The Marketing Situation of Coca-Cola in the UAE - Case Study Example

Marketing Research for Coca-Cola UAE Table of contents Table of contents i Executive summary i Introduction 1 Research objectives 2 Rationale for method 2 Benefits of using secondary methods and databases 2 Research problem 3 Literature review: Coca-Cola’s challenges/limitations 4 Analysis 7 Recommendations 9 Conclusion 10 Executive summary This paper analyses the marketing situation of Coca-Cola in the UAE. Though a popular brand, Coca-Cola has faced a number of challenges in the UAE. Some of the challenges are related to the perception of the Coca-Cola drink (Coke) as an American product and idea. This is compounded by the fact that there is a long-standing misunderstanding between Coca-Cola’s country of origin (the United States) and the many Muslim nations. Although Coca-Cola has always attempted to portray itself as a global company and not just an American company, the efforts are hindered by constant allegations that the company promotes anti-Islam principles; for instance that Coke was laced with alcohol. Many of Coca-Cola’s challenges arise because the company has always assumed that a single marketing strategy will work globally. However, there is need for the company to come up with ideas that reflect what is required in different regions by thinking locally and acting locally rather thinking globally and acting – locally which seems to be the current mantra. Despite the challenges, Coca-Cola has opportunities to advance its marketing strategy in the UAE by taking advantage of the hot climate and strict laws on alcohol – which give leeway for consumption of more soft drinks. Introduction Established in 1886, Coca-Cola is one of the most common soft drinks in the world with presence in more than 200 countries. A key feature of the Coca-Cola Company’s strengths is that it has a strong brand identity, and market statistics show that most consumers perceive it as a trustworthy brand (Hutt, 2001). Notably, the brand has made ‘exceeding consumer expectations’ it mantra, and has lived up to the same by satisfying its consumers through a quality product, and its formation of lasting relationships with its consumers. Despite the fact that Coca-Cola has enjoyed tremendous growth in its target markets, the United Arab Emirates (UAE) is a special case for the company whose success is pegged largely on its secret formula used in making the soft drink. Specifically, the UAE presents mixed fortunes for the multinational company starting from being recognized for its environment friendly practices (Zawya, 2010), to being accused of lacing the beverage with alcohol (Huang & Sapsted, 2011), and even flouting the consumer protection laws and regulations by selling the 300 ml can instead of the approved 330 ml and 355 ml can variants (Bouckley, 2012). Additionally, Coca-Cola in UAE has faced challenges in marketing its products in the predominantly Muslim region due to its genesis in America. As will be expounded in this essay, its American roots have led to its product being boycotted by the Arab world twice; first during the Israel-Palestine conflict, and secondly during the Iraq invasion by the US. This research essay seeks to address a gap in knowledge, which exists because it seems (albeit through a review of several literature sources) that most marketing researchers have accepted that perhaps Coca-Cola’s lack of marketing differentiation in all its international markets is suitable for its operations. Whereas the components that make some of Coca-Cola’s product remain a well guarded trade secret, this research essay proposes that the differences in culture especially in UAE should not be ignored. Research objectives This research will be descriptive, and will attempt to systematically: Describe the situation faced by Coca-Cola in the UAE; Identify the problem of the company’s current marketing strategy; and Recommend ways of handling the problem in order to ensure that the marketing strategy is more successful in future. Rationale for method This research will use secondary research and databases to acquire information that is relevant to the marketing of Coca-Cola in the UAE. The use of secondary data is the most preferred method for this exercise since it will allow the writer to analyze the marketing trends that Coca-Cola has adopted in the past and their successes or failures, with a view of recommending future marketing strategies. Benefits of using secondary methods and databases As has been indicated by Bajpai (2011, p. 127), the ‘main advantage of using secondary data sources is that they already