Coca-Cola is perhaps the most popular and well known soft drink worldwide. Almost 98% of people worldwide know the word Coca-Cola and it is available in more than 190 countries. Coca-Cola belongs to the Coca-Cola Company and is only one of the 400 non-alcoholic brands that this company owns. The Coca-Cola Company is one of the largest corporations in the world, with a global workforce of 90,000 and revenues of $31 billion (in 2009).
In this analysis I will go into details about the product Coca-Cola, its special characteristics, competition- and position in the market, the role of government, its success and finally give a future insight how this market could possibly develop. The logo, red background with a rolling white script which says Coca-Cola, was invented in 1886 and has remained unchanged. Remarkable is also the design of the Coca-Cola bottle, which was invented in 1916. The design of the bottle became a registered trademark in the USA in 1960.
This is a special characteristic because it gives Coca-Cola a unique look. Coca-Cola is a beverage that can be drink at any time and at any place because it is made for the mass. In order to control the market, the Coca-Cola Company itself produces only a concentration. Then it grants licenses (also called concessions) to independent entrepreneur (bottling partners), who then manufacture, package, merchandise and distribute the final branded beverages to customers and vending partners, who then sell the products to consumers.
The Coca-Cola Company owns all rights for its brands. The Coca-Cola Company finances itself only through revenues of the sale of the concentration. The aim of the Coca-Cola Company is to provide a drink for everybody worldwide. A drink that is available at any time, is homogenous in quality, taste and packaging. A further aim is to develop their brand, create value and to explore new markets. To make sure that Coca-Cola, as a beverage is available to everybody, the Coca-Cola Company keeps the price down so that everybody can afford it.
This product is made for the mass-market. Coca-Cola is not an essential beverage; it is more like a cheap luxury-beverage. The first advertisement for Coca-Cola was in 1886, followed by a constantly elaborated marketing strategy, which Asa Candler, the business owner of the Coca-Cola Company followed. Coca-Cola should not only be known in Atlanta but also in other States of the United States and also in other countries. The Coca-Cola expansion to Europe began in the 1920s and the first country where Coca-Cola was available was Germany.
Until this date, Coca-Cola was only available in the United States and Canada. The marketing department of Coca-Cola first concentrated on standardization of the quality and packaging. There were many bottling partners, so standardization was necessary to promote Coca-Cola. Therefore it should have the same quality and packaging in every country. In 1933 the process to automatically mix Coca-Cola was invented. That was the biggest success in the standardization of Coca-Cola. Soon Coca-Cola was mobile and available at petrol stations, cinemas and amusement parks.
The recipe of Coca-Cola was changed in 1903 but since they effectively maintain their market position with the help of this secret blend, it has remained almost the same. Until today the ingredients of Coca-Cola are unknown. To make sure that no one will ever find out what the secret of the Coca-Cola taste is, all books about the Coca-Cola recipe were burned in 1910. The press had major interests to find out the secret about Coca-Cola and its success. The marketing department of Coca-Cola realized that and used this fact to promote their drink.
Coca-Cola grew up in a century where marketing had its debut and the marketing department of Coca-Cola used every possible way for promotion. Coca-Cola slogans were everywhere, on bill boards or on shop windows but they also used to give ‘take aways’ where the advertisement of Coca-Cola was pictured, for example on matches, calendar or on clocks. Later, in the second half of the 19th century Coca-Cola also used the more modern version of marketing and advertisement, such as commercial on radio, in the cinemas or on Television.
It was the Coca-Cola Company who gave birth to innovation such as aluminum cans or returnable bottles. One of the greatest successes in advertising Coca-Cola is definitely the idea of dressing Santa Claus in the colors of Coca-Cola (1931). This advertisement is still shown on Television and remained unforgettable. Santa Claus became famous with this advertisement and is surely the biggest marketing success of the Coca-Cola Company. As mentioned before, the drink Coca-Cola was made for everybody advertisements were created for universal appeal.
Many pictures and less script was the message of Coca-Cola to make their message understandable to everybody. As the Coca-Cola Company grew, they also started to sponsor major events and especially sport events such as the Olympics or FIFA World Cup. In the Second World War, the US government declared Coca-Cola as the most essential war commodity. This was a big success for Coca-Cola, because it supported its expansion into Africa. In effect government intervention was fundamental in securing a global market for the company. This was the crossover for the internationalization of the Coca-Cola market.
