Coca Cola Case Study

Coca Cola Case Study

Introduction

The purpose of this paper is to present a strategic marketing plan to identify and evaluate new business opportunities for Coca Cola Amatil, a leading beverage manufacturer based in Australia. The analysis will begin with a brief background of the company including company mission statement and business objectives. It will be followed by a comprehensive market analysis examining the corporation’s market competitiveness and structure, market size, projected growth trends, competitors, influencing environmental factors and target market. The paper will then analyze the anticipated new opportunity and would go on to formulate a marketing strategy which will seek to explore various significant aspects relating to optimum utilization of the new business prospect. Break-Even analysis will also be presented of the projected product along with an account of the changes in the business operations that may be made for incorporating the business requirements for the new product.

Coca Cola Amatil: Background

Coca Cola Amatil is one of Australia’s leading and oldest business corporations, which was established in 1989 as a result of a grand re-organization of Amatil Limited. The multinational business is mainly based on manufacturing and distributing alcohol-free beverages and snack foods. With its headquarters in Australia, the company also operates in New Zealand, Indonesia, South Korea, Papua New Guinea, Fiji and is the largest producer of Coca Cola trademarked products with primary focus on Asia-Pacific region (About Coca Cola, n.d.). The company besides producing its own products, manufacture, market and sell the trademarked products of Coca Cola Company across its targeted region.

Mission

  • To refresh and revitalize the world in mind, body and spirit.
  • To inspire through our activities and brands, moments of Positivity and hopefulness.
  • To build value and make a difference wherever we participate (Curd, n.d.).

Objectives

Coca Cola Company seeks to introduce quality in every aspect of the business. The firm aims to:

  • Serve as a workplace where individuals are inspired to give in their best.
  • Create and introduce a range of beverage brands that satisfies customers’ wishes and needs.
  • Develop a strong and efficient network of customers and suppliers to enhance value.
  • Optimize enduring returns to shareowners while being attentive of our overall responsibilities as a corporate citizen.
  • Be a highly operative, efficient and fast-growing organization (Mission, n.d.).

 

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Market Analysis

Market Background

According to the council of Australian Food Technology association and Institute of Food Science and Technology (1988, p. 333), the Australian non-alcoholic beverages industry has been growing steadily, with 2.3 percent increase in overall production in the year 2000 which amounts to 2.25 billion liters. However, in the recent years, sales of customary carbonated soft drinks have dropped as more and more customers become health conscious and move away from high-calorie sugary drinks. Soft Carbonated drinks and other alcohol free beverages manufacturers have also sensed the effects of intensifying competition from private-label soft drink makers. Nevertheless, sales of greater value energy and sports drinks have driven profit generation in the industry.

The Soft Drink and Beverage manufacturing industry is primarily concentrated in the eastern Australian states, close to the foremost population centres, according to Soft Drink market research report published in IBIS World (2012). New South Wales alone has 34.6% of such establishments, while Victoria is home to 11.5% and Queensland to 20.5%. The report shows that Victoria’s share of total beverage producing firms has declined over the past few years because of enhanced investment in facilities in other regions of the country. Meanwhile, South Australia’s market share has been growing, as has N.S.W’s share.

Market Size

Coca Cola Amatil is the leading and largest provider of alcohol-free beverages and Coca Cola trademark products as it covers a huge market segment. The annual revenue at present is $3 Billion and according to the estimates, the yearly profit is expected to increase by 1.8 percent. (See Appendix 1).The market conditions for soft drink companies in Australia are encouraging and it still has a huge potential to grow more. The market if considered in the realm of retail sales industry, has reached an estimated value of $239.5 billion in 2011, representing a rise of 1.3 percent from 2010 (IBIS World, 2011).

Market Growth

Today, Australia is commercially assisted by both outsized multi-plant companies and by persistent dynamic and robust regional bottlers that are innovative and manufacturing products for both the domestic and foreign markets. A forceful and ever changing alcohol-free beverages industry is crucial for both our economic and social well-being as it provides the extensive range of liquid refreshment that meet people’s nutritive needs and social occasion. At present, the beverage industry produces a remarkable wide collection of beverages, from the traditional carbonated soft drinks and fruit juices to sports, energy and other formulated beverages, and a booming bottled water market (Australian beverages, 2004).

