Consultancy Report on Coca Cola at UK Market - Essay Example

?Consultancy Report on Coca Cola UK Market Introduction Trivia has it that there are only two words known in all parts of the world, whatever the language of this locality. One of these utterances is “O.K.,” the universal indication of all things being right with the world. The other word is the world’s most popular sizzling soft drink – Coke. This popularity of this drink makes it not unlike the other word “O.K.” insofar as it does, for many people, makes everything right with the world. From its invention in 1886, the brand is still going strong, and is such a success that efforts in the past decade to revise the original formula has met with stiff resistance. In this report, the marketing elements (i.e., marketing mix) of this Company as of the year 2009 and earlier shall be explored and specific strengths and weaknesses noted in order to arrive at a recommendation for possible changes in the marketing thrust of the firm. For the purpose of this study and to better incorporate the customer focus of contemporary market research, the expanded version of the marketing mix – the seven P’s framework – will be employed to establish the merits of the marketing strategy of Coca Cola. The seven P’s are namely Product, Place, Price, Promotion, with the inclusion of People, Process and Physical (tangible) evidence. Part 1- The macro and competitive environments The marketing strategy and performance of the company is best seen in the light of the macroeconomic setting prevailing at the present time. Figures presented are until 2009 performance inasmuch as 2010 full year data have not yet been released. Source: The 2010 UK Soft Drinks Report, The British Soft Drinks Association The data gathered for the soft drink industry in the UK presented in the table above shows the soft drinks consumption figures for the years 2003 to 2009. The data shows that there has been in general only a slight increase in the total volume of consumption, as well as the volume consumed per person. The value of product consumed, however, rose consistently, indicating that a rise in prices (value per litre) of soft drinks products from one year to the next has had little effect on the consumption patterns of individuals as well as the collective market. This is favourable for the industry, showing the price elasticity to be relatively inelastic and ensuring that a steady demand may be expected well into the future. The next graph below, from the same U.K. soft drinks report, shows the graph of the annual percentage change in the consumption of different types of soft drinks. Covered under the category of soft drinks are bottle water, carbonated (so called “sizzling”) drinks, dilutables, fruit juice and juice drinks (not shown are tea, coffee, and a few other “soft” beverage products). The downward convergence of the different soft drinks products are indicative of a general slowdown in the growth of the market in the U.K., pointing to the possibility that the industry is arriving at the maturity stage when the growth will continue, but at a lower rate. With market maturity will come shakeout of the industry, where weaker competitors are likely to retire. Source: The 2010 UK Soft Drinks Report, The British Soft Drinks Association The following two pages contain the tables for the PESTLE and SWOT analysis of the company. The strategic positioning of the company indicates a strong market presence, but with concerns that may impact on its market performance efficiency. PESTLE ANALYSIS The next two tables were the results of studies by the 2010 UK Soft Drinks Report by the BSDA. Carbonated drinks (so-called “sparkling” soft drinks) commands the largest market share at 42%. The type of soft drink with the second largest share comprises only slightly more than half of carbonated drinks. This makes Coca Cola’s leading brand particularly well positioned to dominate the soft drinks market. There is also significant demand for drink variants that have low calorie content or those that have no sugar, which dominates at 6 out of every 10 soft drinks purchased. Low calorie & no added sugar drinks vs regular Drink variant Market share Low calorie & no added sugar  61% Regular 39% Part 2 - The marketing programme elements (marketing mix elements) currently employed Product The company’s product policy is to offer a beverage suitable for all lifestyles, life stages and occasions (Coca Cola 2009 Annual Review). Coca Cola Company has several brands in both the sparkling and still beverages catsegory. In 2009, Simply trademark became the Company’s 12th brand, in addition to Coca?Cola, to have annual retail sales of more than $1 billion, joining Coca Cola Zero, Diet Coke/Coca-Cola light, Sprite, Fanta, Minute Maid, Dasani, Aquarius, Powerade, Sokenbicha, Georgia Coffee and Glaceau Vitaminwater (Coca