changing society. The company adapts various management strategies to adapt to these social trends. Coca-Cola which is a B2C company, is directly related to the customer, so social changes are the most important factors to consider. Each and every country has a unique culture and attitude among the people. It is very important to know about the culture before marketing in a particular country. Coca-Cola has about 3300+ products in their stable, when entering into a country it does not introduce all the products. It introduces minimum number of products according to the culture of the country and the attitude of the people. Consumers and government are becoming increasingly aware of the public health consequences, mainly obesity which is the second social factor in the soft drinks industry. It inspired the company to venture into the areas of Diet coke and zero calorie soft drinks. The problem of obesity is taken seriously among the youngsters who like to maintain a good physique. Hence coke introduced dietary products for those youngsters who can enjoy coke with zero calories. In one of the study it is said that “Consumer from the age groups 37 to 55 are also increasingly concerned with nutrition”. Since many are aware, they are concerned with the longevity of their lives. This will affect the demand of the company in the existing product and also is an opportunity to venture into new health and energy drinks industry. Population growth rate and the age distribution is another social factor to be considered. It is very important because non-alcoholic markets have most of its share from the children and youngsters. Adults used to celebrate mostly with alcohol. The age distribution of the country becomes important for the success of the product in a country.
Technology plays a varied role in the soft drinks industry. The manufacturing and distribution of the products is relatively a Low-Tech business, although the creation of a new product with the perfect blend and taste is a science (an art in itself). Technological contributions are most important in packaging. The company rely on their bottling partners for a significant portion of their business. Nearly 83% of the worldwide unit case volume is manufactured and distributed by their bottling partners in whom the company does not have controlling power. Hence it is necessary for the company to maintain a cordial relation with their bottling partners. If the company do not give ample support in pricing, marketing and advertising then the bottling industry while increase their short term profits, may become detrimental to the company. The advancement in technology in the company has led to: Introduction of new ways for the availability of Coca-Cola, it introduced general vending machines all over the world. In products it led to the development of new products like Cherry Coke, Diet Coke etc. The technical advancement in the bottling industries include, introduction of recyclable and non refillable bottles, introduction of cans which are trendy, stylish and popular among the youngsters.
The legal factors include discrimination law, customer law, antitrust law, employment law and health and safety law. In Coca-Cola the business is subjected to various laws and regulation in the numerous countries in which they do the business, the laws include competition, product safety, advertising and labelling, container deposits, environment protection, labour practices. In the US the products of the company is subjected to various acts like Federal Food, Drug and Cosmetic Act, the Federal Trade Commission Act, Occupation Safety and Health Act,
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” various environment related acts and regulations, the production, distribution, sale and advertising of all the products are subjected to various laws and regulations. Changes in these laws could result in increased costs and capital expenditures, which affects the company profitability and also the production and distribution of the products. Various jurisdictions may adopt significant regulations in the additional product labelling and warning of certain chemical content or perceived health consequences. These requirements if become applicable in the future the company must be ready to accept and have necessary changes in hand for the same.
These factors include the environment such as the weather conditions and the seasons in which people prefer to buy cool beverages. Also the company must follow the environmental issues related to the product manufacturing, packaging and distributing in various countries. It must adhere to the norms and market the product accordingly. Usage of renewable plastic in the PET bottles is followed by the company strictly.
SWOT ANALYSIS OF COCA-COLA
Fig 2.1 SWOT ANALYSIS OF COCA-COLA
STRENGTHES: WORLD’S LEADING BRAND
Coca-Cola has strong brand recognition across the globe. The company has a leading brand value and a strong brand portfolio. Business-Week and Inter-brand, a branding consultancy, recognize. Coca-Cola as one of the leading brands in their top 100 global brands ranking in 2006.The Business Week-Inter-brand valued Coca-Cola at $67,000 million in 2006. Coca-
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Cola ranks well ahead of its close competitor Pepsi which has a ranking of 22 having a brand value of $12,690 million Furthermore; Coca-Cola owns a large portfolio of product brands. The company owns four of the top five soft drink brands in the world: Coca-Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce brand extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the company has made large investments in brand promotions. Consequently, Coca-cola is one of the best recognized global brands. The company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate new markets and consolidate existing ones.
LARGE SCALE OF OPERATIONS
With revenues in excess of $24 billion Coca-Cola has a large scale of operation. Coca-Cola is the largest manufacturer, distributor and marketer of non-alcoholic beverage concentrates and syrups in the world. Coco-Cola is selling trademarked beverage products since the year 1886 in the US. The company currently sells its products in more than 200 countries. Of the approximately 52 billion beverage servings of all types consumed worldwide every day, beverages bearing trademarks owned by or licensed to Coca-Cola account for more than 1.4 billion. The company’s operations are supported by a strong infrastructure across the world. CocaCola owns and operates 32 principal beverage concentrates and/or syrup manufacturing plants located throughout the world. In addition, it owns or has interest in 37 operations with 95 principal beverage bottling and canning plants located outside the US. The company also owns bottled water production and still beverage facilities as well as a facility that manufactures juice concentrates. The company’s large scale of operation allows it to feed upcoming markets with relative ease and enhances its revenue generation capacity.
ROBUST REVENUE GROWTH IN 3 SEGMENTS
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Coca-Cola’s revenues recorded a double digit growth, in three operating segments. These three segments are Latin America, ‘East, South Asia, and Pacific Rim’ and Bottling investments. Revenues from Latin America grew by 20.4% during fiscal 2006, over 2005. During the same period, revenues from ‘East, South Asia, and Pacific Rim’ grew by 10.6% while revenues from the bottling investments segment by 19.9%. Together, the three segments of “Latin America”, “East, South Asia” and “Pacific Rim” bottling investments, accounted for 34.8% of total revenues during fiscal 2006. Robust revenues growth rates in these segments contributed to top-line growth for Coca-Cola during 2006.
WEAKNESS: NEGATIVE PUBLICITY
The Coca-Cola Company has been involved in a number of controversies and lawsuits related to its relationship with human rights violations and other perceived unethical practices. There have been continuing criticisms regarding the Coca-Cola Company's relation to the Middle East and U.S. foreign policy. The company received negative publicity in India during September 2006.The company was accused by the Centre for Science and Environment (CSE) of selling products containing pesticide residues. Coca-Cola products sold in and around the Indian national capital region contained a hazardous pesticide residue.
On 10 December 2008, the US Food and Drug Administration (FDA) wrote to Mr. Muhtar Kent, President and Chief Executive Officer, to warn him that the FDA had concluded that Coca-Cola's product Diet Coke Plus 20 FL OZ was is in violation of the Federal Food, Drug, and Cosmetic Act. In January 2009, the US consumer group the Centre for Science in the Public Interest filed a class-action lawsuit against Coca-Cola. The lawsuit was in regards to claims made, along
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” with the company's flavours, of Vitamin Water. Claims say that the 33 grams of sugar are more harmful than the vitamins and other additives are helpful.
