What I did: Brand History Study, Situation Analysis, New Branding Proposal for Coca-Cola Amusement Park
Current State and Opportunities of Coca-Cola (Situation Analysis)
Strength
Regardless of the declining carbonated drink industry, Coca-Cola still keeps its leading position in the beverage market. Coca-Cola leverages its strengths in several aspects, which made it excel in the rivalrous competition. The first strength of Coca-Cola is its highest market share and brand awareness in the beverage market. In 2017, Coca-Cola’s avenue hit 35 billion dollars in the U.S., almost 6 billion dollars higher than its primary competitors, Pepsi and Nestlé. As the largest non-alcoholic beverage company, Coca-Cola possessed an almost eighteenth percentage of market share.
On the contrary, Pepsi’s market share descended to approximately eight percent in the same period. In the meanwhile, the brand value of Coca-Cola is highest among its competitors. According to Forbes, Coca-Cola, with a brand value of fifty-seven billion dollars, became the sixth most valuable brand worldwide in 2018. Since brand awareness is positively related to brand equity, Coca-Cola is the most recognizable brand in the beverage market now.
The unique distribution system of Coca-Cola differentiates itself from other beverage companies, like Nestlé. Unlike Nestlé, which has its distribution system, packaging, and transporting products by itself, Coca-Cola collaborates with numerous bottlers worldwide, authorizing them to manufacture the syrup they provide, packaging, distributing, and selling the products. Through this bottling and distributing network, Coca-Cola expanded its business worldwide rapidly. Until now, Coca-Cola beverages are available in over two hundred countries, and about 1.9 billion servings of Coca-Cola beverages are sold each day. However, even having their sophisticated distribution system, Nestlé only expands its business in less than one hundred and ninety countries.
Another Coca-Cola’s unique distributing approach is its vending machines. In 2010, the number of Coca-Cola vending machines in the U.S reached over 6.9 million. In addition to the vast quantity, currently, Coca-Cola’s vending machines provide opportunities for strengthening the relationship among consumers. By purchasing beverages on the website of the Coca-Cola store, consumers can send the vending pass to others, sharing Coca-Cola beverages with their friends or families. What’s more, Coca-Cola even created several innovative vending machines for eliciting happiness among people. For example, Coca-Cola’s vending machine in New York once delivered unexpected things to people, like flowers and pizzas.
The massive funds that Coca-Cola invested in advertising and marketing help Coca-Cola keep staying ahead of its rivals. Coca-Cola spent almost four billion dollars on advertising in 2017. Its marketing expenses even occupied 17.5 percentage of its revenue. However, in the same year, Pepsi only spent two-thirds of the money Coca-Cola spent on advertising, its total marketing budget was 4.2 billion dollars. Also, Nestlé’s advertising expenses were 2.13 billion dollars in 2017, far less than Coca-Cola’s. The massive advertising and marketing expenses Coca-Cola spent brought significant revenue to it. In 2017, Coca-Cola’s investment in marketing-generated about thirty-five billion dollars in revenue.
Weakness
One of the significant weaknesses of Coca-Cola is that the company relies strongly on carbonated soft drinks to generate the company’s revenue. As a company that owns market four of the world’s top five non-alcoholic sparkling soft drink brands: Coca-Cola, Diet Coke, Fanta, and Sprite, it is benefited a lot from those soda brands. However, the heavy reliance on the soda brands would risk the company since the carbonated drink market is declining; for example, in 2016, a change in the sales volume of carbonated soft drinks decreases. Coke and Diet sales decreased by 0.1% and 4.3%, and their competitors, Pepsi Cola and Diet Pepsi sales fell by 2.8% and 9.2%. Meanwhile, as the direct and most significant competitor of Coca-Cola (The Coca-Cola Company, 2017), Pepsi diversified into the snacks segment, such as Lays and Doritos.
Other significant competitors, such as Nestlé, impact Coca-Cola’s business includes pricing, advertising, promotion, and product innovation. Nestlé, which produces coffee and competes with Coca-Cola in the non-alcoholic market, has it’s coffee and snacks line that can generate a large amount of revenue to the company. Meanwhile, Coca-Cola’s chief operating officers have already realized the issue and state that the company should focus on its development of products beyond soda to become a “total beverage company.”
The growing concerns on transportation and environmental impact could also affect Coca-Cola’s developments. Coca-Cola relies a lot on shipping and its bottlers, and the cooperation with its bottlers and partners to maintain sustainability production would be essential to the company’s strategic plan all the time.
The reliance on the retail market can also risk the company to meet the adverse effect on its financial performance if the retail landscape changes or the company losses the main retail customers. The fierce competition with Pepsi and Nestlé could cause large retailers to require lower prices and more promotions, therefore affect negatively on Coca-Cola’s profitability. Due to the massive price competition, the firm reliance on both local and large retailers, there is no assurance for Coca-Cola’s product and innovation to be accepted and grow in the future.
Threats
Threats on Coca-Cola primarily lie in customer’s changing preferences. Overall, soda consumption has been decreasing due to cultural and taste changes. Concerns for obesity and choices for organic food gradually make carbonated and sweetened drinks outdated. Stricter government regulations on labeling and marketing are likely to affect Coca-Cola’s ability to promote its core products, carbonated, and sweetened beverages. Unfavorable taxation may be made against the industry affecting drinks’ pricing.
Ready to drink coffee is leading the beverage consumption. It grows 12.3% in volume and 14.4% in the retail dollar, whereas carbonated soft drinks decrease 1.3% in size and have only a 1.2% increase in the retail dollar. Coca-Cola’s entry into the coffee industry is relatively late and slow. It starts to get involved in this industry around 2017 by pairing up with Dunkin Donuts and Illy coffee.