Cola 2009 Annual Review, p. 18). Aside from these popular brand names, the company has a portfolio of more than 500 brands and 3,000 beverage products in over 200 countries worldwide, including waters, juices and juice drinks, teas, coffees, sports drinks, energy drinks, and of course sparkling drinks (Coca Cola website, 2010). The following diagrams are taken from the firm’s 2009 Annual Review, pp. 18-19. (Note: By “International” is meant sales volume in all countries outside the U.S.) In both total and incremental volume mix, still beverages have captured greater market share from sparkling drinks. Growth rates in the sales of particular company brands with Ice Dew, Minute Maid Pulpy, Gold Peak and Mother emerging as the fastest growing in their particular categories. Over all, majority of Coca Cola brands are experiencing strong growth particularly in penetrating new markets outside the U.S. The same trend is evident for the major brands of sparkling soft drinks. The growth rates for the major brands (in the figure presented above) show its major brands, the Coca Cola series and Sprite, growing at slower rates for the year, because these brands have already gained wide popularity and continue to experience strong sales. At present, the company is pursuing a policy of consistently maintaining its market leadership in its well-known brands, but at the same time it is aware that its customers want to have a choice of a variety of beverages, in a variety of sizes, and with low- and no-calorie options. Among its competitors industrywide and worldwide, the Global NARTD Beverage Leadership survey established that Coca Cola is the top provider of sparkling beverages, juices and juice drinks, RTD coffees and RTD Teas. The company also ranks second in the sports drinks category, and the top third company in the markets for packaged water and energy drinks. The following tables were the findings of AdBrands.Net on the UK soft drinks market. They show the relative positioning of the soft drinks companies among competitors. In both categories, Coca Cola leads the rest of the brands and competitors, and its affiliate brands also occupying another spot in the top ten. Place / Distribution Coca Cola brands are being sold in over 200 countries around the world; the firm’s distribution strategy is to establish and maintain a presence in developed, developing, and emerging markets worldwide, and has attuned its strategies to each of these groups of countries. The business operations are divided into five geographies, namely Eurasia and Africa, Europe, Latin America, North America, and the Pacific groups. Price According to Golan, Karp and Perloff (1999), historically Coca Cola and its rival Pepsi Cola have been engaged in price and advertising strategies. The recent economic crisis, however, appears to have benefited the cola sub-category as customers switched from the more expensive smoothies and fruit juices. Customers who switched from the health drinks still opted for the low calorie and no-sugar variants (Britvic Soft Drinks Report 2010). Between the two rivals, Pepsi was reported to have grown by 5%, slightly faster than Coke’s 4%. Among the variants, Pepsi Max grew fastest, with value of sales growing at 9%. Promotion Coca Cola uses the traditional media in its promotional campaigns, but also explores new avenues of promoting its products while allowing for two way communications by which its customers are able to provide immediate feedback. The company maintains a presence in social networking circles such as Facebook through which it is able to dialogue with its customers. Furthermore, it runs a series of loyalty programmes online such as My Coke Rewards that allows it to keep track of what its customers are purchasing. Globally the company is running some 20 online loyalty programmes. In terms of advertising campaigns, Coca Cola has suffered a spate of unfortunate incidences that have cast it in a bad light. In January 2011, Coca-Cola was censured a second time in 18 months with regard to its Vitaminwater brand, for supposedly “misleading” health claims (O’Reilly, 2011). The censure was based on the poster ad for the brand that stated “enhanced hydration for the nation,” under which are the range of drinks and the words, “delicious and nutritious.” The Advertising Standards Authority (ASA) advised Coca-Cola that most people would not consider a drink that has four or five teaspoons of added sugar to be nutritious. Coca-Cola defended the accuracy of its claim, pointing out that Vitaminwater had “meaningful quantities of several nutrients, and 100% of the recommended daily allowance of vitamin C.” The new poster ad was circulated despite an October 2009 ban imposed by the ASA on the campaign based on the misleading claim. This is not the first time one of Coca-Cola’s advertisements came under fire. In April 2010, Vitaminwater