SLUGGISH PERFORMANCE IN NORTH AMERICA
Coca-Cola’s performance in North America was far from robust. North America is CocaCola’s core market generating about 30% of total revenues during fiscal 2006. Therefore, a strong performance in North America is important for the company. I n North America the sale of unit cases did not record any growth. Unit case retail volume in North America decreased 1% primarily due to weak sparkling beverage trends in the second half of 2006 and decline in the warehouse-delivered water and juice businesses. Moreover, the company also expects performance in North America to be weak during 2007. Sluggish performance in North America could impact the company’s future growth prospects and prevent Coca-Cola from recording a more robust top-line growth.
DECLINE IN CASH FROM OPERATING ACTIVITIES
The company’s cash flow from operating activities declined during fiscal 2006. Cash flows from operating activities decreased 7% in 2006 compared to 2005. Net cash provided by operating activities reached $5,957 million in 2006, from $6,423 million in 2005. CocaCola’s cash flows from operating activities in 2006 also decreased compared with 2005 as a result of a contribution of approximately $216 million to a tax-qualified trust to fund retiree medical benefits. The decrease was also the result of certain marketing accruals recorded in 2005.Decline in cash from operating activities reduces availability of funds for the company’s investing and financing activities, which, in turn, increases the company’s exposure to debt markets and fluctuating interest rates.
During 2006, its acquisitions included Kerry Beverages, (KBL), which was subsequently, reappointed Coca-Cola China Industries (CCCIL). Coca-Cola acquired a controlling shareholding in KBL, its bottling joint venture with the Kerry Group, in Hong Kong. The acquisition extended Coca-Cola’s control over manufacturing and distribution joint ventures in nine Chinese provinces. In Germany the company acquired Apollinaris which sells sparkling and still mineral water. Coca-Cola has also acquired a 100% interest in TJC Holdings, a bottling company in South Africa. Coca-Cola also made acquisitions in Australia and New Zealand during 2006. These acquisitions strengthened Coca-Cola’s international operations. These also give Coca- Cola an opportunity for growth, through new product launch or greater penetration of existing markets. Stronger international operations increase the company’s capacity to penetrate international markets and also gives it an opportunity to diversity its revenue stream. On 25 February 2010, Coco cola confirms to acquire the Coca cola enterprises (CCE) one the biggest bottler in North America. This strategy of coca cola strengthens its operations internationally.
GROWING BOTTLED WATER MARKET
Bottled water is one of the fastest-growing segments in the world’s food and beverage market owing to increasing health concerns. The market for bottled water in the US generated revenues of about $15.6 billion in 2006. Market consumption volumes were estimated to be 30 billion litres in 2006. The market's consumption volume is expected to rise to 38.6 billion units by the end of 2010. This represents a CAGR of 6.9% during 2005-2010. In terms of value, the bottled water market is forecast to reach $19.3 billion by the end of 2010. In the bottled water market, the revenue of flavoured water (water-based, slightly sweetened refreshment drink) segment is growing by about $10 billion annually. The
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” company’s Dasani brand water is the third best-selling bottled water in the US. Coca-Cola could leverage its strong position in the bottled water segment to take advantage of growing demand for flavoured water.
GROWING HISPANIC POPULATION IN U.S
Hispanics are growing rapidly both in number and economic power. As a result, they have become more important to marketers than ever before. In 2006, about 11.6 million US households were estimated to be Hispanic. This translates into a Hispanic population of about 42 million. The US Census estimates that by 2020, the Hispanic population will reach 60 million or almost 18% of the total US population. The economic influence of Hispanics is growing even faster than their population. Nielsen Media Research estimates that the buying power of Hispanics will exceed $1 trillion by 2008- a 55% increase over 2003 levels. Coca-Cola has extensive operations and an extensive product portfolio in the US. The company can benefit from an expanding Hispanic population in the US, which would translate into higher consumption of Coca-Cola products and higher revenues for the company.
THREATS: INTENSE COMPETITION
Coca-Cola competes in the non-alcoholic beverages segment of the commercial beverages industry. The company faces intense competition in various markets from regional as well as global players. Also, the company faces competition from various non-alcoholic sparkling beverages including juices and nectars and fruit drinks. In many of the countries in which Coca-Cola operates, including the US, PepsiCo is one of the company’s primary competitors. Other significant competitors include Nestle, Cadbury Schweppes, Groupe DANONE and Kraft Foods. Competitive factors impacting the company’s business include pricing, advertising, sales
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” promotion programs, product innovation, and brand and trademark development and protection. Intense competition could impact Coca-Cola’s market share and revenue growth rates.
DEPENDENCE ON BOTTLING PARTNERS
Coca-Cola generates most of its revenues by selling concentrates and syrups to bottlers in whom it doesn’t have any ownership interest or in which it has no controlling ownership interest. In 2006, approximately 83% of its worldwide unit case volumes were produced and distributed by bottling partners in which the company did not have any controlling interests. As independent companies, its bottling partners, some of whom are publicly traded companies, make their own business decisions that may not always be in line with the company’s interests. In addition, many of its bottling partners have the right to manufacture or distribute their own products or certain products of other beverage companies. If Coca-Cola is unable to provide an appropriate mix of incentives to its bottling partners, then the partners may take actions that, while maximizing their own short-term profits, may be detrimental to Coca-Cola. These bottlers may devote more resources to business opportunities or products other than those beneficial for Coca-Cola. Such actions could, in the long run, have an adverse effect on Coca-Cola’s profitability. In addition, loss of one or more of its major customers by any one of its major bottling partners could indirectly affect Coca-Cola’s business results. Such dependence on third parties is a weak link in Coca-Cola’s operations and increases the company’s business risks.
SLIGGISH GROWTH OF CARBONATED BEVERAGES
US consumers have started to look for greater variety in their drinks and are becoming increasingly health conscious. This has led to a decrease in the consumption of carbonated and other sweetened beverages in the US. The US carbonated soft drinks market generated total revenues of $63.9 billion in 2005, this representing a compound annual growth rate (CAGR) of only 0.2% for the five-year period spanning 2001-2005. The performance of the
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” market is forecast to decelerate, with an anticipated compound annual rate of change (CAGR) of -0.3% for the five-year period 2005-2010 expected to drive the market to a value of $62.9 billion by the end of 2010. Moreover in the recent years, beverage companies such as Coca-Cola have been criticized for selling carbonated beverages with high amounts of sugar and unacceptable levels of dangerous chemical content, and have been implicated for facilitating poor diet and increasing childhood obesity. Moreover, the US is the company’s core market. Coca-Cola already expects its performance in the region to be sluggish during 2007. Coca-Cola’s revenues could be adversely affected by a slowdown in the US carbonated beverage market.