On the other hand, the rapid and stable growth of the retail trade is because of the strong position of the Australian dollar and encouraging employment conditions. This economic stability has reduced the cost of retail goods that are imported. Hence improved employment and economic conditions has led to better purchasing power and positive consumer behavior (IBIS World, 2011).

Key Competitors

Since now Coca Cola Amatil manufactures a number of beverages other than cola such as lemon drinks (sprite), bottled water (Mount Franklin) and Orange drinks (Fanta). The company faces competition from tea and coffee offerings by Nestea and from smoothies and juices produced by companies like Boost. Other key competitors include Monster Beverage Corp, Goodman Fielder Ltd and Metcash Ltd.

Environmental Factors

  • Internal Rivalry

There is an intense rivalry among the top market players; Coca Cola, Nestle and Pepsi which comprises of a strong concentration of approximately 43 percent of the market. However, the rest of the market is quite fragmented. There is a considerable degree of rivalry among these competitors because they operate internationally with a wide network of bottlers (San Francisco Chronicle, 2012).


  • Consumer Buying Power

Because of the absence of influential supermarket chains in CCA’s markets like Fiji, Papua New Guinea and Indonesia, the buying power is considerably low. Meanwhile, in markets like Australia and New Zealand that has sturdy supermarket chains like Coles, Woolworths, Progressive and Foodstuff, the buying power of consumers is comparatively high.

  • Supplier Power

Apparently, the supplier power seems to be absent because almost all of the inputs are supplies and are readily available. Yet, a vital issue that needs to be monitored and evaluated in the mounting commodity prices of necessary production inputs such as sugar and packaging supplies like aluminum. CCA possesses the essential evading strategies well in place to combat increasing commodity prices. This stabilizes the supplier power that input suppliers and packaging manufacturers might have in the industry.

  • Effect of Climate Events

The recent floods in the Queensland and Victoria had significant negative effects on the food prices and agriculture supply system. Further destruction caused by Cyclone Yasi led to inflation and rise in interest rates had a strong impact on retail spending (IBIS World, 2011). After experiencing harsh economic circumstances, the Confectionary and Soft drink industry regained strength owing mainly to better employment and currency condition.

Target Markets

As a manufacturer and distributor of a diverse range of non-alcoholic beverages, Coca Cola Amatil operates in different markets. The company functions in consumer market as such beverages are purchased and sold there. Additionally, the corporation also operates in intermediate markets as its offerings are distributed by means of retailers such as supermarkets. Being the producer of mass market products such as fruit juices, smoothies and soft drinks, CCA also engages in mass-market, and at the same time, in niche markets because it also manufactures niches products like energy drinks (Rees, 2004, p.1).

Evaluating New Marketing Opportunities

Coca Cola Amatil has experienced years of consistent growth and profit since its inception. At present, the company sells over one billion servings every day (See Appendix 2), however, CCA is also aware of 47 billion servings that are sold by other competitors and it seeks to make optimum use of potential opportunities in the market.

Introducing New Brand

The prospect of introducing a new flavored cola brand is highly appealing and with right marketing strategy, such an innovation will create value and will bring fruitful results in terms of revenue growth. The new product will offer a unique drinking experience to consumers and is expected to enhance brand loyalty. The new drink will be a bottled flavored bubble tea, a creative blend that would give the fizz of Cola and taste of flavored tea. Such an innovative offering will present itself as a healthy, funky and unusual substitute for other soft drinks and would appeal to the health-conscious population segment, which previously proved to be a tough market segment to target.

Marketing Strategy for the New Product

Product Development

The new bottled beverage will have a playful, modern and funky branding and its brand personality will be characterized by healthy, unique and energizing drink. The new drink will have a strong brand equity and consumer base owing to the existing widespread brand power of Coca Cola and other popular CCA’s products.

Product Positioning

Since this innovative drink will be one of its kinds in the market, a strong and well-designed marketing campaign is expected to result in big sales. The positioning strategy will be based on quick and wide-scale distribution activities since the product is prone to imitation. CCA will be marketing an existing brand with modified taste and features. The brand will be positioned as a functional, revitalizing and healthy soft drink so that it can attract health conscious consumers.

Market Penetration and Development

The introduction of new product would be a source of market pull because it would give a competitive advantage to the company as CCA will be able to target new markets (diet conscious population segment) and will serve the corporation’s need for doing green business. Innovative and attractive non-alcoholic flavored drink will give the company a significant control over its prices.

