Extended Essay

November 2022
Business Management

Title: Strategic Growth Analysis of the Coca-Cola Company

Research Question: How Can Coca-Cola implement Growth Strategies

to Meet the Demand for Healthier Beverages?

Word Count: 3938

Table of Contents
Methodology ....................................................................................................................4
Sources .................................................................................................................................... 4
Theory and Tools ..................................................................................................................... 4
Investigation ....................................................................................................................5
Health and Wellness trend ....................................................................................................... 5
STEEPLE analysis ...................................................................................................................... 7
Ansoff Matrix......................................................................................................................... 10
Boston Consulting Group Matrix............................................................................................. 13
Competition....................................................................................................................15
Diet Coke ........................................................................................................................17
Conclusion ......................................................................................................................18
Works Cited ....................................................................................................................18
Appendix ........................................................................................................................22
Appendix 1 - CSD Industry Revenue Growth............................................................................ 22
Appendix 2 – Interview .......................................................................................................... 22

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Introduction

The Coca-Cola Company is a beverage retailer, manufacturer and marketer of non-

alcoholic beverage concentrates and syrups (The Guardian,2010). Coca-Cola is a household

brand with a significant global presence, controlling several hundred brand names. The

company has been the market leader in carbonated soft drinks for the last two decades (J.B

Maverick,2022).

They have produced many sodas, including Diet Coke, Sprite and Fanta. Founded in

1886 by Sir Asa Griggs Candler (Encyclopaedia Britannica,2020), the Coca-Cola Company

introduced coke as a five-cent-per-glass fountain beverage alternative to alcoholic

beverages. The business grew in the 1930s due to the addictive nature of the drink. By the

end of the Second World War's, Coca-Cola was being produced in forty-four nations. They

now generate a net profit of $38.7 billion per year (The Coca-Cola Company,2022).

The demand for healthier lifestyles is growing as consumers look for choices that

support their efforts to feel, look, and live better. That trend is affecting all aspects of life,

including beverages. The global market for healthier drinks is anticipated to have positive

growth, “with a CAGR of 7.88% predicted for the following five years” (HEALTH DRINKS

MARKET GROWTH, TRENDS AND FORECASTS (2022 - 2027),2022). Bottled water is America's

favourite drink. Water outsold soda sales for the first time since 2016 and has kept up the

trend (NetworkNewsWire,2021). The continued growth comes from purchases across

various sectors, including convenience store sales, e-commerce, and the hospitality sector.

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 The Coca-Cola company is currently facing difficulties in the market, as they struggle

to adapt and create successful products that meet the growing demand for healthier

beverages.

This essay will analyse and discuss Coca-Cola's current growth strategies to establish

whether they are successfully meeting the demand for healthier beverages. Therefore, the

proposed research question is: How can Coca-Cola use growth strategies to meet the

demand for healthier beverages? This essay will discuss this using a wide range of tools and

methods.

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Methodology
Sources

Most of the information and data were gathered through secondary research, which

was conducted through various online sources and textbooks. Although most of the

information regarding Coca-Cola’s data came from the Coca-Cola website itself; there could

have been a bias towards Coca-Cola as they are unlikely to discuss topics that could represent

the company negatively. Hence other sources, such as scholarly articles from Simon Fraser

University, were used to explore Coca-Cola’s potential future growth strategies. For business

resources, the “Business Management Study and Revision Guide” (Hang,2013) was used to

provide business concepts, tools, and theories to analyse market share, competition, and

growth strategies.

This variety of resources, which includes but is not limited to academic research

articles, case study reports, videos, and interviews, to support the qualitative evaluations and

analyses made in this essay. An objective viewpoint was formulated through a wide range of

sources to enhance the analysis and give answer to the research question.

Theory and Tools

To analyse the success of Coca-Cola’s current growth strategies, this essay has

implemented business tools including the STEEPLE analysis, Ansoff’s Matrix, and Boston

Matrix. A STEEPLE analysis is a framework that assesses the “business environment in which

the firm operates” (Peterdy,2022), and can be used to determine how various factors

determine Coca-Cola’s growth strategy decisions. The STEEPLE analysis focused on the

Social, Environmental, and Ethical factors in this essay because the research that was

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conducted found that the other factors were not valuable in answering the research

question.