Coca-Cola India was the leading soft drink brand in India till 1977 when it was forced to
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” close down its operation by a socialist government in the drive for self sufficiency. After 16 years of absence, coca cola returned to India and witnessed a different culture and economic platform. During their absence, Parle brothers introduced a new type of cola called THUMS UP. Along with, they also formulated a lemon flavoured drink, LIMCA, and mango flavoured, MAAZA. In 1993, coca cola bought the whole Parle Brother operation, in a hope to beat the main competitor (Pepsi). They presumed that with the tried and tested products of Parle they will be able to regain their throne in the Indian soft drink market. Pepsi having a 6 year head start helped revive the demand for global cola but it was not easy for the soft drink giant (coca cola) to return to India. Pepsi put more focus on the youth of the country in their advertisements but coca cola tried influencing Indians with the ‘American’ way of life, which turned out to be a mistake. Coca-Cola invested heavily in India for the first five years, which got them credit of being one of the biggest investor in the country; however, their sales figures were not so impressive. Hence, they had to re-think their market strategies. Coca-Cola learned from Hindustan Lever that reducing their will result in more turnover, hence leading to profit. They launched an extensive market research in India. They ascertained that in India 3 As must be applied; Affordability, Availability and Acceptability. Coca-Cola learnt that they were competing with local drinks such as “Nimbu Pani”, “Narial Pani”, “Lassi” etc. and reached to a conclusion that competitive pricing was unavoidable. Since then they introduced a 200 ml glass bottle for Rs.5.
Further, they had different advertising campaigns for different regions of the country. In the southern part, their strategy was to make Bollywood or Tamil stars to endorse their products. In various regions they tried portraying coca cola products with different regional food products. One of the most famous ad campaigns in India was ‘Thanda Matlab Coca-Cola’; they featured the same quote with different regional entities. Presently, Coca-Cola is the biggest brand in soft drinks and is way ahead in market share i.e.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” 60% in Carbonated Soft drinks Segment, 36% in Fruit drinks Segment, 33% in Packaged water Segment, compared to its arch rival, Pepsi. Diversifying their product range and having a competitive pricing policy, they have regained their throne. With virtually all the goods and services required to produce and market Coca-Cola being made in India, the business system of the Company directly employs approximately 6,000 people, and indirectly creates employment for more than 125,000 people in related industries through its vast procurement, supply, and distribution System. The Indian operations comprises of 50 bottling operations, 25 owned by the Company, with another 25 being owned by franchisees. That apart, a network of 21 contract packers manufactures a range of products for the Company. On the distribution front, 10-tonne trucks – open bay three-wheelers that can navigate the narrow alleyways of Indian cities – constantly keep our brands available in every nook and corner of the Country’s remotest areas.
PRODUCTS OF COCA-COLA INDIA
COCA-COLA:In India Coca-Cola was leading soft drink till 1977 when Government policies necessitated its departure. Coca-Cola made its return to the country in 1993 and made significant investments to ensure that the beverage is available to more and more people, even in remote and inaccessible parts of the nation. Over the past fourteen years has enthralled consumers in India by connecting with passions of India – Cricket, movies, music & food. Coca-Cola’s advertising campaigns “Jo Chaho Ho Jaye” & “Life Ho Toh Aise” were very popular & had entered youths vocabulary. In 2002.Coca-Cola launched its iconic campaign “Thanda Matlab Coca-Cola” which sky rocketed the brand to make it India’s favourite soft drink brand.
200ml, 300ml, 500ml, 1000ml
PET 500ml, 1.5L, 2L, 2.25L, 500ml, 100ml Table - 1.0
CAN 330 ml
FOUNTAIN VARIOUS SIZES
LIMCA:Limca was introduced in 1971 in India. Limca has remained unchallenged as the No.1 sparkling drink in the cloudy lemon segment. The success formula is the sharp fizz and lemoni bite combined with the single minded proposition of the brand as the provider of “Freshness”. Limca can cast a tangy refreshing spell on anyone, anywhere. Derived from “Nimbu” + “Jaise” hence Lime Sa, Limca has lived up to its promises of refreshment and has been the original thirst choice of millions of customers for over 3 decades.
200ml, 300ml, 500ml, 1000ml
PET 500ml, 1.5L, 2L, 2.25L, 500ml, 100ml Table - 1.1
CAN 330 ml
FOUNTAIN VARIOUS SIZES
THUMS UP:Thums up is a leading sparkling soft drink and most trusted brand in India. Originally introduced in 1977, Thums up was acquires by The Coca-Cola Company in 1993. Thums up
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” is known for its strong, fizzy taste and it confident, mature and uniquely masculine attitude. This brand clearly seeks to separate the men from the boys.
200ml, 300ml, 500ml, 1000ml
PET 500ml, 1.5L, 2L, 2.25L, 500ml, 100ml Table - 1.2
CAN 330 ml
FOUNTAIN VARIOUS SIZES
SPRITE:Sprite a global leader in the lemon lime category is the second largest sparkling beverage brand in India. Launched in 1999, Sprite with its cut-thru perspective has managed to be a true teen icon.
PET 500ml, 600ml, 1250ml, 1500ml, 2000ml, 2250ml
CAN 330 ml
FOUNTAIN VARIOUS SIZES
Table – 1.3
FANTA:Fanta entered the Indian market in the year 1993. Over the years Fanta has occupied a strong
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” market place and is identifies as “The Fun Catalyst”. Perceived as a fun youth brand, Fanta stands for its vibrant colour, tempting taste and tingling bubbles that not just uplifts feelings but also helps free spirit thus encouraging one to indulge in the moment. This positive imagery is associated with happy, cheerful and special times with friends.
PET 500ml, 1.5L, 2L, 2.25L, 500ml, 100ml Table – 1.4
CAN 330 ml
FOUNTAIN VARIOUS SIZES
MINUTE MAID PULPY ORANGE:The history of the Minute Maid brand goes as far back as 1945 when the Florida Food Corporation developed orange juice powder. The company developed a process that eliminated 80% of the water in the orange juice, forming a frozen concentrate that when reconstitute created orange juice. They branded it Minute Maid a name connoting the convenience and the ease of preparation. Minute Maid thus moved from a powdered concentrate to the first ever orange juice from concentrate. The launch of Minute Maid in India (started with the south of the country) is aimed to further extend the leadership of Coca-Cola in India in the juice drink category. Available in 3 PET pack sizes i.e. 400ml, 1 litre, 1.25 litres.
MAAZA:Maaza was introduced in late 1970’s. Maaza has today come to symbolise the very spirit of
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” mangoes. Universally loved for its taste, colour, thickness and wholesome properties, Maaza is the mango lover’s first choice.
PET 250ml, 600ml, 1.2L Table – 1.5
POCKET MAAZA 200ml
KINLEY:The importance of water can never be understated, Particularly in a nation such as India where water governs the lives of the millions, be it as a part of everyday ritual or as the monsoon which gives life to the sub continent. Kinley water comes with the assurance of safety from the Coca-Cola Company. Available in PET 500ml and 1000ml.
