Coca-Cola Case Study

1.0 Introduction

Coca-Cola Company is the world largest soft-drink maker selling 1.7 billion servings (Coca-Cola Company 2011) each day second by Diet Coke, Pepsi and so on as attached in Appendix (The Top Selling Soft Drinks Companies Worldwide, 2011), (Hartlaub n.d). Coca-Cola has world's most pervasive distribution system, offering 400 beverages products in more than 200 countries with 139,600 employees and 125 years in business (Coca-Cola Company 2011). Coke in United States generates pre-tax income of $2.38 billion and after-tax revenue of $1.9 billion (Coca-Cola Co 2011). Research is done on Coca-Cola Classic targeting United States.

2.0 Situational Analysis

2.1 Current Product

Product has three forms which are core, actual and augmented product. Customers buy Coke to quench thirst. The actual product is the Coke Classic having packaged in glass bottles, 355ml (12 ounces), 473ml (16 ounces), 500ml (16.9 ounces) in cans (Andreani 2010), and 0.5 to 2 litres in bottles giving variety in size. Coke cans and bottles are light, safe, and flexible packaged avoiding leakage. Labelling of nutrition facts on ingredients used and calories per serving are printed adhering to governmental regulations (Coca-Cola Company 2011). 10,450 soft drinks from The Coca-Cola Company are consumed every second of the day (Coca-Cola Amatil New Zealand n.d). It is bought for its well-known brand of Coca-Cola created with its trademark of bright red and white color Coca-Cola logo (Coca-Cola Company 2011) recognized by 94% of world's population (Coca-Cola Amatil New Zealand n.d) to withstand competitors providing high standard and quality with "best by" date on Coke (Marketing Plan for Coca-Cola Alcoholic Beverages, 2011). Since Coke is Fast Moving Consumer Goods (FMCG), it has low involvement therefore is convenience good (Hair, Lamb & McDaniel 2006). It is bought regularly, frequently, immediately, impulsively when seen with little decision and buying effort also widely distributed. As Coke is a consumer good, light-weighted, satisfying customers demands, the augmented level is limited (Murphy & Enis 1986). Service of help-line is labelled on the Coke for customer's feedback and complaints (Joeydaprot 2006). Besides Coke, there are other products like Diet Coke, Vanilla Coke, Cherry Coke and more (Coca-Cola Company 2011) to lengthen the product line to increase consumption contributing 56% sales (Marketing Plan for Coca-Cola Alcoholic Beverages 2011) for profit maximization. Coke Classic in United States is currently in its growth stage as its sales and volume increases by 6% and 2% respectively in 2011 first quarter (Coca-Cola Company 2011). It has a uniquely designed bottle shape which fits in your hand perfectly creating nicer and futuristic looks (Rai 2010). One of Coca-Cola's product objectives is to increase public consumption of Coke (Coca-Cola Company 2011).

2.2 Current Pricing

Coca-Cola Company operates in a monopolistic competition market with many buyers and many sellers. Its main competitor is Pepsi competing on price and also non-price basis. Objective is to maintain its competitive advantage with its Pepsi rival in all aspect. In United States, Coca-Cola targets the market widely, setting the price suitable for all generation. Coca-Cola Company uses four different set of pricing strategies for different season in convenient stores, petrol stations, hypermarkets and more. One is psychological pricing strategy where price set affected by consumer behaviour for example setting price of 2 litre Coke at $2.49 instead of $2.50 cheaper by 1 cent, then segmented pricing strategy packing Coke in 6 pack cans and 12 pack cans in separate pricing, and international pricing strategy where different selling price in different countries to fit local economic conditions, competitive situations and laws where price in United States is $2.50 to $3.00 but in Malaysia is RM 2.00 to RM 3.00 for 2 litre in different currency but same digits (Coca-Cola Pricing and Distribution 2009). They also practice promotional pricing whereby during summer, prices of Coke is pushed up by 6% to 9% (Maiti 2011) to maximize profit because consumers will consume more during hot weather periods. One problem is prices of raw materials like corn, aluminium, and sugar are rising in the United State. According to Geller (n.d), Coca-Cola planned to raise prices on beverages in United States as cost raises $300 million to $400 million for commodities like corn, juice, plastic and metal. Base on the report of USDA (Economics Research Department of United States), selling price of sugar per pound rose from 32.95 cents in fourth quarter 2010 to 34.02 cents in first quarter 2011 amount to approximately 3.247% per pound of sugar. Coke's volume declined 1.5 percent during 2008, including a 7.0 percent decline in the fourth quarter of the year when prices are increased (Coca-Cola Company 2011).

2.3 Current Distribution

Coca-Cola is a sort of franchised operation distributed over 200 countries with 50% market share (Daltorio 2011). United States Coca-Cola Company sell syrup concentrates to bottlers Coca-Cola Enterprise and Swire Beverages for completion and distribution (Marketing Plan for Coca-Cola alcoholic Beverages 2011). This can be a problem as Coke Company will have no control over distribution. Coke is distributed through direct and indirect channels. Coca-Cola is distributed directly through vending machines and slot machines placed in colleges, shopping mall and other miscellaneous businesses (Coca-Cola Uses the Following Distribution Channel 2011). Vending machines help accomplish instant consumption because they provide ice-cold Coca-Cola products to consumers in a variety of locations (Joeydaprot 2006). Coke is distributed through indirect channels to grocery stores, restaurants, airlines, hotels, petrol stations, kiosk and etc. by intermediaries like wholesaler, retailers, and distributors through conventional channel. This takes up a lot of time for transporting Coke to places to reach consumers. As Coke is convenience goods, it has to be reachable and easily obtained ahead of competitors. Coca Cola uses push strategy through mass coverage (Level of Distribution Coverage, 2011) which is also known as intensive distribution whereby widely-distributed everywhere anywhere to reach customers (Research Paper on Coca-Cola Company 2010). For instance, you will find the Coca Cola products anywhere you go, from supermarkets to service stations or to any shops. As Coke is recognized worldwide, pull strategy is used when customers demand are high due to brand loyalty and awareness (Coca-Cola Company 2010) for Coke through price and product distinctions.