CONTENT

Executive summary

The company's history and birth of Coca-Cola

Coca-Cola's Marketing Strategy

Market Segmentation
Mass Marketing vs. Targeted Marketing
Geographical Segmentation
Gender
PEST-Analysis
Political Factors
Economic Factors
Social Factors
Technology
Porter's Five Forces
The threat of new entrants
Rivalry
The threat of Substitutes
Bargaining power of buyers
The bargaining power of suppliers
SWOT-Analysis
Strengths
Weaknesses
Opportunities
Threats
Marketing strategy and Marketing Mix

Product and Pricing Policy

Coca Cola's Product Portfolio
Most important brands
Pricing Strategy
Evaluation of Coca-Cola's current product and pricing policy
Recommendation

Communication policy
Communication Strategy
Messages within Coca-Cola's communication
Advertising
Public Relations
Personal Selling
Sales promotion
Direct Marketing
Viral Marketing
Most important communication channels and Social Media Activity
Evaluation of the company’s communication policy
Recommendation

Summary of the Main Results

Main results of the price, product and communication policy
Main recommendations

Sources

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

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

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

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

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

THE COMPANY'S HISTORY AND BIRTH OF COCA-

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

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

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

In 1887, another Atlanta pharmacist and businessman, Asa Candler bought the formula
for Coca Cola from inventor John Pemberton for $2,300. By the late 1890s, Coca Cola
was one of America's most popular fountain drinks, mainly due to Candler's aggressive
marketing of the product. With Asa Candler, now at the helm, the Coca Cola Company
increased syrup sales by over 4000% between 1890 and 1900.
Advertising was an important factor in John Pemberton and Asa Candler's success and by
the turn of the century, the drink was sold across the United States and Canada. Around
the same time, the company began selling syrup to independent bottling companies
licensed to sell the drink. Even today, the US soft drink industry is organized on this
principle.

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

“Coca-Cola’s mission is to

- Refresh the world...

- Inspire moments of optimism
- Create value and make a difference

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

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

COCA-COLA'S MARKETING STRATEGY

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

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

MASS MARKETING VS. TARGETED MARKETING

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

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

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

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

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

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

An example would be America and China: In America the products of Coca-Cola almost
reached maturity level, whereas in China there is a high growth potential, but the needs
and habits differ.

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

Abbildung in dieser Leseprobe nicht enthalten

Coca-Cola China - www.forbes.com

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

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

raKanzleiMarketing

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

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

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

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

Coca-Cola’s production is also influenced by the different government systems: here, the
question arises whether it is liberal or has strict regulations influencing the production or
employment of the company.

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

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

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

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

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

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

SOCIAL FACTORS
The growing importance of Health Consciousness affected Coca-Cola’s product portfolio
by offering drinks tailored to the new customer needs, such as Diet Coke.

Moreover, the whole Non-alcohol market has increased as many people switched over
from beer or other alcoholic beverages and it definitely will increase further.

The population growth rate has also a strong influence on the market as it differs strongly
between countries. The company has to adapt its production to it and consider it in their
strategy and further planning.

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

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

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

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

TECHNOLOGY
Some advances in technology have pushed Coca-Cola’s sales volume tremendously, for
example the introduction of cans and plastic bottles in the past. Now, people could carry
and bin them. Advancement in communication technologies like television or the Internet
had a significant influence on Coca-Cola’s communication policy and Marketing
strategy.
Advances in media help the company make their product attractive to the customer
continuously supporting Coca-Cola’s promotion activities.

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

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

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

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

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

PORTER'S FIVE FORCES

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

THE THREAT OF NEW ENTRANTS

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

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

RIVALRY
As the threat of new entrants is quite low in this specific industry, the rivalry between the
two existing companies Coca-Cola and PepsiCo is even higher. Here, you can identify a
Duopoly.
“Usually, a duopoly trying to maximize profits will produce more than a monopolist but
less than a competitive industry.”[12] The two big players have the majority of the market
share.

THE THREAT OF SUBSTITUTES

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

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

BARGAINING POWER OF BUYERS

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

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

Abbildung in dieser Leseprobe nicht enthalten

www.lesen.net

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

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

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

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

THE BARGAINING POWER OF SUPPLIERS

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

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

SWOT-ANALYSIS
The SWOT-analysis is a framework of a company’s strengths, weaknesses, opportunities
and threats. The strengths and weakness deal with internal issues, whereas the
opportunities and threats are applied to external factors.

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

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

With its secret formula Coca-Cola has created a unique taste McDonald’s which so far
couldn’t be copied. The company uses this also as a Marketing tool by communicating to
their customers that only they have the real Coke.

As a big player Coca-Cola has many exclusive contracts with big restaurants like
McDonalds; so it’s connected with it and even more people buy the product. www.
popsop. com

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

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

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

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

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

Being an iconic American company it may cause problems in some countries as people
refuse to purchase the products due to America’s image in the world.

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

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

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

[...]

[1]
 See The Coca-Cola Company - History http://heritage.coca-cola.com/

[2]
 The Coca-Cola Company - Mission, Vision and Values

http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html

 Comparative analysis of marketing segmentation, targeting strategy between Pepsi vs

[3]

Coca Cola in Asia, http://ankandhk.hubpages.com/hub/PEPSIvsCOCACOLAmarketing-

strategy

 See Comparative analysis of marketing segmentation, targeting strategy between Pepsi

[4]

vs Coca Cola in Asia,

http://ankandhk.hubpages.com/hub/PEPSIvsCOCACOLAmarketing-strategy

[5]
 See raKanzleiMarketing - Coca Cola Light vs. Coca Cola Zero
http://ra-kanzleimarketing.blogspot.com/2010/07/coca-cola-light-vs-coca-cola-zero.html

[6]
 See U.S. Food and Drug Administration www.fda.gov

 See Romeo Regenass , Tagesanzeiger- Coca-Cola lobbyierte und taktierte, bis die EU
[7]

das Ampelsystem kippte

http://www.tagesanzeiger.ch/wirtschaft/unternehmen-und-konjunktur/CocaCola-
lobbyierte-und-taktierte-bis-die- EU-das-Ampelsystem-kippte/story/16688519,
12.12.2011

[8]
 wikiinvest - Coca-Cola Company (KO)

http://www.wikinvest.com/stock/Coca-Cola_Company_(KO)

 Foodprocessing-technology.com - Coca Cola Bottling Plant, United Kingdom

[9]

http://www.foodprocessing-technology.com/projects/coca-bottling/

 See Modern Russia - New production facility for Coca-Cola in Russia

[10]

http://www.modernrussia.com/content/new-production-facility-coca-cola-russia,
Oct.2011

 See forbes.com - Coca Cola Co Ratios and Returns

[11]

http://fmapps.forbes.com/fmapps/jsp/fmance/compinfo/Ratios.jsp?tkr=KO

 Basic Economics - Oligopoly Market structure

[12]

http://www.basiceconomics.info/oligopoly-market-structure.php

 see Ksingh/Elisabeth Wistrom - The Cola War: Coke’s Porter's Five Force Model
[13]

http://www.brighthub.com/office/entrepreneurs/articles/79263.aspx Jul.25, 2010

 Ksingh/Elisabeth Wistrom - The Cola War: Coke's Porter's Five Force Model
[14]

http://www.brighthub.com/office/entrepreneurs/articles/79263.aspx Jul.25, 2010

[15]
 The CocaCola Company - Product Descriptions http://www.virtualvender. coca-cola. com/
ft/index.j sp ?brand_id=705