GEORGIA GOLD COFFEE:Georgia coffee was introduced in India in 2004. The Georgia gold range of Tea and coffee beverages is the perfect solution for office and restaurant needs. Today Georgia coffee is available at Quick-Service Restaurants, Airports, Cinemas and in Corporates across all major metros in India. HOT BEVERAGES Espresso, Americano, Cappuccino, Caffe Latte, Mochaccino, Hot Chocolate, Cardamon Tea. COLD BEVERAGES Ice Teas, Cold Coffee. Table – 1.6
MARKETING MIX OF COCA-COLA INDIA
PRODUCT:Coca-Cola India has a wide range of products in its product line i.e. Coca-Cola, Fanta, Sprite, Thums Up, Maaza, Minute Maid and Georgia Gold. Bottled water was another area where Coca-Cola identified major opportunities. In 2002, Packaged drinking water in India was a Rs 1,000 cr industry and growing by 40% every year. PDW was a low margin – high volume business, but it was an attractive proposition for bottlers as it increased plant utilization rates. In this market Coke’s Kinley was pitched against Ramesh Chauhan’s Bisleri and Pepsi’s Aquafina. The product not only faced intense competition but also was difficult to differentiate. Coke positioned Kinley as natural water with the tag line “Bhoond Bhoond Mein Vishwas” (Trust in each drop of water). In early 1999, the parent company acquired Cadbury Schweppes. As a result 12 more bottlers were brought into CCI’s fold. This acquisition added Crush, Canada Dry and Sport Cola to CCI’s product line. This meant CCI had three orange, clear lime and cola drinks each in its portfolio.
PRICE:Coke learnt with experience that price was a strategic weapon in an emerging market like India. An increase in value added tax in 1996 had taken the price of the 300ml bottle beyond the reach of many Indian customers. In 2000, CCI conducted a yearlong experiment in coastal Andhra Pradesh by introducing a 200ml bottle at Rs 7. The volumes went up by 30% demonstrating the importance of consumer affordability. So the 200ml pack priced at Rs 5 was rolled out countrywide in January 2003. The advertising Campaign highlighted the affordability and Indian image. To make it affordable, Coke introduced Kinley in 200ml pouches for Re. 1 in selected places in Ahmadabad and 200ml water cups in Maharashtra, priced at Rs 3 per cup in testing marketing exercise conducted in mid – 2002. In 2002 Kinley with 35% market share had become the leader in the retail PDW segment and was contributing 20% of CCI’s revenues.
PLACE:Coke pushed down responsibilities from corporate headquarters to the local business units. The aim was to effectively align CCI's corporate resources, support systems and culture to leverage the local capabilities. CCI's operations had been divided into North, Central and Southern regions. Each region had a president at the top, with divisions comprising marketing, finance, human resources and bottling operations. The heads of the divisions reported to the CEO. Bottling operations were divided into four companies directed by the bottling head from headquarters. Under the new plan, CCI shifted to a six region profit center set up where product customization and packaging, marketing and brand building were taken up locally. A Regional General Manager (RGM) headed each region with the regional functional heads reporting to him. All the RGMs reported to VP (Operations, who in turn reported to CEO. The four bottling operations, with 37 bottling plants, were merged into Hindustan Coca-Cola Beverages (HCCB). Each of the six regions had on an average six bottling plants. Each plant was headed by an Area General Manager (AGM) and held profit center responsibility for a business territory. He reported to the RGM as well as the head of bottling at the head quarters.
PROMOTION:In the initial years, CCI focused on establishing the Coca-Cola brand quickly. The marketing campaign positioned Coca-Cola as an international brand and did not emphasize local association. Coke, as a deliberate strategy, decided not to spend heavily on promoting Thums Up. Indeed the marketing spend on Thums Up between 1993 and 1996 was almost negligible. The overall marketing effort was also not focused as CCI changed the head of marketing three times during the period. Thumps Up remained neglected. Inadequate marketing support for other Parle brands also led to their declining market shares. The bottlers taken over by Coke also had problems adjusting to a new work culture. They argued that CCI's lack of interest in promoting Thumps Up was resulting in falling sales and
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” asked CCI to take corrective action.
Coke is primarily targeted at young individuals over the age of twenty-five. This can be seen by Coca-Colas advertising campaigns, which are aimed towards the young, by featuring well known personalities popular to this age group. During 90'ies Coke's promotion efforts did not seem to be effective. They were focused on mega events like the 1996 Cricket World Cup held in India. CCI's World Cup Cricket campaign was overshadowed by Pepsi's "Nothing official about it" campaign. Major analysts were surprised that Thumps Up was totally out of the picture during such a mega event. In 1998 localization of marketing efforts, CCI signed up celebrities like Aamir Khan, Aishwarya Rai, and Sunil Gavaskar to promote Coke. Coke also began efforts to rejuvenate the Parle brands, Limca and Thumps Up. In 1998, India was declared the fastest growing market within the Coca-Cola system. But things were far from normal. Attempts at building growth through discounts and PET take home segment were not very successful because of lack of coordination between the launches and marketing back-up. To maintain good relationships with bottlers and avoid defections to the other camp, dealers had been pampered by offering expensive overseas trips. In 2000, Coke wrote off investments in India, amounting to $400 Mn. The revised value of CCI's assets after the charge was $300 mn. CCI spent $3.5 mn to beef up advertising and distribution for Thumps Up. By 2002, it had become India's No.2 cola drink after Pepsi. Maaza, the mango drink, was repositioned as a juice brand and saw a growth of almost 30% in 2001. Since India was a large country of different tastes and cultures, CCI customized its marketing strategy for different regions. It promoted the Coke brand in Delhi, Thumps Up in Mumbai and Andhra Pradesh, and Fanta in Tamil Nadu. Coke had plans to launch Rimzim, a spicy soda drink in North Maharashtra.
PESTEL ANALYSIS OF COCA-COLA INDIA
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental. It is a tool that helps the organisations for making strategies and to know the EXTERNAL environment in which the organisation is working and is going to work in the future.
Coca Cola India was the leading soft drink brand in India till 1977 when it left rather than revealing its formula to the government. They re-entered the country in 1993. However, the primary barrier for Coca-Cola’s entry into the Indian market was its political environment. Despite the liberalization of the Indian economy in 1991 and introduction of the New Industrial Policy to eliminate barriers such as bureaucracy and regulation, there was still a lot of protectionism. India’s past promotion of “Indigenous availability” or “Swadeshi movement” depicted its affinity for local products. Due to India’s suspicion of foreign business entering Indian markets, Coca Cola received alien status its re-entry. This and some of the policies imposed on foreign enterprises proved as a hindrance to the growth of the company in the country. To make things worse, the policies were neither clear nor unchanging. For example, foreign businesses were not allowed to market their products under the same name if selling within the Indian market. Thus, Coca Cola had to be changed to Coca Cola India (and Pepsi had to be renamed to Lehar Pepsi). However, the most controversial, and by far, the most damaging was when Coca-Cola was forced to sign an agreement to sell 49% of its equity in order to buy out Indian bottlers. Due to the lack of consistency in the legal aspects, more importance was being given to lobbying the politicians.