was again severely criticized, this time by the Forum of Private Business, for the ad that said, “If you’ve had to use sick days because you’ve actually been sick, then you’re seriously missing out…The trick is to stay perky and use sick days to just, not go in.” The business group protested that the ad condoned faking sickness in order to skip work (Fernandez, 2010) People The Coca-Cola Company global workforce numbers some 92,800, broken down as follows: North America Group 10,800 Bottling investments 1,200 Latin America Group 4,200 Bottling investments 8,400 Europe Group 2,500 Bottling investments 13,500 Eurasia & Africa Group 2,500 Bottling investments 20,300 Pacific Group 2,600 Bottling investments 26,800 Coca Cola ensure that its personnel are afforded top training, incentives and benefits comparable with its competitor firms. The company supports a policy of equal opportunity and affirmative action in employment, and strives to maintain an inclusive work environment with respect to race, gender, color, national origin, religion, age, disability, sexual orientation, gender identity and/or expression, and makes reasonable accommodation for individuals with disabilities and those with religious practices. The company has made it the responsibility of every individual in the company to maintain a work environment reflective of the spirit of equal opportunity, and to prohibit practices that would constitute harassment. Process Coca Cola is the world’s most popular drink, yet the original formula has remained a tightly guarded secret from the time it was concocted in 1886. The company’s process maintains the integrity of the formulation by preparing the mixture in the home plant and allowing for its reconstitution in the bottling plant located in the host country. The secret of the formula is so vital to the company that in 1977, when it was required by the Foreign Exchange Regulation Act in India that the company reveal its formula, it decided instead to withdraw from the country. The company had since returned to the country pursuant to the investment liberalization policy in 1993 (Hills & Welford, 2005). While the Coca Cola brand remains unchanged, its variants and innovations on the other brands is always addressed with a full evaluation of the entire value chain, from the sourcing of ingredients to the formulation of the value chain (2009 Annual Review). In the recent past, Coca Cola’s processes have been linked to allegations of water pollution, illegal disposal of toxic waste, and the detection of pesticides in the products. According to non-governmental agencies (NGOs) and environmental activist groups in India, aside from the destruction of the environment, the company’s processes have created a pattern of dire repercussions for the communities surrounding the area. Communities around Coca Cola bottling plants have experienced regular and severe water shortage as the direct result of the plant’s extraction of water from the common groundwater resources, causing wells to run dry and hand water pumps to be unable to produce water from the severely depleted water table (Hills & Welford, 2005). Physical evidence / Packaging Coca-Cola is materially tangible to the customers by way of its packaging. In 2009, a re-imaging and change in package design of Del Valle, Coca Cola’s juice drinks brand, had been undertaken in order to create a greater impact on the market and improve brand recognition. Furthermore, the Coke brand has recently come out in smaller, taller “mini cans” to allow customers greater flexibility in its choice of quantity. The company has likewise integrated its product packaging with its sustainability thrust. Packaging material efficiency in 2009 has improved by 7% over its 2008 figure. Its goal is to increase material recovery to 50% by the year 2015. The use of recyclable bottles and cans is continually pursued worldwide, and the company has invested in building the world’s largest plastic bottle-to-bottle recovery plant in the U.S. Furthermore, in an ingenious innovation, the company has designed and introduced the PlantBottle that is comprised of up to 30% plant-based material. The PlantBottle is a 100% recyclable bottle, similar to the traditional PET plastic currently used (Coca Cola website, 2011). Part 3 - Recommendations with respect to the revised marketing programme elements needed to improve market size and/or profitability As a result of the preceding data and analysis, the following are recommendations meant to address those elements in the marketing programme wherein Coca Cola is seen to have problematic issues. Product – According to sales figures, there is no doubt that Coca Cola’s standard bearer, the Coca Cola series, need not fear being displaced from top position, although there seems to be the danger of Coke losing some market share to Pepsi. There is an