Coca-Cola Japan: Should tea be introduced?

1. Coca-Cola Japan:Should tea be introduced? Consultants: Sarita Ambani Leah Bernstein Rani Ngai Emily Phung

2. Outline of Report • Coca-Cola Background • Japan and its culture • Japan’s Beverage and Tea Market • Coca-Cola Japan and its success • Coca-Cola Product Line • Competition • SWOT Analysis • Research and Development • Marketing Plan and Recommendations

3. Coca-Cola Company Background • Founded in 1886 by John C. Pemberton • World’s leading manufacturer, marketer, and distributor of nonalcoholic beverage concentrates and syrups • More than 300 brands • Corporate Headquarters in Atlanta with local operations in over 200 countries around the world

4. Two Business Sectors • North American • Coca-Cola USA • Coca-Cola Ltd. = Canadian Operations • Coca-Cola Foods = juice drinks • International • Greater Europe • Latin America • Middle and Far East • Africa http://www.cocacola.com/worldwide/flashindex1.html

5. Japan in the 1980s • Economy improving • Yen appreciating in value • Boom in consumer spending • Health trend Map Source: http://gojapan.about.com

6. Average Exchange Rates, Japanese Yen/US Dollar, 1970-87

7. Japanese Beverage Market

8. Japanese Tea Market • Ready-to-drink segment • Annual growth for tea categories • Oolong: 42% • Black: 60% • Western-style: 60%

9. Places to Sell • Grocery stores • 5.1% annual average growth rate • Convenience stores • 15.8% annual average growth rate • Restaurants • Vending machines Image Source: www.cocacola.com

10. The Coca-Cola (Japan) Company • 1957, established in Tokyo • Due to trade regulations, focus attention on: • Local connections • Competitive environment • Japanese culture • 1961, trade deregulation policies • Form strategic alliances with powerful Japanese corporations which allowed local acceptance of the product • 1965, Coca-Cola best-selling soft drink in Japan

11. CCJC Success • Two main factors contributing to leadership position • Direct marketing approach • Distribution system • “From the TV set to the store shelf”

12. Direct Sales Concept • Stiff Resistance • Wholesaler concept • Turnaround • Bottlers’ enthusiasm • Strong Coca Cola sales

13. Key Element • In Principle • Bottlers acted as independent corporation • Sourced raw materials locally • Complete all production on site • CCJC unified bottlers through • Aggressive Monitoring • Marketing Strategies • New Product Development

14. Japan’s Favorites • HI-C • Opened a way for new fruit juice market • Averted crisis for Japanese citrus farmers • Overproduction of Mikan • Coca-Cola bought crop to produce HI-C • Led to lasting relationship between CCJC and growers

15. Georgia • Lack of canned coffee product source of controversy between CCJC and Japanese bottlers • Leading brand in market segment • 34% of market in 1987 • Young businessmen primary target

16. Aquarious • Isotonic drinks • Touted as “health drink” • Female consumer targeted • Ideal for replenishing fluid and electrolytes lost through perspiration

17. Market Share • Commanded 90% of cola market • 60% noncola carbonated market • 10% remaining drink market • 21.5% of Coca-Cola’s worldwide profits came from Japan • Profit per gallon four times higher than U.S.

18. Competition • Included private-label suppliers, international and domestic producers • Other beverages besides cola competed for their percentage of the market. • Advertising, sales promo programs, intro of new packaging and new products, were competitive factors.

19. Tea market competitors • Ito En Ltd • Suntory Ltd • Kirin • Hitachi Zosen Corp • Ashai Breweries Ltd.

20. Ito En Ltd. • Leading Japanese canned tea marketer • First to come out with canned tea product • Introduction of green tea with superior quality in 1985 • Central focus is just tea products

21. Suntory Ltd. • Largest distillory in Japan due to production of alcholic beverages • Decided to enter tea market by intro of canned oolong tea and resulted into 50 % of market • Big competitor of Coca-Cola due to production of beverages including cola, green tea, and health tonics.

22. Kirin • First canned black tea “Afternoon Tea” • Advantage- facilities= 5th largest brewery • Brand recognition due to having 50% market share of beers • Leading domestic soft drink producer along with similar beverages to Coca-Cola

23. Hitachi Zosen Corp. • Prestigious company due to biotech background • Developed “healthy” tea from bark of tochu tree

24. Ashai Breweries Ltd. • 1st producer of Western- style canned tea • Significant competitor in canned coffee market

25. Strengths • Multinational enterprise • Global acceptance of beverage products • Trademark is widely recognizable. • Successful incoporation of local tastes and preferences • Production and distribution in domestic and host countries • Market leader, not a follower. • Willingness to find new target markets.

26. Weaknesses • Not enough research on new trends in the market. • Not broadening /entering new markets that could be a success for Cola-Cola.

27. Opportunities • Expanding product categories to include some products offered in U.S.A. • Diversify product lines • Co-Branding with local companies • Capitalize on local trends and favorites

28. Threats • Local and global competition • Production difficulties • Culture and lifestyle differences • Research and Development errors • Investment loss

29. Factors to Consider • Cola-Cola US focuses on expansion rather than researching and developing. • Has foreign direct investments in Japan with local companies.

30. Marketing Plan • Research for niches in the market • Develop a product that fits those needs • Infuse Western culture with Japanese culture (allows brand recognition) • Focus on distribution and production with local franchises which aid in promotion and enthusiasm about the new product • Incentives to try new products so tea products can be the new “cash cow” (since other Coca-Cola products may be in the maturity stage of the Product Life Cycle) • Promotion through samples & coupons

31. Value-added • Unique packaging • Focus on health awareness • Be the first-mover advantage in different types of teas

32. Research and Development • 2 new products that may cause a successful venture for Coca-Cola Japan that the research and development team are proposing: • Marocha Tea • Sokenbicha

33. MAROCHA™ TEAWell worth the wait The distinct flavor of Coca-Cola Japan's Marocha Tea comes from Kabusecha tea leaves, which take the longest time to ripen to perfection and, of all tea varieties, require the greatest effort to produce.Marocha Green Tea and Marocha Gyokuro are superb quality green teas that contain a touch of sweetness and offer the deep mellow taste of a freshly brewed tea that consumers might make at home themselves.Consumers of all ages are recognizing the abundance of vitamins and anti-oxidants in green tea leaves and their positive effects.

34. SOKENBICHA® Sokenbicha tea is popular among young Japanese women for its health-giving properties. With 11 natural ingredients, including roasted rice, green tea, evening primrose, loquat leaves, chicory, and vitamin C, Sokenbicha reminds consumers that beauty and vibrant health naturally engender feelings of happiness and hope. Health trends make this product unique from others. The packaging incorporates an image of sunlight shining through leaves in a forest, suggesting refreshment amidst nature.

35. Resources • www.cocacola.com • Srinivasan, Srini Seminar in Marketing Strategy.