During recent times, Coca Cola India has faced its fair share of problems. On August 5 th
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” 2003, The Centre for Science and Environment (CSE), an activist group in India focused on environmental sustainability issues (specifically the effects of industrialization and economic growth) issued a press release stating: "12 major cold drink brands sold in and around Delhi contain a deadly cocktail of pesticide residues". According to tests conducted by the Pollution Monitoring Laboratory (PML) of the CSE from April to August, three samples of twelve PepsiCo and Coca-Cola brands from across the city were found to contain pesticide residues surpassing global standards by 30-36 times. This had an adverse impact on the sales of Coca Cola, with a drop of almost 30-40%1 in only two weeks on the heels of a 75% five-year growth trajectory. Many leading clubs, retailers, restaurants, and college campuses across the country had stopped selling Coca-Cola. This threatened the newly achieved leadership attained over Pepsi due to a successful marketing campaign. But this was not the end of Coca Cola’s troubles. There was widespread discontent around many of their plants. For example, in Plachimada, Kerala, the communities in and around the Coca Cola plant blamed the factory for their water problems. Due to this, the local Panchayat decided not to renew the license issued to Coca Cola to “protect public interest". The company has also been accused of illegally occupying a portion of the village property resources in Mehdiganj, near Varanasi. However, there are certain positives as well, with a 22 percent increase in its unit case volume last quarter.
The Indian economy sustained the global economic slowdown in the previous year and has shown a tremendous economic growth. It showed 8.6% of growth in the last quarter of 200910 as compared to 5.8% same time in the previous year. It has emerged as an attractive economy to invest in as many opportunities has been recognized.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” India is ranked second in economic growth, just behind China. Analysts have said that India will be the third biggest economy of the world in the coming year behind China and USA. With economic growth many opportunities have been seen, which have attracted many foreign investor to the company. Coca cola India returned to the country in 1993, despite few problems in the start they have emerged as the king of soft drink industry in India. The strong economic growth of India has resulted in coca cola to invest heavily in sales and distributive channels. It has introduced two new products, Nimbu Fresh and an energy drink ‘Burn’.
Coca cola registered 22% growth in their unit case volume in the second quarter (April-June). It is the 16th consecutive quarter of such growth out of which 13 are double digit. Coca cola India’s growth is in contrast to its overall performance, the beverage king reported a growth of just 5% (worldwide) in the same quarter.
Inflation is one of the main problems that Indian economy has been facing for a year now. Rising prices in the food and other products doesn’t only effect the consumers it also has an adverse effect on a company. The inflation rate for the year 2009 was recorded to be 11.49%. As prices have gone up in India for various products, especially oil, there has been uncertainty in decision making of almost every company. Coca cola India has also been affected by the same; it has been forced to think about their input costs, as they have been rising due to inflation. Their expenditure has been rising, with more costs in salaries, distribution channels and other operating costs. Beverage industry being price competitive market, they have not revised their product prices.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” The exchange rate of rupee to US Dollar has been stable but in the previous months the rate has had a tumultuous period. Exchange rate determines at what price will the company export its products and import whatever is required by it. The previous year, the rate of rupee to USD touched 44, on an average it has been around 47, so the exports earned less and the imports cost more. Therefore, coca cola India had to bear some low profitable times. However, in the present scenario rates have reached a stable level and exports are on an increasing trend.
Coca- Cola returned to India in 1993 after a 16 year hiatus, amidst competition from Leher Pepsi which had the advantage of entering the country 7 years earlier. Initially, it struggled to find acceptance as there were already other brands such as Parle’s Thums Up which existed in the market. Coca-Cola had earlier focussed more on the American way of life in their advertising campaigns, which the Indian consumers could not identify with. Also, they did not focus on competition from other alternatives such as lemonade, Lassi etc. These products had been around for centuries, and were also cheaper alternatives to CocaCola. However, things were brought under control when Thums Up was bought over by Coca Cola, and more attention was paid by the company on their marketing mix. With the lowering of their prices by almost 15-20%, introduction of newer products which appealed to the Indian tastes, more investment in market research and focussing on the target group of 18-24 year olds, they were able to increase their market share and build brand loyalty. Coca Cola today, has made significant investments to build its business in India. It has also generated employment for almost 1,25,000 people in related industry through its procurement, supply and distribution cycles. The soft drink industry today is growing steadily due to the booming economy, strengthened
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” middle class and low per capita consumption. With the increase in health consciousness among the urban consumers, the company has introduced newer products such as Diet Coke, which contain lesser calories than ordinary Coca Cola. This is also responsible for the company shifting focus from carbonated drinks to Fruit Drinks / Juices and bottled water. The rural market had also been identified by Coca-Cola India as an attractive target, with almost 70% of the country’s population. The company has recorded significant growth in recent years Coca Cola India has also taken many initiatives as a responsible corporate citizen, by tying up with many NGOs such as BAIF (or Bharatiya Agro Industries Foundation), SOS Children’s Villages and Save the Children. It has also taken initiatives to promote education in rural areas.
Coca-Cola has started operations of its R&D facility in India, with the view of localizing its product portfolio. The major focus would be on non carbonated drinks and flavours. The company’s R&D team has already rolled out drinks such as Maaza aam panna and also a Maaza mango milk drink, and is exploring options to enter new categories in India such as juices in localised flavours, energy drinks, sports drinks and flavoured water. These initiatives are being taken by the company to further expand their product portfolio. With the increasing importance of 360 degree media tools and overall ad spend on social media sets likely to grow by almost 44%, Coca-Cola has increased ad spend on the internet. Case in point is the recent 2009 Sprite campaign, which was first launched on the internet.
Coca Cola has earned a title of environment friendly company and Coca Cola India too has followed in the footsteps. Coca Cola India’s Corporate Social Responsibility (CSR), is an initiative that prioritizes many social and environmental issues; one of them being ‘water conservation’. They support many community based rainwater harvesting projects and help
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” lending conservation education. The company has made sure that the following ideas are considered during their operations: 1. Environmental due diligence before acquiring land 2. Environmental impact assessment before commencing project 3. Ground water and environment survey before selecting the site 4. Ban on purchasing CFC emitting refrigerating equipment 5. Waste water treatment facilities 6. Compliance with all regulatory environmental requirements 7. Energy conservation programs By following these guidelines Coca-Cola India has helped the environment with consistent profits and success. They seek to provide leadership in three different areas, these are as follows: 1. Water efficiency and water quality 2. Energy efficiency 3. Eliminating or minimizing solid waste. Thoug h being an environmental friendly company, Coca Cola India had to face its share of controversies. On 4th February, 2003, Centre of Science and Environment in India, released a report based on experiment done by Pollution Monitoring Laboratory. In the experiment, they tested 17 packaged drinking water brands and found that, Coca Cola’s Kinley has 15 times more pesticide residual levels than the stipulated norms, Bisleri had 59 times and Aquaplus had 109 times.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” The main law governing the food safety is the 1954 Prevention of food alteration act, which stated that pesticides should not be present in any food item but did not have law against pesticides being present in soft drinks. However, the Food Processing Order 1955 stated that the main ingredient used in soft drinks must be ‘potable water’ but the Bureau of Indian Standards had no prescribed standards for pesticides in water. But later it was found that BIS had stated that pesticides should not be present or it should not exceed 0.001 part per million. Further, the health ministry of India admitted that ‘there were lapses in PFA regarding carbonated drinks’.