Since then, Coca-Cola Company has the target to capture new markets and brands such they did with Apollinaris in 2006. Coca-Colas biggest competitor was and is Pepsi, which was available from 1896. Pepsis strategy was to sell itself as a cure product that helps against digestive complaints. This was a strategy to distance themselves from Coca-Cola and to show that Pepsi is a unique beverage but this image changed as time passed. While Coca-Cola strategy is to put its most weight on a price-moderate intense advertising, Pepsi puts its weight on a high price-intensive advertising strategy.
Both companies are highly represented in the United States but Coca-Cola sells more beverages outside of the US and receives almost 80% of its income from international markets, whereas Pepsi receives only 42% of its income from outside the US. (In Pepsis international income includes also its snack business included, in which the Coca-Cola Company does not participate. ) Coca-Cola did not accept imitations so they fought back with slogans saying ‘Accept no substitutes’ (Exler 2006, p. 35). Indeed Coca-Cola was the first kind of its beverage and they reinforced this fact for its marketing.
Yet they are the worldwide leading Company in the beverage business. Since the 1930s Pepsi become the primary competitor of Coca-Cola although there are other regional as well as global competitors. The competitive factors includes pricing, sales promotion, advertising, product innovation, trademark and brand. Coca-Cola and Pepsi build together an oligopoly. Therefore Coca-Cola and Pepsi are seen as substitutes. If Pepsi increases its price, people are more likely to purchase Coca-Cola. In this case, consumers are indifferent between these two products which make the consumers being sensitive to price changes.
Hence we can say that an increase in price for one kind of product will result in an increase in demand for its substitutes. It could be said that Pepsi and Coca-Cola are effectively interchangeable. Historically, the prices for Coca-Cola and Pepsi have mirrored one another so that there is no actual price war between these two competitors. The role of the government differs from country to country in an oligopoly market. Acquisitions can lead on a long-term basis to an unfair competition and an increase in price and this could lead to a decrease of competitiveness.
On the other side, oligopoly can be an easy way of adopting standards. The government or Federal Trade Commissions can interfere into the market, by for example passing bills. Wherever we have a liberalized marked, it is very important for the government to provide a fair competitive environment. The government is basically responsible for the general condition on the market without interfering, if possible (passive performance). The more you abolish trade and investment barriers, the more one (the government for example) must ensure that these barriers do not get replaced by private barriers (such as pricing).
In Europe the European Union monitors the Companies. ‘Under the laws of the European Union, a company with a “dominant market share”, usually 50 percent or more, become governed by a stricter set of rules designed to guard against monopolistic practices. Coke had far more than 50 percent in most of Europe…’ (Hays 2004, p. 194). Therefore it could be said that there is a strong governmental influence on the Coca-Cola Company. There are also secondary competitors, mainly present in Asia such as Mecca-Cola, Tawfik, Kampa-cola or Zam-Zam Cola.
Some of these secondary beverages were produced in Algeria, Pakistan or also in Iran but these beverages are only sold nationally and do have a mirror effect on Coca-Cola. The major supporter of the alternative products are countries that have a considerable Islamic influence that may not be totally pro-America. ‘And Pepsi never developed the classic American image that Coke had, and has’. (Hays 2006, p. 218) In times of recession, Pepsi seemed to be more successful than Coca-Cola because Pepsi was perhaps seen as a cheap version of Coca-Cola.
In comparison to Coca-Cola, Pepsi embodies an anti-American Image and is market leader in newly industrialized countries, such as Saudi-Arabia. There is a big difference between PepsiCo. and the Coca-Cola Company. While the Coca-Cola Company is only involved in beverages, PepsiCo. does also have a large food division. Both companies have a different size and to compare them only as beverage companies is possible but does not really say the truth about Pepsi, as the facts and figures which Pepsi gains from selling food would not be included.
As a conclusion we can say that the beverage market will not experience major changes. Coca-Cola Company will remain clearly a market leader worldwide. Their main product Coca-Cola has been positioned in the mind of the customer. The stream of advertisement is a support to promote Coca-Cola but their success is rather due to the fact that the Coca-Cola Company was the first Company in the beverage industry and Coca-Cola their first drink that made the company successful. So the power of this company comes from its brand. The Coca-Cola Company will use the power of its brand to inspire and create differences.
Furthermore Coca-Cola will follow its values and experience so as to maximize profit, acquire new customers, to deliver quality beverage and to expand their beverage portfolio in order to meet consumers’ needs and to stay a leading company. The Coca-Cola Company will also pay attention to health concerns and to introduce carbonated beverages with almost no sugar, in countries where there is still a gap in that market. As the world is changing I assume that the Coca-Cola Company will also consider the environmental sustainability and make their products and packaging environmentally friendly.
List of references
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