Concerning the Ansoff Matrix, it is a tool that is used to analyse a firm’s strategies for

growth (Matei,2008). The Ansoff Matrix can determine what growth strategy Coca-Cola uses

to dominate the food and beverage industry. Finally, using the Boston Matrix allowed for an

evaluation of Coca-Cola’s growth opportunities by reviewing its portfolio of products.

Investigation
Health and Wellness trend

The global beverage market continues to see a strong trend toward health and

wellness. Research from ADM's OutsideVoice revealed that “77% of consumers would like to

do more to stay healthy in the future” (Poinski,2020). This sudden shift towards a healthier

lifestyle is predominantly because consumers are becoming more aware of the importance

of having health-conscious lifestyle, and “they are much more open to experimenting to try

different things" (Poinski,2020).

This trend is incentivising innovation across a range of beverage sectors. Most soft

drink consumers are shifting their consumption patterns to low-calorie carbonates, bottled

water, sport drinks, juice, and RTD green and white teas instead of regular carbonates.

Specifically, as it is illustrated below in Figure 2, the amount of soft drink consumption in the

US, has encountered a consistent decline during the last decade, simultaneously when the

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level of consumption of bottled water and sports drinks is considerably on the rise (Business

Bliss Consultants FZE ,2018) .

The obesity controversy is one of the most significant factors shaping the future of the

soft drink industry. Moreover, soft drinks also have a direct linkage to heart disease and

diabetes. According to a recent investigation that observed the health of approximately

90,000 women for twenty years, those who drank just one sugary soda per day had a faced

double the risk of developing Type 2 diabetes. A woman's risk of having a heart attack

increased by 40% if she consumed more than two daily servings. No matter how different the

women's diets, levels of exercise, or weights were, drinking soda increased their health risks

(MB, JE and DS,2004). With this in mind, people are using this as an incentive for a healthier

lifestyle (Mastroianni,2020).

Although Coca-Cola has the right idea and is investing in positive alternative

beverages, making absolute commitments to active living, and introducing an inventive 7.5-

ounce mini-can, the company continues to contribute to the obesity problem. Furthermore,

they have launched new brands as "healthier" alternatives. However, these are merely

substitutes. For instance, coke zero, which is marketed as a healthier alternative to Coca-Cola

Classic. The substitute uses artificial sweeteners to sweeten this beverage without adding

calories. The health effects of artificial sweeteners are controversial, and scientists are

becoming increasingly concerned regarding safety (Heasman and Ndabane,2021) . The only

differences between Coke Zero and the classic coke are the minor changes to the natural

flavour composition (Bantilan,2019). Despite scientific advancements making diet-

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carbonated soft drinks more appealing, consumer preference may remain inelastic as many

people see it as a "slur on Coca-Cola's main ingredient" (Wiener-Bronner,2021).

STEEPLE analysis

A STEEPLE Analysis stands for Social, Technological, Economic, Environmental,

Political, Legal, and Ethical, as shown in figure 1. Planning Tank states, “STEEPLE is an

advanced analysis as it measures the macro-environmental external factors. It offers a

detailed overview of different external fields” (Choo,2017). A STEEPLE analysis provides

businesses with a tool to examine the external factors that influence productivity,

marketing, and decision-making and how they can use them to their advantage when

discussing business operations. Furthermore, STEEPLE analysis is used to determine the

“validity of reasonableness of the overriding of business targets and strategies”

(Choo,2017). Thus, if the analysis provides useful information, such as a growing drive to be

socially sustainable, it helps a company move in the right direction. This STEEPLE analysis

will focus specifically on the social, technological, legal, and ethical factors, as they are most

relevant to this essay and will help answer the research question.

Figure 1 - STEEPLE analysis (Cuofano ,2022)

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 In the case of Coca-Cola’s expansion towards becoming the market leader of the

beverage industry, the STEEPLE Analysis will provide insight into how each external factor,

whether social or ethical, affects this new operation and how the business can use this to

their advantage against competing firms.