Fig 2.2 GRAPH OF PESTICIDES IN SOFT DRINKS IN INDIA
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” As the Indian consumer is getting more educated, the government is also paying special attention to consumer laws. In the past, there were not so many laws protecting the benefits to the consumer but now every business has to go by the law and fix their operations, strategies so as to satisfy their consumers, and employees. Keeping in mind the consumer laws, employment laws, antitrust law, discrimination laws etc. a business should plan out everything.
In the present scenario, consumer is the king, if a product is defective, not meeting the stated standards a consumer can complain against the manufacturer. Complaining and getting the verdict the court has made very fast and efficient as government of India has installed new consumers courts. Their main job is to see that the consumer benefits are being met or not. When producing their beverages, Coca Cola India has to make sure that they have written price, manufacturing date, expiry date, batch no, nutritional facts are written on the packed product.
Ministry of Labour makes the laws for proper employment in the country. They have stipulated norms on employing people from the country and getting expatriates in the company as well. India has strict laws against employing child labour. Being a male dominated society, the ministry has made sure that female employees are treated with respect and given equal importance at the work place. Every field of work has got its own wage, these are to meet the norms and laws set by the labour ministry. When employing anyone, coca cola India cannot discriminate on social, regional or any racists’ basis. If it is found that the company has been violating the law, it has to face strict action and fines.
Health and safety laws
As coca cola produces a product that is consumed by the consumer as a food item, there are laws that the company must abide by when producing it. Ministry of Food Processing
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Industries makes and oversees the laws and norms for the food processing industries. The Indian Parliament has recently passed the Food Safety and Standards Act, 2006 that overrides all other food related laws. It will specifically repeal eight laws:
• • • • • • • •
The Prevention of Food Adulteration Act, 1954. The Fruit Products Order, 1955. The Meat Food Products Order, 1973. The Vegetable Oil Products (Control) Order, 1947. The Edible Oils Packaging (Regulation) Order, 1998. The Solvent Extracted Oil, De oiled Meal, and Edible Flour (Control) Order, 1967. The Milk and Milk Products Order, 1992. Essential Commodities Act, 1955 relating to food.
From now on, the act establishes a regulatory body, the Food Safety and Standards Authority of India. Anything that coca cola makes, have to make accordingly to the laws. They have to check the weight, volume and ingredients of the product. The export or the import of the products by the company has to meet the quality standards stipulated by the law.
The Competition Commission of India was made under the Indian Competition Act 2002, Monopolies Restrictive and Trade Practices Act 1969 was replaced by it. This committee looks after all the issues regarding unethical means of doing business, competition issues and any dispute between two different business entities. CLG competition and anti trust practices are as follows:
Representing clients before the MRTP Commission in ‘monopolistic and restrictive trade practices’ and ‘unfair trade practices’ matters.
Legal Advice and sophisticated insight into the international best practices on
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” competition law. • Consultancy services on specific issues - supply and distribution, pricing and marketing, ‘promotional materials’, mergers, acquisitions, amalgamation, licensing, joint operation and research, joint buying, ‘dominant-firm’ status etc.
• • • • •
Competition Audit and Due Diligence for developing appropriate guidelines for employees, distributors, agents, franchisees etc. Legal Due Diligence on anti-competition, unfair and restrictive market practices. Drafting claims, counter-claims, replies, rejoinders, representations etc. on Competition Law and related legal issues. Strategic policing on anti-competition market practices and trends. Policy due diligence for mergers, acquisitions, joint ventures with appropriate antitrust safeguard measures and policy.
All these laws help Coca Cola India to maintain its own brand and values. Any other business trying to copy the brand of coca cola will face the strict action against itself. These laws help every business to compete in a fair environment. As it is known that the coca cola and Pepsi are the fiercest rivals in the beverage industry, the CCI makes sure that either of them does not indulge in unfair means to make profits and hurt each other’s business.
SWOT ANALYSIS OF COCA-COLA INDIA
Fig 2.3 SWOT ANALYSIS OF COCA-COLA INDIA
STRENGTHES: DISTRIBUTION NETWORK
The Company has a strong and reliable distribution network. The network is formed on the
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” basis of the time of consumption and the amount of sale yielded by a particular customer in one transaction. It has a distribution network consisting of a number of efficient salesmen, 700,000 retail outlets and 8000 distributors. The distribution fleet includes different modes of distribution, from 10 tonne to open bay three wheelers that can navigate the narrow alleyways of Indian cities – constantly keep Coca-Cola brands available in every nook and corner of the Country’s remotest areas.
STRONG BRAND IMAGE
Coke has its history of about more than a century and this prolonged sustenance has definitely added to the brand image in the minds of the consumers and to its wallet. The products produced and marketed by Coca-Cola India have a strong brand image. Strong brand names like Coca-Cola, Fanta, Thums up, Limca and Maaza add up to the brand name of Coca-Cola Company as a whole. Coca Cola India for the first time has come out with corporate campaign in India targeting its stakeholders. The multimedia campaign “Little Drops of Joy " is aimed at raising the corporate brand image of the company which took a heavy beating with a number of controversies it faced in different domains. The new campaign is a part of a complete restructuring exercise in the Indian arm of this global change. Coca Cola recently announced its new corporate strategy called the “5 Pillar" strategy. The company has identified the 5 pillars as • • • • • People. Planet. Portfolio. Partners. Performance.
LOW COST OF OPERATIONS
In light of the company’s Affordability Strategy, Coca-Cola went about bringing a cost-focus culture in the company. This included procurement Efficiencies – through focus on key input materials, trade discipline and control and proactive tax management through tax incentives, excise duty reduction and creating marketing companies. These measures have reduced the costs of operations and increased profit margins.
WEAKNESSES: HEALTH CARE ISSUES
In India, there exists a major controversy concerning pesticides and other harmful chemicals in bottled products including Coca-Cola. In 2003, the Centre for Science and Environment (CSE), a non- governmental organization in New Delhi, said aerated waters produced by soft drinks manufacturers in India, including multinational giants PepsiCo and Coca-Cola, contained toxins including lindane, DDT, malathion and chlorpyrifos - pesticides that can contribute to cancer and a breakdown of the immune system.
SMALL SCALE SECTOR RESERVATIONS
The Company’s operations are carried out on a small scale and due to Government restrictions and ‘red-tapism’, the Company finds it very difficult to invest in technological advancements and achieve economies of scale.
