Coca Cola Industrial Analysis

Coca-Cola has strong brand recognition across the globe. The company has a leading brand value and a strong brand portfolio. Coca-Cola is the leading brands in the top 100 global brands ranking in 2012 (Interbrand). Interbrand also valued Coca-Cola at $67,000 million. Coca-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.

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 nonalcoholic 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 (Answers). The company’s operations are supported by a strong infrastructure across the world. Coca-Cola 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 (Answers). 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 (Coca-Cola Company, 2012). Revenues from Latin America grew by 20.

4%. 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’ and bottling investments, accounted for 34. 8% of total revenues.

Robust revenues growth rates in these segments contributed to top-line growth for Coca-Cola (Coca-Cola Company, 2012).The company received negative publicity in India during September 2006. The Company was accused by the Center 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.

These pesticides included chemicals which could cause cancers, damage the nervous and reproductive systems and reduce bone mineral density. Such negative publicity could adversely impact the company’s brand image and the demand for Coca-Cola products.This could also have an adverse impact on the company’s growth prospects in the international markets (Mahajan, 2009). In 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 and decline in the warehouse-delivered water and juice businesses.

Moreover, the company also expects performance in North America to be weak during. 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 (Corporate, 2012).Stronger international operations increase the company’s capacity to penetrate international markets and also gives it an opportunity to diversity its revenue stream. 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.

Market consumption volumes were estimated to be 30 billion liters. The market's consumption volume is expected to rise to 38. 6 billion units. In terms of value, the bottled water market is forecast to reach $19. 3 billion.In the bottled water market, the revenue of flavored water (water-based, slightly sweetened refreshment drink) segment is growing by about $10 billion annually.

The 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 flavored water (Business Policy and Strategy). Intense competition Coca-Cola competes in the nonalcoholic 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 nonalcoholic 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 (10-K, 2010). Competitive factors impacting the company’s business include pricing, advertising, sales promotion programs, product innovation, and brand and trademark development and protection.Intense competition could impact Coca-Cola’s market share and revenue growth rates. 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 anyone 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. 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. Coca-Cola’s revenues could be adversely affected by a slowdown in the US carbonated beverage market (Answers). The Five Forces Frameworkis a strategy concept created by Michael Porter that organizes many of the complex mangerial economics issuses into five categories (Laudon ; Laudon, 2012). The five categories or “forces” that impact the sustainability of industry profits are entry, power of input suppliers, power of buyers, industry rivalry, and substitutes and complements.The entry barriers are relatively low for the beverage industry.

There is no consumer switching cost and zero capital requirements. There is also an increasing amount of new brands appearing in the market with similar prices than Coke products. Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market share for a long time and loyal customers are not very likely to try a new brand. (Porter’s Five Forces In Action: Sample Analysis of Coca-Cola, 2010).

The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine.Coca-Cola is the largest customer of any of these suppliers. However the suppliers have no bargaining power over pricing because the suppliers in the soft drink industry are weak (Porter's Five Forces Model of Coca Cola, 2010). The individual buyer doesn’t place any pressure on Coca-Cola.

However large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the bargaining power is lessened because of the end consumer brand loyalty. (Porter’s Five Forces In Action: Sample Analysis of Coca-Cola, 2010).The industry is almost dominated by Coke and Pepsi. This industry is well known as a duopoly. They both have the majority of the market share and rest of the competitors have very low market share.

Because of this there is barely if any disorder in the industry structure. They also don’t compete base on pricing rather they compete base on advertising and differentiation (Porter's Five Forces Model of Coca Cola, 2010). There are many kinds of soft drink products in the market. Coca-Cola doesn’t really have an entirely unique flavor.In a blind taste test, people can’t tell the difference between Coca-Cola and Pepsi.

Even though there are countless substitutes for Coca Cola they however need a whole lot of advertising, brand equity, brand loyalty, making the product accessible in a mass scale. (Porter's Five Forces Model of Coca Cola, 2010). Coca Cola in the end of the day is a strong brand that has global appeal that can only be rivaled by Apple. The financial statement and balance sheet may demonstrate a decline in profitability but the same affect goes to Pepsi. Coca Cola is a good company to invest in.