The following STEEPLE analysis can be performed for Coca-Cola:

1. Social: About two-fifths of the world population is estimated to be obese and

scientists have speculated a correlation between soft drink consumption and obesity

(Ji-Myung e Lee ,2019). With this in mind, an article from the university of Georgia

found that beverages are one of the fasting growing segments in the healthy food

market, because many people have become increasingly cautious about their diet and

are avoiding sugary based beverages (Juyoung,2018) . As consumers become more

educated, they are incentivised to becoming healthier, which is why 77% of consumers

want to do more to remain healthy (Poinski,2020). As a matter of fact, from 2015 to

2018, “the volume of sugars sold per capita per day from soft drinks declined by 30%”,

and this decline has continued to increase to this present day (BMC Med,2020) .

Consequentially, dieting has become a widespread trend, pressuring the soft drink

industry to develop new goods that cater to consumer preferences. These trends have

made people avoid unhealthy beverages.

2. Technological: Advancement in technology has led to improvement in manufacturing

and increased “quality concepts such as JIT, Six Sigma, MRP-II” which have improved

the effectiveness of bottling operations and quality of products (Romain, Matthieu

and Frank,2019). Technological advancement also supports the launch of new product

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 lines, such as new flavours, “sugar-free or diet sweeteners”, and “caffeine-free

products”, enabling PepsiCo and Coca-Cola to launch brands that meet the shifting

taste and preferences of consumers (MBA Posts ,2012) . Technology can give firms in

the soft drink industry a competitive advantage.

• Legal: Governments worldwide have extensive regulatory laws for every aspect of the

beverage industry, making the food industry one of the most “tightly regulated

industries of all” (BUSH,2019). Several countries have already issued a range for sugar

usage in beverages, which on average is 5% (European Commission , N.D). Companies

need to need to respect these restrictions or else they may face legal issues.

Moreover, the introduction of the Sugar-Sweetened Beverage (SSB) Tax was

implemented to reduce the consumption of drinks with added sugars. Governments

also made it necessary for beverages companies to include warning labels on products

and in advertisements to make consumers aware about the risks associated with

consuming a product (HARVARD LAW SCHOOL ,2022).

• Ethical: Because of the increased consciousness of the unhealthy health effects linked

with carbonated beverages, in the past two decades, a notable number of businesses

in the carbonated soft drink (CSD) the beverage industry has moved away from sugar-

based drinks and toward diet drinks, which are believed to have few or no calories

(Future Market Insights ,2022). Moreover, studies revealed that there is a rapidly

growing market for diet drinks, some of which are claimed to contain zero calories or

fewer calories than regular soft drinks (GRAND VIEW RESEARCH, 2019). However,

Jillian Kubula claims that the appearance of the word "diet" on the packaging of these

beverages "these does not necessarily mean that these products are safe and healthy

for human consumption". (Kubula,2021). As aforementioned, Coca-Cola’s market

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 development products like Coke zero and diet coke, use artificial sweeteners as a

substitute for sugar. In fact, these sweeteners are likely to have worse health effects

than regular sugar (Cleveland Clinic ,2018). Coca-Cola does not mention this on any of

their products. This raises the question on whether it’s ethical for Coca-Cola to be

hiding the sugar ingredients in their healthier products.

Ansoff Matrix

Figure 2 - Ansoff Matrix (Reiling ,2021)

The Ansoff matrix, is a tool that companies use to assess their growth strategies. The

matrix depicts four strategies assisting a company’s growth strategies. The matrix illustrates

four strategies which support company’s growth strategies, as well as the risks involved in

each strategy.

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An Ansoff matrix includes four categories: Market Penetration, Product development, Market

Development, and Diversification. According to the business management revision guide, the

definitions for the four categories are:

1. Market Penetration: focuses on increasing sales of existing products in an existing

market.

2. Market Development: Targeting with current products in a new market

3. Product Development: Introducing new products into an existent market for

expansion

4. Diversification: Introducing new products in a new market

The CSD industry “generated $212.1 billion in revenue in 2018” (see appendix 1). The

market is a “maturing industry with little room to grow due to the changing economic, health,

and environmental factors” (Alahi,2018). Furthermore, because of the vast diversification of

CSD companies’ goods and services, the companies are experiencing “growth” in some areas

such as offering “healthy drinks”. Consequentially, companies are incorporating “different

strategies to each of their departments and product segments”. The sale of sodas is one of

the largest CSD operations, and over the last five years, CSD businesses have found it

increasingly difficult to “bring in profits from the sales of their flagship products”. Moreover,

the flagship products of CSD companies are becoming less demanded by consumers because

of several problems like the “high level of sugar in Coca-Cola’s original drink” (Alahi,2018).