OPPORTUNITIES: LARGE DOMESTIC MARKETS
The domestic market for the products of the Company is very high as compared to any other soft drink manufacturer. Coca-Cola India claims a 58 per cent share of the soft drinks market;
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” this includes a 42 per cent share of the cola market.
Other products account for 16 per cent market share, chiefly led by Limca. The company appointed 50,000 new outlets in the first two months of this year, as part of its plans to cover one lakh outlets for the coming summer season and this also covered 3,500 new villages. In Bangalore, Coca-Cola amounts for 74% of the beverage market.
The Company can come up with new products which are not manufactured abroad, like Maaza etc and export them to foreign nations. It can come up with strategies to eliminate apprehension from the minds of the people towards the Coke products produced in India so that there will be a considerable amount of exports and it is yet another opportunity to broaden future prospects and cater to the global markets rather than just domestic market.
HIGHER INCOME AMONG PEOPLE
Development of India as a whole has lead to an increase in the per capita income thereby causing an increase in disposable income. Unlike olden times, people now have the power of buying goods of their choice without having to worry much about the flow of their income. Coca-Cola Company can take advantage of such a situation and enhance their sales.
As India is developing at a fast pace, the per capita income has increased over the years and a majority of the people are educated, the export levels have gone high. People understand trade to a large extent and the demand for foreign goods has increased over the years.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” If consumers shift onto imported beverages rather than have beverages manufactured within the country, it could pose a threat to the Indian beverage industry as a whole in turn affecting the sales of the Company.
TAX & REGULATORY SECTOR
The tax system in India is accompanied by a variety of regulations at each stage on the consequence from production to consumption. When a license is issued, the production capacity is mentioned on the license and every time the production capacity needs to be increased, the license poses a problem. Renewing or updating a license every now and then is difficult. Therefore, this can limit the growth of the Company and pose problems.
SLOWDOWN IN RURAL DEMAND
The rural market may be alluring but it is not without its problems: Low per capita disposable incomes that is half the urban disposable income; large number of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal consumption linked to harvests and festivals and special occasions; poor roads; power problems; and inaccessibility to conventional advertising media. All these problems might lead to a slowdown in the demand for the company’s products.
4. RESEARCH METHODOLOGY
OBJECTIVES OF THE STUDY
The main objective of the project is to analyze and study in efficient way the current
position of Coca- Cola Company.
To perform PESTLE and SWOT analysis of Coca-cola globally as well as locally.
This would help us identify areas of potential growth.
The study was aimed to perform Market Analysis of Coca-Cola Company & find out
different factors effecting the growth of Coca-Cola.
Another objective of the study was to perform Competitive analysis between Coca-
Cola and its competitors.
To understand the reasons behind the purchase of Coca-Cola products.
SCOPE OF THE STUDY:Page 69
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” This study basically tries to discover the current position of Coca-cola in the market. It also tries to discover the preferences of the customers when posed with a choice between Coca-Cola and Pepsi. It is primarily directed to the general public but was done only in New Delhi, Noida and Greater Noida
A research design is the specification of methods and procedures for acquiring the needed information. It is overall operational pattern or framework of the project that stipulates what information is to be collected from which source by what procedure. There are three types of objectives in a marketing research project:• • • Exploratory Research. Descriptive Research. Casual Research.
1. Exploratory Research:The objective of exploratory research is to gather preliminary information that will help define problems and suggest hypothesis.
2. Descriptive Research:The objective of descriptive research is to describe things, such as the market potential for a product or the demographics and attitudes of consumers who buy the product.
3. Casual Research:The objective of casual research is to test hypothesis about casual and effect relationships.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Based on the above definitions it can be established that this study is a Descriptive Research as the attitudes of the customers who buy the products have been stated. Through this study we are trying to analyze the various factors that may be responsible for the preference of Coca-Cola products.
SOURCES OF DATA
The data has been collected from both primary as well as secondary sources.
SECONDARY DATA:It is defined as the data collected earlier for a purpose other than one currently being pursued. As a researcher I have scanned lot of sources to get an access to secondary data which have formed a reference base to compare the research findings. Secondary data in this study has provided an insight and forms an outline for the core objectives established.
The various sources of secondary data used for this study are: News papers. Magazines. Text books. Marketing reports of the company. Internet.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” The primary data has been collected simultaneously along with secondary data for meeting the established objectives to provide the solution for the problem identified in this study. The methods that have been used to collect the primary data are: Questionnaire. Personal Interview.
RESEARCH MEASURING TOOLS & TECHNIQUES
The primary tool for the data collection used in this study is the respondent’s response to the questionnaire given to them. The various research measuring tools used are: Questionnaire. Personal interview. Tables. Percentages. Pie-charts. Bar-charts. Column charts.
An integral component of a research design is the sampling plan. Especially it addresses three questions: Whom to survey (sample Unit), how many to survey (Sample Size) and how to select them (sampling Procedure). Making the census study of the entire universe will be
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” impossible on the account of limitations of time and money. Hence sampling becomes inevitable. A sample is only his portion of population. Properly done, sampling produces representative data of the entire population.
SAMPLE SIZE:i. ii.
Through questionnaire – 150 respondents. Through personal interview – 27 respondents.
SAMPLING TOOL:Questionnaire was used as a main tool for the collection of data, mainly because it gives the chance for timely feedback from respondents. Moreover respondents feel free to disclose all necessary detail while filling up a questionnaire. Respondents seeking any clarification can easily be sorted out through tool.
Sampling Tools Questionnaire Personal Interview
Respondents Customers Customers Total Table – 1.7 150 27 177
FIELD WORK:The study was conducted in New Delhi, Noida and Greater Noida. The questionnaires were given to the respondents to fill in order to get their feedback. Questions were read out to the respondents and the answers were noted.
LIMITATIONS OF THE STUDY:The main purpose of this study is get idea about the preference of the customers towards various Coca-Cola products. But there are certain factors which affects this study they are as follow: Since the sampling procedure was judgmental, the sample selected may not be true representative of the population. Economic and market conditions are very unpredictable (Present and future). The project duration is limited to 4 weeks so it limits the area of study.
The study was confined to New Delhi, Noida and Greater Noida due to which the
result cannot be applied universally.
5. DATA ANALYSIS
AGE GROUP & GENDER:
From Fig 2.4, we can comprehend that 90% of total respondents belong to the age group of 20-30. This is because most of the consumers that prefer or consume Coca-Cola products belong to this age group. About 6% belong to age group below 20 and 3% belong to age group of 30-40.Form Fig 2.5, we come to know that the gender ratio of the total respondents is almost 2:1 (male: female).
SOFT DRINK CONSUMPTION & EXPENDITURE:
From Fig 2.6, we interpret that about 48% of the total respondents consume soft drinks rarely or once a week. About 35% respondents consume soft drinks twice or thrice a week and only 18% consumes soft drinks every day.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” From Fig 2.7, we interpret that about 81% of the respondents spend only Rs. 50-100 a week on Coca-Cola products, which is very low as compared to the global scenario. This creates a potential growth market for Coca-Cola India. About 12% spends from 100-150 a week & 7% spend above 150.