exist’; this then means that the researcher does not need to‘re-invent’ the wheel by gathering primary data that has already been gathered and stored by other researchers. Secondary methods and databases also consume less time hence affording the researcher more time to analyze the data. In regard to cost and effort, it is also apparent that secondary data and database are cheaper and more convenient compared to primary research methods (Bajpai, 2011, p. 127). The secondary research methods are also ideal in cases where collecting primary data would be shrouded with difficulties, or where attaining the objectives of the research does not necessitate primary data collection. In this research, scholarly journals, books, company records, newspapers, magazines and/or computer databases will be used. The secondary sources will be chosen based on their relevance to the topic. Research problem The psychographics of the UAE market are unlike what Coca-Cola is exposed to in the western world. Specifically, the UAE consumer market has high collectivism; high power-distance index (PDI); high uncertainty avoidance; high masculinity pegged on the prominent Islam religion; and is mainly oriented to past and present events (Razzouk, Seitz & Al-Shamsi, 2004, pp. 79-80). In other words, the UAE consumer market is very different from say, the consumer markets in Europe and the Americas. Yet, it is worth noting that Coca-Cola’s packaging of its products and promotions are mainly are similar throughout the world. This means that apart from the marketing differentials in pricing and distribution, the company does not localize its marketing content to suit the local culture. It thus assumes that similar product packages and promotional messages would appeal to its worldwide consumer base regardless of their cultural differences. This research therefore seeks to answer the question – should Coca-Cola consider different aspects of packaging and promotions (i.e. away from the worldwide approach) for its UAE market? Literature review: Coca-Cola’s challenges/limitations Having set base in the UAE in 1989, Coca-Cola is one of multinational companies that have sustained its operations in the region for a long time (Zawya, 2010). Its production and distribution activities are handled by Al Ahlia Gulf Line (AGL), which was recognized as one of the ‘best bottling country operations’ within the Eurasia and African regions (Zawya, 2010, para.1). With this recognition came some good news for Coca-Cola since the company has been trying to push the environment agenda as one of its marketing strategies. Specifically, the company has stated that it is focused on an ‘initiative that protects the environment, conserves resources and enhances the economic development of the communities’ (Zawya, 2010, para. 7). In 2011, rumors were circulating in the UAE that coca-cola contains alcohol (Huang & Sapsted, 2011). Notably, UAE officials were quick to reject the possibility of any truth in the rumors; however, the fact that the secret ingredient that makes Coca-Cola such a loved beverage remains a secret (only known to two Coca-Cola employees at any one time), is bound to continuously raise eyebrows among consumers where strict non-alcoholic laws are the norm, especially for religious reasons. However, it is also worth noting that UAE is a rich market for Coca-Cola with 2011 estimates indicating that the 200 liters per capita per annum are consumed there compared to Germany’s 80 per capita per annum, and India’s 3 liters per capita per annum (Choudhury & Reddy, 2011, p. 28). To draw the connection between Coca-Cola, the alcohol-content rumors, and the probable effects that such a rumor may have on the company’s UAE operations, it is important to look into why Coca-Cola sales are so high in the region. For starters, Hutt (2001) observes that the Middle East (where UAE is located) is an ideal market for Coke because: I) the hot climate makes beverages appealing to the consumer market as individuals seek effective ways to quench their thirst; and II) because the predominantly Islamic culture makes alcoholic beverages a taboo. This then means that if the latter reason was portrayed as doubtful by the alcohol-rumors content, then fewer consumers (especially those who uphold the alcohol taboo) would be willing to purchase the product. It is also apparent that the American and Arab worlds are in a constant state of flux, especially with the ongoing terrorism debate. Although Coca-Cola has bottling plants based in the UAE, its image as a typical American product has in the 1960s (at the height of the Israeli-Palestine strife) (Hutt, 