unmistakable preference by the market, however, for healthier alternatives to the carbonated drinks, and this is seen in the past years’ faster growth of still beverages, including bottled water, juices and smoothies, and the low calorie and no-sugar variants of the sparkling category. Product development should therefore move in this direction, and for those drinks the formula of which goes unchanged, to offer packaging with smaller quantities, in the nature of the mini-can recently distributed. Promotion – In the foregoing situationer, there were bans imposed on certain ad campaigns of Vitaminwater, counting three incidents for two different reasons, in the span of two years. Coca Cola should choose its promotional campaigns with care; its aim should be to create popular, not notorious brand names. Repeated citations by public authorities must be avoided, much less confronted head on, to protect an advertisement. The company must admit when it has made a mistake, such as its apparent endorsement of falsifying sick leaves; the ad was in bad taste, and its defence by the firm harms the product name more than helps it. The company’s use of social networking and new media is an important step in the right direction, but this is also resorted to by its competitors. Sponsorship of important sports events such as the FIFA World Cup will drive home the point that its health beverages are truly nutritious, rather than quarrelling over terminology with the ASA. Coca-Cola should proceed along this direction, promotion by association rather than through the war of words in the media. Process – The best way a company may convince its market of the worthiness of its product is by its actions. Coca Cola’s bottling operations are as salient as its manufacturing processes, particularly when it affects the community it operates in. The company takes great pains to make itself seen by the public to be participating in sustainability projects, but this effort is put to waste if in its regular operations the very principles of sustainability are transgressed. The company should address the issues not by protestations in the media, but by working with the community to solve the problems through their mutual benefit. It is not sufficient for Coca Cola to say it did not cause the water shortage in India; the company must join with the community to find ways and means for the water supply to be replenished. The same is true for the issues of toxic waste, water pollution, and pesticides. Whether it is the company’s fault is beside the point, because the mere perception that it is so is damage enough. Coca Cola must show that it operates transparently through good corporate citizenship and operating in close partnership with the community. People – The nearly one hundred thousand employees in the Coca Cola system are situated in different countries around the world, for which reason the company HR policies will have to contend with different legal requisites involving labor standards and relations. A set of company policies that allow for sufficient flexibility while maintaining workable standards throughout will have to be worked out. In the UK, development of diversity in the work place is a desirable as a means by which competitive advantages may be developed and realized. Diversity, mobility, and elimination of discrimination at the workplace is mandated by EU directives which the UK is required to comply with. Doing so strengthens the firm’s human resources potential, especially in the cultural aspect. As a multinational corporation, creating bridges with the different cultures in which market Coca Cola participates will require the active presence and participation of diverse nationalities, cultures, religions, and other attributes, in the workforce. As for the price, placement and physical evidence, Coca Cola appears to be pursuing policies that put the company at an advantage, and therefore should continue to do so until conditions develop that would render these policies no longer appropriate or desirable. Presently, there appears to be no reason for any radical change in the course of action it has chosen to address these elements. Wordcount = 3,012 excluding title References ­­­Anon. 2004 “Coca Cola: downsizing portions, upsizing profits.” MarketWatch: Drinks, March 2004, Vol. 3 Issue 3, p7-8 Anon. 2009“Coca-Cola Launches Mini Cans.” Beverage World, 11/15/2009, Vol. 128 Issue 11, p12 Anon. 2007 “Soft drinks maintain healthy growth.” Vending International, Aug 07, Vol. 41 Issue 8, p8 British Soft Drinks Association, The 2010 UK Soft Drinks Report: Investing in Refreshment. Accessed 4 February 2010 from http://www.britishsoftdrinks.com/PDF/2010%20soft%20drinks%20report.pdf Fernandez, J 2010 “Vitamin Water ad blasted for condoning skipping work.” Marketing Week, 14 April 2010. 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