PURCHASING PORTAL PREFERENCE:
From the above data, we have ascertained that preferred portal for purchase of Coca-Cola products is the retail shops i.e. 58%. This is probably because not all communities in India have supermarkets and other purchasing channels present nearby, whereas, we can find retail shops in every corner.19% prefer to purchase from Supermarkets and Vendor machines. 23% prefer to purchase from Pubs, Restaurants and Multiplexes.
REASON FOR CONSUMPTION:
From this graph, we infer that there is no specific occasion why people purchase Coca-Cola products. Although some of the advertising campaigns target special occasion or festivals. From Fig 2.9 it is concluded that 59% respondents purchase Coca-Cola without any specific reason. About 23% purchase for the purpose of parties, 15% purchase while watching movies in the cinemas and only about 4% purchase during festivals and for picnic purposes.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” Fig 2.10
SOFT DRINK PREFERENCE:
From the above graph we interpret that about 70% of the respondents, prefer consuming Coca-Cola product over Pepsi and other drinks. This clearly states why Coca-Cola is market leader with almost 60% of market share. 23% prefer Pepsi Products and only 75 prefer other drinks.
OPINION ABOUT COCA-COLA PRODUCTS & PRODUCTS EXPECTED BY CONSUMERS:
From Fig 2.11, we infer that though the respondents are more than satisfied by the Coca-Cola product range they would still like the company to introduce new drinks. From Fig 2.12, we conclude that about 40% would like to see a new fruit drink being added to the product basket, 26% want energy drinks, 20% alcoholic drinks and only 14% want another fizzy drink. Majority of the people wanting to see a fruit drink is mainly because people are more health conscious now and want to manage their calorie intake.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” From Fig 2.13, we infer that about 47% of respondents prefer to purchase PET bottle of Coca-Cola Products. About 27% prefer to purchase glass bottles, 19% prefer Can of 300ml and only 8% prefer 1 & 2 litre bottles of Coca-Cola.
BRANDING & PRICING:
From Fig 2.14, it is concluded that respondents find Coca-Cola products better than that of Pepsi products. About 62% respondents said that they find Coca-cola products better than Pepsi and only 38% supported Pepsi products. From Fig 2.15, we infer that about 62% of the respondent considers the pricing of Coca-Cola much more reliable than that of Pepsi. About 38% respondents think that Pepsi have better pricing than that of Coca-Cola.
QUALITY & TASTE:
From Fig 2.16 & 2.17, it’s clear that Coca-Cola products have better taste and quality than that of Pepsi. About 73% respondents consider that Coca-Cola products have very good quality and taste. 27% respondents consider Pepsi products have better taste and quality.
AVAILABILITY & SATISFACTION:
From Fig 2.18, it’s clear that there is slight difference between the availability of products of Coca-Cola and Pepsi. About 51% respondents think that Coca-Cola products are much easily available in the market.49% consider that availability of Pepsi products is more in the market. About 70% of respondents are satisfied with the Coca-Cola products while as 30% respondents are satisfied with the Pepsi products as shown in Fig 2.19.
6. SUGGESTIONS AND CONCLUSION
The suggestions made in this section are based on the market study conducted as part of “Coca-Cola India”. The suggestions are arranged in order of priority, highest first. Perform a detail demand survey at regular interval to know about the unique needs and requirements of the customer. The company should make hindrance free arrangement for its customers/retailers to make any feedback or suggestions as and when they feel.
The company should focus to bring some more flavors like health drinks and other
low-calorie offerings. Coca-Cola India can also introduce some fruit based drinks, as it has already entered the energy drink arena with “Burn”. Coca-Cola’s distribution channel is mostly through retail. Whereas the competitors also concentrates more on the multiplexes, pubs and restaurants. Coca-Cola should try to increase their distribution in these areas.
The company must keep a watch on its primary competitors in market in order to be
able to compete with them.
The company should use new attractive system of word of mouth advertisement to
keep alive the general awareness in the whole market as a whole.
The company should be always in a position to receive continuous feedback and
suggestions from its customers/ consumers as well as from the market and try to solve it without any delay to establish its own good credibility.
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India” A strong watch should be kept on distributors so that the goodwill of the BRAND doesn’t get affected.
Though there were certain limitations in the study that was conducted. The sample allowed for some conclusions to be drawn on the basis of analysis that was done on the data collected. The data has clearly indicated that Coca-Cola products are more popular than the products of Pepsi mainly because of its TASTE, BRAND NAME, INNOVATIVENESS and AVAILABILITY, thus it should focus on good taste so that it can capture the major part of the market. The study also indicated that the consumers are satisfied with the Coca-Cola products and purchase them without any specific occasions. In today’s scenario, customer is the king because he has got various choices around him. If you are not capable of providing him the desired result he will definitely switch over to the other provider. Therefore to survive in this cutthroat competition, you need to be the best. Customer is no more loyal in today’s scenario, so you need to be always on your toes.
Marketing Management – Kotler Philip. Research Methodology – Kothari.
www.thecoca-colacompany.com www.news.bbc.co.uk www.india-server.com www.magindia.com www.coca-colaindia.com www.wikiinvest.com www.open2.net
Annual report of Coca-Cola 2008. Annual report of Coca-Cola 2009.
NAME: .............................................................................. GENDER: a) Male b) Female Do you drink Soft drinks? a) Yes b) No How often do you have soft drinks per week? a) Once a week b) Twice a week c) Thrice a week d) Everyday e) Rarely What drink comes to your mind when you think of soft drinks?
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
a) b) c) d) e) Coca-Cola Pepsi Other products of Coca-Cola Other products of Pepsi Other drinks
What quantity do you usually prefer to buy? a) 200-250 ml Glass bottle b) 300 ml Can c) 500 ml Pet bottle d) 1 litre e) 2 litre What do you feel about Coca-Cola product range? a) Excellent b) Good c) Satisfactory d) Below Satisfactory e) Bad
What occasions do you prefer to buy Coca-Cola products? a) Festivals b) Picnics c) Parties d) Cinemas e) Just like that What is your most preferred channel for purchasing Coca-Cola products? a) Super markets b) Retails c) Vendor Machines d) Pubs & Restaurants e) Multiplexes How much do you spend on Coca-Cola products per week? a) 50-100 b) 100-150
“Project Report on Coca-Cola Company and study of customer preference for Coca-Cola brands with reference to Coca-Cola India”
c) 150-200 d) Above 200 Put (X) mark in which ever you feel is appropriate? Parameters / Product 1) Branding 2) Quality 3) Price 4) Taste 5) Availability 6) Satisfaction Coca-Cola Products Pepsi Products
What kind of products do you want Coca-Cola to introduce in the future? a) Fizzy Drinks b) Fruit Drinks c) Energy Drinks d) Alcoholic Drinks
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