2001), and lately during America’s invasion of Iraq (Clerides, Davis & Michis, 2011) led to its boycott by the Arab world. Such association of the company to what the American government chooses to do (as was the case in Iraq), or chooses to sympathize with (as was the case with perceived support of Israel) poses a marketing challenge to Coca-Cola. The remedy to the apparent ‘Americanization’ of the product, as suggested by Daft (2000, p. 11) therefore seems to lie in a concept dubbed ‘think locally and act locally’. The cited concept was an idea conceptualized by Douglas Daft who was Coca-Cola’s Chairman and Chief Executive Officer for four years between 2000 and 2004 (Rowe & Guerrero, 2010, p. 360). During his tenure, Daft proposed that Coca-Cola should shed off its global way of thinking if it was to successfully make inroads in its diverse overseas markets. However, Hutt (2001) observe that such an approach was difficult to forge considering that Coca-Cola’s history and values are deeply grounded in the American culture. To this end, Hutt (2001) suggests that instead of trying to shed off its American image entirely, it should seek to acts as ‘a trusted friend and a good neighbor’ in all its overseas markets (para.75). The concept that Daft was advocating for, though not adopted in the long-term, was used to address short-term challenges that the company was facing in the UAE and the larger Arabic countries. In 2008 for example, Coca-Cola created special cans for the Ramadan, which had a crescent and a star emblem on them (Langton, 2012). This difference in branding was in response to allegations that label used by Coca-Cola had hidden phrases that were anti-Islamic. The allegations had started in Egypt where it was claimed that the Coca-Cola logo when reflected in a mirror in an upside manner, would read “No Mohammed. No Mecca” (Sriramesh, 2009, p. 408). Luckily for the company, their response was punctual, reasoned and culturally sensitive since they engaged the religious leaders to help disconfirm the rumor. In fact, the country engaged the Grand Mufti – the highest ranked Islamic figure in Egypt – who chastised those who had generated the rumor and those who were propagating the same (Sriramesh, 2009). However, it is likely that the rumors affected the trust that people have towards the beverage company. The UAE market still poses challenges for Coca-Cola as indicated by Damyanova and Singer (2006, p. 110), who observe that some consumers still refer to Coke as the “red Pepsi”. In other words, their brand recognition for Coke is low hence their reference of the product by its competitor’s name. Even where advertising would have worked to cement the brand identity of Coca-Cola products, the company sometimes gets it wrong (or at least has gotten the timing wrong once in the past). A case in point was an advertising campaign that would, according to Damyanova and Singer (2006), have had an impact in the consumer market; were it not for its ill timing. The advert that incorporates the UAE cultural aspect where men usually write their phone number on a piece of paper in the hope that the woman would call them back, coincided with the US’s invasion of Iraq. Coincidentally, the larger Emirates was boycotting American products and hence the advert only aired once, and the liberal concept in it was chastised as yet another ‘American thing’ (Damyanova & Singer, 2006, p. 110). Notably, the UAE presents a potential lucrative market for Coca-Cola, especially given that non-alcoholic laws leave a large market for the soft drinks to fill. However, the company needs to be ware of competitors such as Mecca Cola – a soft drink whose value proposition is pegged on being anti-American – and hence posing a real challenge to companies like of Coca-Cola and Pepsi (BBC News, 2003). Analysis Going by the observations by Hutt (2001), changing people’s perceptions about Coca-Cola being an American company is mostly likely impossible. The ‘think locally, act locally’ concept has therefore failed to take effect in most markets and has instead been overshadowed by the ‘think globally; act locally’ concept that has always been at the core of the company’s international marketing strategy (Rowe & Guerrero, 2010, p. 360). Is it possible then that different product packages and promotional activities would succeed in UAE? Even if they were to succeed, would Coca-Cola’s attempt to tweak its marketing to fit the UAE psychographics have negative or positive effects? Well, for starters, a marketing strategy meant to enhance the cultural fit of any product with its target market is likely to have positive