Traditional marketing strategies lose their power as a result of exploded digital marketing. Intense competition in attention is winning from its competitors also possess pressure on Coca-Cola. More companies are fighting over limited consumer attention. Delivering information to the customer with the one-way flow does not impress the customer as well. Used to relying heavily on traditional marketing like TV ads, Coca-Cola needs to shift to consumer-facing advertising and digital advertising. Promoting coke products, including coke zero and flavored coke under its one brand, Coca-Cola fails to produce buzz advertising. Being a brand with more than 100-year history, Coca-Cola has the challenge of staying relevant. It needs exciting and engaging content that attracts both the customers, the aging population, and the new customers, the younger generation.
Opportunities
As a company that exhibits brand ideals regarding the human value, such as aiming to elicit joy since the last century, Coca-Cola can offer more benefits to its customers and evolve its personality in turn. The opportunity for Coca-Cola is to overcome its weaknesses and threats and enhance its strength to elicit more joy for the customers nowadays.
The first change for Coca-Cola is to fulfill the consumer’s demand and develop its global brands in the coffee segments. Coca-Cola has already made its step to expanding its coffee segment by bought the U.K. coffee shop leader Costa for $5.1 million as its most significant acquisition in recent years. Back in 2016, Coca-Cola partnered with Dunkin Donuts for cold coffee drinks, launching to the ready-to-drink coffee market. Coke’s annual sales have been declined since 2012 due to the declining of the carbonated soft drinks market, obesity concern, etc. the company had realized that diversify its products to fulfill current consumers’ demands. By teaming with Dunkin Donuts, Coca-Cola could compete with its major competitor Nestlé in the ready-to-drink coffee market and generating its revenue from the market segment other than its traditional brands, such as Coke and Sprite. Moreover, developing its impacts on coffee segments by acquiring Costa can compete with its indirect competitor Starbucks in the mass market and response to its primary competitor Nestlé’s move of buying Blue Bottle Coffee in the niche market.
Buying Costa and partnering with Dunkin Donuts is just the first step for Coca-Cola to foster its global coffee brand. Building the connection and continuing eliciting joy to its consumers from those two brands are the significant challenges and opportunities for Coca-Cola to expand its impact on the coffee market. Unlike the last century, consumers’ needs are more complicated, and in response, Coca-Cola’s brand personality should be more involved by being different, to keep exhibiting its human value. Here, Coca-Cola’s coffee brand can keep its brand ideal of eliciting joy to the consumers and meanwhile develop multiple services to maintain its old customer and target more customers. For example, it can be inspired by Apple to enhance the employee’s service to customers and its coffee shop interior design. The different steps can help the brand to evolve its brand ideals to keep customer loyalty and attract more customers.
Along with the coffee business, Coca-Cola should also respond to the change in marketing. It would be benefited from adhering to the customer-centered marketing model. Customers are empowered with platforms like the online forum and social network where they can create and exchange content about brands. Coca-Cola should get customers involved in the brand as much as possible. A high level of involvement allows Coca-Cola to control more customer experience and access rich input from customers. As the current CEO James Quincey states in one interview, the company needs to understand who the customers are, what do they want to drink, and where do they shop.
Coca-Cola can use its advantages as a huge brand to cater to customers’ needs. For example, it has been providing various packaging sizes to meet different customer’s requirements. The various size and price combinations help Coca-Cola to win market share in return. It could also utilize its seller’s power to make their drinks more available by setting up the vending machine at more locations.
With its marketing capacity and power, Coca-Cola can continuously stay relevance to today’s customers by producing linked content and products. The TV ad “history of celebration” for the 2010 world cup with the song “wavin’ flag” won considerable success. The ad is relatable to fans all over the world and creates a connection between Coca-Cola and celebration. Recently, Coca-Cola also put innovated effort into diet coke to make it stay in fashion. By introducing a sleek can packaging and new flavors, the diet soda category grows better than expected when the soda industry is declining as a whole. Coca-Cola should build on its advantages and replicate previous successes that are customers-centered.
Marketing effectiveness should be further stressed. While digital marketing is growing and TV marketing becomes more expensive, TV ads still have the best recall rate across all media. Coca-Cola could be up to date by focusing on digital marketing, but the core is to measure productivity and adjust further marketing investment accordingly.
Business strategies can be implemented effectively only when business structure and policy are built around them. Coca-Cola axes its CMO’s position for chief growth officer. While such a move is logical, given that growing as a brand is more critical than merely market the brand, Coca-Cola needs to build up the system that allows experiment and failure when making customer-centered decisions.
Since the carbonated beverage market is declining, Coca-Cola could focus on increasing revenue from its non-carbonated drinks by enhancing marketing efforts. Unlike the declining soft beverage market, the demand for non-carbonated beverages proliferates in recent years. The volume of non-carbonated drinks, like bottled water, energy drinks, and ready-to-drink tea, increased in 2017. In particular, the value-added water’s volume sales grew by almost twelve percent, and the selling of bottled water increased by seven percent. Despite bottled water, coconut water is in high demand in the beverage market contemporarily, as well. Due to health concerns, growing contemporary people prefer to choose healthy non-carbonated beverages with good flavor, and coconut water can be such an excellent choice, meeting people’s needs.
New branding campaign proposal
If you are interested in Coca-Cola’s brand history and my new proposal for its amusement park, please contact me!
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Levy Luo 