Coca Cola Analysis Essay

Strengths 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 Interbrand, a branding consultancy, recognize. Coca-Cola as one of the top 20 brands in their top 100 global brands ranking in 2009. The Business Week-Interbrand valued Coca-Cola at $67,000 million in 2009. 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. The company’s strong brand value facilitates customer recall and allows Coca-Cola to penetrate new markets and consolidate existing ones. The Coca-Cola image is displayed on T-shirts, hats, and collectible memorabilia. This extremely recognizable branding is one of Coca-Cola’s greatest strengths Large scale of operations

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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. 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 elative ease and enhances its revenue generation capacity. Robust revenue growth in three segments 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 2008, over 2007. 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. %. Together, the three segments of Latin America, South east Asia, and Pacific Rim’ and bottling investments, accounted for 34. 8% of total revenues during fiscal 2009. Robust revenues growth rates in these segments contributed to top-line growth for Coca-Cola during 2009. Weaknesses Negative publicity The company has been receiving negative publicity in India since 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. these negative publicity had an adverse impact on 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. Coca-Cola on the other side has effects on the teeth’s which is an issue for health care.

It also has got sugar by which continuous drinking of Coca-Cola may cause health problems. Being addicted to Coca-Cola also is a health problem, because drinking of Coca-Cola daily has an effect on our body after few years. Sluggish performance in North America Coca-Cola’s performance in North America was far from robust. North America is Coca-Cola’s core market generating about 30% of total revenues during fiscal 2008 Therefore, a strong performance in North America is important for the company. 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 in the second half of 2008 and decline in the warehouse-delivered water and juice businesses. 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. Coca cola faces such problems in many of developedeconomies. Decline in cash from operating activities The company’s cash flow from operating activities declined during fiscal 2008.

Cash flows from operating activities decreased 7% in 2008 compared to 2007. Net cash provided by operating activities reached $5,957 million in 2008, from $6,423 million in 2007 . 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. Opportunities Acquisitions For the last one year, Coca-Cola has been aggressively adopting the inorganic growth path.

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 in Germany. 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 2008-09. 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. 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 2008. Market consumption volumes were estimated to be 30 billion liters in 2008. 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 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. Growing world population Populations are growing rapidly both in number and economic power. As a result, they have become more important to marketers than ever before. The company can benefit from an expanding population , which would translate into higher consumption of Coca-Cola products and higher revenues for the company. Threats Intense competition

Currently, the threat of new viable competitors in the carbonated soft drink industry is not very substantial. The threat of substitutes, however, is a very real threat. that Coca-Cola competes. 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, PepsiCo is one of the company’s primary competitors as it manufactures not only cola but orange juice brand named as Tropicana, sports drink brand Gatorade and Aquafina mineral water PepsiCo also sells Dole juices and Lipton ready-to-drink tea.

Other significant competitors include Nestle though it does not give that tough competition to Coca-Cola But the iced tea that is Nestea provides a considerable amount of competition to the products of the Company. Iced tea is one of the closest substitutes to the Colas as it is a thirst quencher and it is healthier when compared to fizz drinks. The flavored milk products also have become substitutes to the products of the company due to growing health awareness among people, Parle gives competition to Coca-Cola in fruit drink segment and also mineral water.

Its products like fruity, Appy and mineral water like Bailey are becoming substitutes to coke products . 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 2008, 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. Sluggish 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 2007, this representing a compound annual growth rate (CAGR) of only 0. 2% for the five-year period spanning 2002-2007. The performance of the 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.


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