effects as indicated by Yip and Bink (2007). Even where cultural fit is not possible, a company like Coca-Cola should strive to understand the UAE culture in order to avoid marketing strategies that could be in conflict with the values, beliefs and norms of the Emirates. Having said that however, it is important to consider the impression that tweaking the Coca-Cola products for the UAE market might have. Specifically, it is important to note that any change in the content for purposes of alleviating the alcohol-content concerns, may be interpreted by other markets as a confirmation that the allegations were indeed true. Additionally, such a move would go against the company’s policy to have the secret formula of making the coke beverage known by two company employees only at any one time; i.e. unless one of the secret formula holders is a UAE national who can reassure the UAE market that the beverage is alcohol free. If Coca-Cola prefers to adopt the friend and good neighbor concept proposed by Hutt (2001), the company would have to deal with trust issues in the region. The first aspect that it should address in order to get consumer trust is reassuring the consumers that it does not have alcohol content; nor does it have any anti-Islamic sentiments. Secondly, it is important to ensure that whatever packaging and pricing changes it does are acceptable in the regulatory front. In 2012 for example, both Coca-Cola and Pepsi (also a US soft beverage company), were accused of ‘unacceptable fraud’ in the UAE for reducing the size of the cans retailing at 1.5 Dirham ‘from 355 ml to 300 ml’ (McGinley, 2012, para. 1). In essence, the government argued that both companies had increased the price of their products through deceptive means and that was unacceptable (ibid). The fact that government’s attention was drawn to the issue by consumer complaints means that the reduction of the can volume may have dented the trust that consumers had on the companies. Although, Coca-Cola UAE tried to control any damage that was caused by the fraud allegations, there is no telling whether that kind of damage control did any good to restore consumers’ trust. The company stated that the 300 ml cans were meant for sale in hotels and the export market and had probably leaked into retail outlets (Bouckley, 2012). Recommendations To address the marketing challenges that it faces in the UAE, it is clear that Coca-Cola needs to present itself as a trustworthy company whose interest in the region is not driven by profit only, but on other considerations such as respecting the culture of the people, preferences, and the regulatory framework. As such, it is important for the company to indulge in culturally acceptable practices, engage in more advertising and promotional activities in order to enhance its brand recognition, and counter any bad publicity immediately and in a manner that respects the UAE culture. It is also important that Coca-Cola abides by the laws and regulations set out in the UAE. It would also be more culturally appealing if Coca-Cola considered long-term branding differentials for its products in the UAE and the larger Arabic market, hence making them different from other products sold elsewhere. As indicated elsewhere in this essay, the inclusion of a crescent and star was adopted for the canned product during the Islamic holy month of Ramadan. Maybe, this should be adopted as a long-term strategy to indicate that Coca-Cola recognizes the cultural differentials that exist between the UAE and the rest of the world markets. Coca-Cola also needs to disassociate itself from any sentiments that could portray it as a representative of the American government in the UAE. As indicated by Hutt (2001), Coca-Cola is perceived by most people as a symbol of America abroad. One of the strategies that the company can employ is to use a workforce sourced from the UAE in its UAE operational offices. Specifically, Coca-Cola should strive to cultivate its image as a ‘lovemark’ brand in the UAE market as suggested by Roberts (2004). According to Roberts, a lovemark brand is one that is personally revered by consumers to the extent that the same consumers would be willing to dissociate it with its origin and be loyal in the product’s good and bad times. The local workforce would be a good source of market insight especially in regard to designing and delivering marketing strategies that are viable for the UAE market. For example, Fullerton (2005) notes that while sex may sell in America and other western democracies, the opposite would be true in Arabic cultures. In reference to Fullerton’s observations, one