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Beverages – Soft Drinks Industry Module 1: The Business and Business Environment. Megan Morava. Background. World’s largest beverage company License and market 500 nonalcoholic beverage brands Primarily sparkling beverages Coca-Cola, Diet Coke, Fanta , Sprite

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beverages soft drinks industry module 1 the business and business environment
Beverages – Soft Drinks Industry

Module 1: The Business and Business Environment

Megan Morava

background
Background
  • World’s largest beverage company
  • License and market 500 nonalcoholic beverage brands
  • Primarily sparkling beverages
    • Coca-Cola, Diet Coke, Fanta, Sprite
  • Strong brand loyalty and diversified geographical operations offer competitive advantage
  • Revenues 2012: $48 billion, 3.17% increase
primary activities
Primary Activities
  • Inbound logistics
    • Ingredients, packaging, machinery
    • Water, nutritive and non-nutritive (low calorie) sweeteners
    • Supplier Guiding Principles
  • Operations
    • Concentrate business
    • Finished products business
  • Outbound Logistics
    • World’s largest distribution system
    • Over 300 bottling partners
primary activities1
Primary Activities
  • Marketing & Sales
    • Marketing strategy centered around creating brand loyalty
    • Constantly reinventing product
    • Promotional funds and services offered to bottlers
    • Provide marketing services, dispensing equipment, and repair services to retailers
  • Servicing
    • Customer support, repair services, installation and training
support activities
Support Activities
  • Company infrastructure
    • Finance and accounting, legal services, quality management and IT services
  • Human resource management
    • Recruiting, payroll, education & training, benefits administration, compensation
  • Technology/product development
    • Product development, process development, market research
  • Procurement
    • Billing systems, supplier vendor relationship, raw materials info systems
swot analysis
SWOT Analysis
  • Strengths
    • Global presence
    • Customer loyalty
    • Operational efficiency
    • Bargaining power over suppliers
  • Weaknesses
    • Product recalls
    • Future demand for carbonated drinks
  • Opportunities
    • Growth initiatives – bottled water and noncarbonated drinks
    • Strategic acquisitions
    • Positive beverages market outlook
  • Threats
    • Highly competitive market
    • Volatile raw material costs
    • Government regulations – product labels and ingredients
industry overview
Industry Overview
  • High brand recognition
  • Coca-cola and Pepsi are industry leaders
  • Industry has remained stagnant in recent years
  • Increased demand for energy drinks
industry competition
Industry Competition
  • Three main firms make up 90% of the industry
  • Duopoly: Pepsi and Coca-Cola
    • Compete of differentiation and advertising, not pricing
  • Growth rate is small but steady
  • Brand names offer a significant competitive advantage
buyer supplier bargaining power
Buyer & Supplier Bargaining Power
  • Buyer
    • Main buyers: food stores, fast food restaurants, vending, convenience stores
    • Customers highly sensitive to prices
  • Supplier
    • Commodity ingredients - supplying undifferentiated products
    • Do not hold much competitive pressure, low bargaining power
    • Low barriers of entry for suppliers in the industry
threat of substitution
Threat of Substitution
  • No costs incurred by customers from switching to substitutes
  • Substitutes include water, tea, juice, sports drinks
  • Advertising and brand recognition counter threat
  • Companies offer substitutes themselves to help eliminate substitution
threat of entry
Threat of Entry
  • High barriers to entry
  • Brand loyalty
  • Advertising and marketing budgets
  • Main competitors have extensive bottling networks and exclusive agreements with bottlers
  • Retailer shelf space
    • Large companies offer high margins
industry outlook
Industry Outlook
  • Non-carbonated beverage market increasing, while carbonated soft drinks decreased slightly
  • Steady volume trends
  • Improving product margins
  • More innovation with natural and low-calorie sweeteners
sources
Sources
  • Coca-Cola Company Form 10-K 2012
  • Business Insights: Essentials
    • http://bi.galegroup.com.proxy.library.nd.edu/essentials/article/GALE%7CI2501600016/acba463cc318645b688ad84cb5198d57?u=nd_ref
  • Global Data
    • http://callisto.ggsrv.com.proxy.library.nd.edu/imgsrv/FastFetch/UBER1/301815_GDCPG28399FSA
  • S&P Capital IQ
    • http://www.netadvantage.standardandpoors.com.proxy.library.nd.edu/NASApp/NetAdvantage/cp/companyIndustrySurvey.do?task=showIndustrySurveyByTicker