Although the CSD industry has become a “mature market” (Mordor Intelligence,2022),

Coca-Cola continues to seek new growth strategies. In fact, Coca-Cola has gone

through different paths to diversify and create an extensive variety of product lines, to get

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their foot in several market segments and increase their revenue (refer to appendix 2). Coca-

Cola has primarily used a “diversification strategy in order to expand”, and the primary way

that Coke has done so is “through acquisitions”. More than any of its rivals, Coca-Cola has

made 11 acquisitions.

Furthermore, the company has a history of acquiring companies outside of its main

industry, as illustrated by its 1982 acquisition of Columbia Picture Entrainment (Hayes,1982)

and its 2018 acquisition of Costa Limited, a multinational coffee company (The Coca-Cola

Company,2019), giving Coca-Cola a strong presence in the coffee market.

Additionally, the company acquired both the Mojo Beverage and Tropico in

September of 2018. These subsidiaries of Coca-Cola are both organic beverage brands.

Moreover, in April 2012, Coca-Cola acquired Zico, a company which manufactures coconut

water. They also obtained Fuze beverage in May 2007, Barq's in May 1995, and Minute Maid

in December 1960 (Alahi,2018). These firms are both in the healthy beverage sector. These

acquisitions exemplify that Coca-Cola has diversified from its carbonated beverage drink-

based business to a great extent as they have expanded into the health drinks market

segment, in an attempt to meet the shifting consumer demands.

In terms of market development, in 2005 Coca-Cola introduced Coke Zero. Its idea is

similar to Diet Coke; a product with the taste of Coca-Cola but with zero sugar and low

calories. However, it was revealed that young men avoided drinking Diet Coke because of the

perception that it was a drink for women. Coke Zero had created a more "masculine" appeal

with its polished black can and polar opposite advertising campaigns (Oakley,2018). Coca-

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Cola introduced this market development strategy to grow its customer base platform and

increase its market share.

Boston Consulting Group Matrix

Figure 3 - Boston Matrix (iEduNote ,2022)

A Boston Consulting Group matrix (BCG) is a model used to analyse a business’s

products to assist with long-term strategic planning. Companies can use the matrix to “find

new growth opportunities” and determine their “future investment strategy” (Martin,2022).

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• Dogs: Dogs are “a company's products with low growth and high market share but has no
promising future outlook” (Gordons,2022). Normally, management shows limited interest in
these products and does not invest in them as the chances of profit or benefits are low. In the
case of Coca-Cola, their product Zico coconut is a dog product. Despite the fact that the
product has a relatively high market share, it has a low market growth rate, suggesting that
the product is becoming saturated less demanded. For this reason, Coca-Cola has limited their
investment in this product.

• Stars: Stars are described as products that have a “high market share and high growth rate”
(HAYES,2022). In Coca-Cola's case, diet coke is their star product as it has a high market share,
and the product will continue to grow as the demand for healthier drinks continues to rise.
Coca-Cola should continue to advertise these products as they are evidently in demand.
Although as previously stated, these products are not entirely healthy, so Coca-Cola should
adjust their formula to reduce the sugar content in them. By doing so they are providing a
product which already has a high market share and growth rate, but they are also being more
transparent by adapting their product to what the market demands.

• Cash Cows: Products with a “high market share but low market growth” are known as cash
cows. They have a high market share, but the products are estimated to have “low chances
of significant growth in the future” (HAYES,2022). These products bring in the most revenue
with the least amount of investment. In the BCG matrix of Coca-Cola, it is evident that Coke
has been the dominant market leader in the CSD industry and has generated a large amount
of revenue for the company. Due to the firm's widespread recognition and long history as a
trusted brand, the company has marked its global presence. However, the company should
consider the changes in consumer preferences. As consumers continue to opt for healthier
alternatives, Coca-Cola drink sales will likely decrease.

• Question Marks: Products considered question marks are still developing, and it is still
unknown how the market will react to them (Alahi,2018). Although these products initially
achieved a small market share, the investment decision still has risks. Thus, these goods have
the potential to either become successful and turn into stars or fail and become cash cows.
Regarding Coca-Cola’s BCG matrix, it is evident that they are launching many new brands and

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product lines including Sparkling water, Smart water, Honest Tea, and Minute Maid. These
products are intended to encourage healthy non-carbonated beverages and healthy lifestyle.
Coca-Cola is also making investments in new products and promoting them. These products
are the question marks for the company (EdrawMax,N.D).