can therefore argue that a predominant UAE workforce would avoid any content that goes against cultural values and norms in the company’s marketing campaigns. Additionally, they would consider other aspects such as the high PDI, collectivism, high uncertainty avoidance, and high masculinity pegged on the prominent Islamic religion, hence designing the products’ marketing strategies in a manner that is more acceptable to the consumers. Conclusion From the analysis and the recommendations sections, it is apparent that Coca-Cola and other American companies need to consider the need to adopt culturally-fit marketing strategies in the UAE. However, it has also been established herein that there is a need for Coca-Cola to disassociate itself from the American image, but even if that is not possible, the company should pursue efforts to present itself as not only a good neighbor, but also a friend who can be trusted by its UAE consumers. Through different packaging and product promotion techniques, the company can further enhance its market position in the region by creating marketing strategies that are well within the cultural sensitivities of its target market. Combined, the measures recommended herein can enable Coca-Cola to market its products and gain the trust and loyalty to make its business venture in the UAE a major success. As indicated above, the UAE’s hot weather and its non-alcoholic laws create a significant potential market for soft-drink manufacturers and marketers. However, there are challenges that need overcoming and such including over-coming the anti-American sentiments that sprouts up every time the US and the Arab/Islamic world have political and social differences; overcoming the competitive pressures posed by the likes of Mecca Cola; and gaining the trust and loyalty of the UAE customers. References Bajpai, N 2011, Business research methods, Pearson Education, New Delhi, India. BBC News 2003, ‘Mecca cola challenges US rival’, BBC News World Edition, viewed 28 July, 2012, Bouckley, B 2012, ‘Relief for Coke, Pepsi after UAE ditches can ban’, William Reed Business Media, viewed 27 July, 2012, http://www.beveragedaily.com/Regulation-Safety/Relief-for-Coke-Pepsi-after-UAE-ditches-can-ban>. Choudhury, R H, & Reddy, N K 2011, ‘market Analysis and brand preferences for coca-cola slim cans’, IJRIM, vol. 1, no. 8, pp. 26-39. Clerides, S, Davis, P, & Michis, A 2011, ‘The impact of Iraq war on US consumer good sales in Arab countries’, viewed 27 July, 2012 from < http://ecgi.ssrn.com/delivery.php?ID=864126029100101102023007092066117095042023056058091028102121005119001067076106084027025117016012040001016123067120079114087005030022087053013098118127006082027084081094094082108109082015025126068115&EXT=pdf> Daft, D 2000, ‘Connecting with global consumers’, executive Excellence, vol. 17, no. 10, pp. 1-11. Damyanova, B, & Singer, T 2006, ‘The role of multinationals companies in Dubai: balancing tradition and modernization’, NIMEP Insights, pp. 100-115. Fullerton, J A 2005, ‘Why do they hate us? International attitudes towards America, American brands and advertising’, Place Branding, vol.1, no. 2, pp. 129-140. Huang, C, & Sapsted, D 2011, ‘Coca-Cola denies rumors it contains alcohol’, The National, viewed 27 July, 2012, < http://www.thenational.ae/lifestyle/food/coca-cola-denies-rumours-it-contains-alcohol#> Hutt, P B 2001, ‘The image and politics of coca-cola: From the early years to the present’, LEDA at Harvard Law School, viewed 28 July, 2012, . Kumar, R 2005, Research methodology: A step by step guide for beginners, Sage, London. Langton, J 2011, ‘Witness to decades of change, Coke makes one of its own’, The National, viewed 28 July, 2012, . McGinley, S 2012, ‘Pepsi and coca-cola accused of consumer fraud’, Arabian Business Publishing Ltd, viewed 27 July, 2012, < http://www.arabianbusiness.com/pepsi-coca-cola-accused-of-consumer-fraud--446162.html> Razzouk, N Y, Seitz, V, & Al-shamsi, R A 2004, ‘Market segmentation in the United Arab Emirates: an Exploratory Investigation’, viewed 27 July, 2012, < http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.199.9032&rep=rep1&type=pdf>. Roberts, K 2004, Lovemarks: The future beyond brands, PowerHouse Books, New York. Rowe, W G, & Guerrero, L 2010, Cases in leadership, Sage, London. Sriramesh, K 2009, The global public relations handbook: Theory, research, and practice, Taylor & Francis, London. Yip, G S, & Bink, A 2007, Managing global customers: An integrated approach, Oxford University Press, Oxford. Zawya 2010, ‘Coca-Cola UAE among most successful bottling operations’, News Release, viewed 27 July, 2012, Read More