Promotion Strategy

The product will be promoted on the grounds of three factors; the demand for the product, potential substitutes and product lifecycle. The promotional activities will fundamentally be based on creating awareness and desire among the targeted consumers through employing different means of advertising and marketing such as electronic media, online advertising, newspapers, billboards, sponsoring matches and events, and direct selling. The focus will be on launching the product as a healthy, energizing and refreshing drink that will offer a unique drinking experience.

Industry Codes of Practice

The company will take into account the following codes of practices while formulating its marketing strategy for the new product.

ADMA Direct Marketing Code of Practice

            According to the ADMA code, the member company must not indulge in any deceptive or false claims while carrying out its marketing functions and every piece of information regarding the product must be validated with given evidences. Therefore CCA will have to validate its health and nutrition claims by making public its green tea base and other dietary aspects. Also the marketing campaign which will include various modes of mass communication should be free from stereotypical messages and false claims (ADMA, 2005).

Free TV Australia – Commercial Television Industry Code of Practice

CCA will have to carefully consider and abide by the provisions in the Commercial television industry code of practice while making use of Television advertising. The advertisements will have to be made keeping in view the standards of broadcasting as set by the code. The marketing messages displayed on television should not offend any culture, race of gender, should not provoke negative feelings against any other person, group, nationality or ethnicity. Besides this, CCA will need to follow the commercial time buying procedures as provided in the clauses 1.16, 1.17 and 1.18 of the code (Free TV, 2010).

Australian E-Commerce Best Practices Model

            The model provides that the marketing content should be original and distinguishable from other material and businesses should be able to support their marketing claims with authentic evidences. In case of personal selling and email advertising, company has to comply to the regulations presented in Spam Act 2003 (Australian govt. treasury dept., 2006). It will be the focus of CCA’s marketing efforts that the advertising material disseminated and the message is appealing, original and free from any illegal or deceptive element.

Trade Practices Act

            Coca Cola Amatil would need to establish relationships with suppliers, competitors, retailers, wholesalers and customers in light of the provisions made in the Act. The Trade Practices Act requires adequate steps to ensure consumer protection and promote fair trading.

Break Even Analysis

Below given is the break-even analysis of a single unit of the proposed product.

Selling Price of one unit= $8.5

Fixed Cost = $3.5

Variable Cost = $1.5

Total Cost = $ 5

Sales revenue per unit = $3.5

Break-Even Point = Fixed Cost / Contribution margin

Contribution Margin = Sales revenue – Variable Cost

=  3.5 – 1.5

= 2$

Break Even Price = 3.5 / 2

= 1.75 $ per unit.

 

 

 

 

Appendix: 1

Revenue generation from 2006 to expected profit in 2013 and 2014.

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Appendix: 2

 

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References

About Coca Cola Amatil. (n.d.). Retrieved May 10, 2012, from,

http://www.afrbiz.com.au/companies/coca-cola.html

Australian Direct Marketing Association. (2005). Direct marketing code of practice. Retrieved

May 11, 2012, from,

www.accc.gov.au

Australian Government Treasury department. (2006). The Australian guidelines for electronic c

ommerce. Retrieved May 11, 2012, from,

www.archive.treasury.gov.au/

 

Daniel Rees. (2004). Coca-Cola Amatil: Marketing. Business studies update. Vol. 4 (2), pg. 1-8.

Council of Australian Food Technology association & Institute of Food Science and Technology. (1988). Food Australia : Official journal of CAFTA and AIFST. North Sydney, Australia : Council of Australian Food Technology Associations.

Curd, M. (n.d.). Marketing plan: Coca Cola in 2015. Retrieved May 10, 2012, from,

www.nice-cuppa-tea.co.uk/marketingplan.pdf

Free TV Australia. (2010). 2010 commerical television code of practice. Retrieved May 11,

2012, from,

http://www.freetv.com.au/content_common/pg-code-of-practice.seo

 

Mission, vision and values. (n.d.). Retrieved 10 May 2012, from,

http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html

Soft Drink Manufacturing in Australia: Market Research Report. (2012). Retrieved May 10,

2012, from,

http://www.ibisworld.com.au/industry/default.aspx?indid=1859

San Francisco Chronicle. (2012). Confectionery and Soft Drink Wholesaling in Australia

Industry Market Research Report Now Updated by IBISWorld. [press release]. Retrieved

May 11, 2012, from,

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/04/26/prweb9444961.DTL