Competition

Figure 4 – Soda Surrenders to Water (Maloney and Steele ,2017)

Coca-Cola is struggling in the current market because of declining sales, regulatory

issues, and overcoming their biggest hurdle of changing consumer perception due to the

growing distress for health and well-being.

The consumer’s demand for a “healthier way of life” combined with “well-being

concerns towards obesity” can be seen as the most significant social change that has

“immediate and significant impact on Coca-Cola’s financial condition” and reputation

(Business Bliss Consultants FZE,2018). In particular, as shown in Figure 4 above, the quantity

of soft drink consumption in the United States has consistently decreased over the past ten

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years, while consumption of bottled water and sports drinks has significantly increased. This

recently growing demand for healthier drinks predominantly came from the covid 19

pandemic, which caused consumers to progressively seek functional and nutritional

beverages “that they believe might aid in the body's defences and immunity”, prompting in

an increase in the consumption of healthy beverages (Mordor Intelligence,2022).

As displayed in figure 4, Nestle leads the global bottled water market with a share of

23.1%. Coca-Cola’s Dasani brand water is the second best-selling bottled water with 18.1%

market share. PepsiCo, with its Aquafina capturing 7.5% market share is the third best-

selling bottled water. To stay ahead of its competitors, Coca-Cola could leverage its secure

position in the bottled water segment to take advantage of growing demand for bottled

water.

PepsiCo is undoubtedly one of Coca-Cola’s biggest competitors. "The two companies

have been in competition with each other for more than a century". Both companies have

very similar ingredients in their flagship beverage products: Coke and Pepsi. The two

companies also have similar still beverage interests, such as milk, orange juice and bottled

water. Most importantly, PepsiCo has a greater capacity to leverage its other product lines

if trends in the carbonated beverage market continue to decline (Strom,2014). Moreover,

PepsiCo is aware of the change in consumer preference towards healthier beverages and

has dedicated their growth strategy cater this demand. This has affected Coca-Cola’s growth

strategy because it has resulted in them putting more focus on expanding its network and

beverage portfolio (Athul,2021) . Focusing on this has led to Coca-Cola becoming more

extensive and in line with PepsiCo. Although this highlights that Coca-Cola’s has put in a

16
great effort to implement growth strategies to gain leverage over PepsiCo, it also shows that

PepsiCo will continue to remain a threat for Coca-Cola in the foreseeable future.

Diet Coke

Figure 5 – Coca-Cola Value Sales (Fleming ,2018)

Over the last few years diet coke’s value has continued to increase, and in 2018 “Diet

Coke sales have overtaken the classic Coca-Cola” with sales figures indicating that the low-

sugar market development product has had an impact. This is also in line with what the

employee has mentioned about the industry (refer to appendix 2).

The data shows that Coca-Cola’s sales values were “higher than Diet Coke every

week for the in 2017, until the brand overhaul and subsequent introduction of the sugar tax

at the start of 2018”. Ever since, they have diverged with Diet Coke sales increasing at a

faster rate than Coca-Cola original (Flemming,2018).

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Conclusion
Limitations

All in all, This essay aimed to answer the research question, "How Can Coca-Cola

implement Growth Strategies to Meet the Demand for Healthier Beverages?" Moreover, in

doing so, findings come down to show that continued innovation and diversification are vital

for coca cola to implement within their business model, to withstand further competition

from healthy drink companies and to tap into the health market to ensure maximum revenue

and company growth. However, this might decrease short-term profits and revenue for Coca-

Cola due to high capital expenditure in R&D. However, it will also create higher shareholder

value in the long run once it can compete and withstand the market competition in this

healthy drink sector, particularly. These interconnected characteristics have played a

significant role in Coca-Cola's marketing strategy to meet the demand for healthier beverages.

Additionally, the essay does not consider much financial data that could reflect the company's

financial situation when recommending the different solutions. Therefore, the feasibility of

these solutions is not considered.

The main limitation of this investigation was that most of Coca-Cola's internal

strategies were confidential. As a result, there was a lack of official documents outlining

whether Coca-Cola was actually implementing the growth strategies discussed in the essay.

Even though bias was considered using a variety of sources, the media can only provide a

constrained view compared to what insider information might have revealed. Coca-Cola has

successfully maintained a good market share despite facing heavy competition. However, as

the demand for healthier beverages continues to increase, as discussed throughout the essay

18
(Poinski,2020), and those for carbonated beverages decrease, there will be more competition

for Coca-Cola to withstand.

From the Ansoff Matrix, market development and diversification in the carbonated

soft drink sector seem to be profitable growth strategies. As aforementioned, Coca-Cola's

extensive acquisition of firms in the healthy drink sector has allowed them to diversify their

portfolio and gain a wider customer base. This is a growth strategy that Coca-Cola should

continue to implement. Moreover, Coca-Cola should continue to innovate across their

portfolio to deliver more beverage options for consumers.

The STEEPLE analysis showed that significant social, legal, and ethical factors could

impact Coca-Cola's growth strategies. Finally, the Boston Consulting matrix revealed that

Coca-Cola should continue advertising diet coke and coke zero as these substitutes are

targeted to meet the demand for healthier beverages. However, Coca-Cola should become

more transparent about the details of the sugar content in their beverages and should adjust

their formula to reduce the sugar content in them. However, a limitation to this is the cost of

changing their formula.

Even though various lenses and analytical frameworks were utilised in this essay to

examine the research question, in the end, the information is still limited; therefore, Coca-

Cola needs to consider its business objectives, values, financial situation and effect on

shareholders to ensure that they make a well-rounded and informed decision when choosing

a recommendation that has been provided.

19
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Appendix
Appendix 1 - CSD Industry Revenue Growth

Appendix 2 – Interview

Interview transcript with Coca-Cola associate manager

Interviewer: Good afternoon, my name is Jude, and I am currently doing an extended essay
for the IB. Thank you for taking part in this interview to help me understand the industry in
which Coca-Cola operates in. I have a few questions I’d like to ask.

Interviewee: You’re welcome, it would be a pleasure to help. Please go ahead and ask.

22
Interviewer: I’d like to know more about the industry in which Coca-Cola operates in. What
are the usual trends that you guys are seeing? And are there any opportunities that you guys
feel like you need to grasp?

Interviewee: We’ve noticed that recently, particularly since the pandemic began, consumers
are opting healthier alter alternatives to the classic Coca-Cola drink. The sales of Coca-Cola
zero and diet coke have risen substantially. Because of this, the demand for the regular Coca-
Cola drink has begun to decrease. We see this as an opportunity for growth. Our aim is to
respond to the consumer’s demand. Therefore, we have begun advertising diet coke and
Coca-Cola zero more to increase its popularity. These are two products that are likely to
increase in value and demand over the coming years.

Interviewer: Wow, that’s interesting because I always thought that the classic coke Coca-
Cola’s most popular and demanded drink. Do you think that the industry is highly
concentrated? And are your competitors giving you a hard time to withstand the
competition?

Interviewee: Yes, I think the industry is highly concentrated. Besides the fact that the market
is extremely competitive there are two dominant parties. Coca-Cola and PepsiCo are the two
leading companies that dominate the beverage market. It is becoming increasingly difficult
for other firms to penetrate the market because these two firms have such a high market
share and continue to innovate and attract new customers.

Interviewer: With this in mind do you feel like there are threats to the industry in which you
operate in? Are there any struggles, and if so, what exactly are you guys doing to address
these struggles?

Interviewee: As I mentioned earlier, consumers are becoming more health conscious. This is
a threat for the industry because reacted slow to this. The industry needs to be actively doing
more to come up with healthier alternatives. Coca-Cola is struggling with the strong
competition facing them and you can see the competition is quite intense for coca cola. For
them to withstand it they need put investment into innovation or diversification. They need

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to continue to diversify into new healthier markets through acquisitions and continue
innovating healthier alternatives so that consumers have a greater choice.

Interviewer: Thank you for that, I appreciate you taking the time to answer these questions.

Interviewee: That’s no problem. Is there anything else I can help you with?

Interviewer: No that is all. Thanks a lot for your time and patience. I will get in contact with
you again once my assignment is complete.

- The interviewee’s name is not provided as anonymity was requested

*END OF INTERVIEW*

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