STRATEGIC MANAGEMENT

REPORT

COCA-COLA PAKISTAN
(CCBPL)
SUBMITTED TO:
SIR M. YAMMAN

GROUP MEMBERS
NAWAL MERAJ (33)
S. AYESHA SADRUDDIN (59)
SEHRISH GHAFOOR (48)
BILAL HAMID FAROOQUI (11)
ANWAAR PASHA (69)
 Table of Contents
The Coca-Cola Company ............................................................................................................ 4
Coca-Cola’s Vision (2020)............................................................................................... 5
Coca-Cola’s Mission ....................................................................................................... 5
Coca-Cola’s Values ......................................................................................................... 5
Coca-Cola’s Goals ........................................................................................................... 5
Coca-Cola History ....................................................................................................................... 6
Coca Cola Pakistan ..................................................................................................................... 8
Interview Session ........................................................................ Error! Bookmark not defined.
Pest Analysis............................................................................................................................. 10
Political Analysis ........................................................................................................... 10
Economic Analysis And Factors.................................................................................... 11
Social Analysis And Factors .......................................................................................... 11
Technological Analysis And Factors ............................................................................. 12
Industry Analysis (Beverage Industry) ..................................................................................... 13
Strategic Analysis Of Coca-Cola Pakistan (Porter’s Five Forces) .............................................. 15
Strategic Industry Analysis (Summarised) ................................................................... 18
Company Analysis .................................................................................................................... 19
Management Of Coca-Cola Pakistan ........................................................................... 21
Swot Analysis (Coca-Cola Swot Analysis For The Year 2015) ...................................... 23
Bcg Matrix .................................................................................................................... 25
Gap Analysis (Ansoff’s Matrix) ..................................................................................... 26
Financial Analysis ......................................................................................................... 27
Marketing Analysis ................................................................................................................... 28
Coca-Cola’s Promise ..................................................................................................... 28
Target Market .............................................................................................................. 28
Product Range .............................................................................................................. 28
Price Strategy ............................................................................................................... 28
Packaging ..................................................................................................................... 28
Major Competitors....................................................................................................... 28
Sales Promotion Activities In Pakistan ......................................................................... 29
Distribution Channels................................................................................................... 29
Additional Facilitation To Its Customers And Retailers ............................................... 29

1
Marketing Strategy .................................................................................................................. 30
Coca-Cola’s Marketing Strategies, ............................................................................... 31
Advertisement ......................................................................................................................... 34
Competitive Analysis ................................................................................................................ 35
Coke’s Competitive Advantage .................................................................................... 35
Competitor Profile (Pepsi Co.) ................................................................................................. 36
Organisational Difference ............................................................................................ 36
Product Competition.................................................................................................... 37
Challenges And Risks ................................................................................................................ 40
Corporate Social Responsibility (Pakistan) .............................................................................. 42
Conclusion And Evaluation ...................................................................................................... 44
References ............................................................................................................................... 45
Appendix .................................................................................................................................. 46

2
 ACKNOWLEDGEMENT

To the most High Sovereign, Allah, Who ordained this path for us, we express

our sincere thanks for the strength, wisdom, and every provision we needed to
make our efforts a reality.

Our heartfelt appreciation goes to Mr. Yamman Khan for seeing through all
the stages of this project. We wish to express thanks for your time, guidance,
critique and encouragement to press ahead with this work despite so many
conflicting pressures, without which this would not have been possible.

Lastly, but not the least, our sincere gratitude to our beloved families
for all the support, encouragement and patience they exhibited
throughout this study period.

Sincerely,

Nawal Meraj
Syeda Ayesha Sadruddin
Sehrish Ghafoor
Bilal Hamid Farooqui
Anwaar Pasha

3
THE COCA-COLA COMPANY1

Coca-Cola is one of the largest beverage producing company. It distributes and markets more
than 500 non-alcoholic brands of beverages. The Coca-Cola Company is the world’s leading
manufacturer, marketer and distributor of non-alcoholic beverages, concentrates and syrups.
It was founded in 1886. The Company’s corporate headquarters are in Atlanta, with local
operations in around 200 countries in the world. Although Coca-Cola was first created in the
United States, it quickly became popular wherever it went. The real reason that Coca-Cola is
a true global company is that the products meet the varied taste and preferences of
consumers everywhere.

Its primary business runs around sparkling beverage brands like Coca-Cola, Diet Coke, Sprite
and Fanta, but it also produces and licenses a variety of other beverages like waters, juices
and juice drinks, enhanced waters, energy and sports drinks and ready-to-drink teas and
coffees. The beverages being their trademarks are now currently sold in almost 200 countries
worldwide.

Coca-Cola makes its beverages available to consumers around the world through its vast and
efficient distribution systems. These are either company-owned or controlled bottling plants
which conduct operations. Their distribution network also includes many independent
bottling partners, distributors, wholesalers and retailers. Coca-Cola owns about 1.9 billion of
the 57 billion serving of beverages of all types of drinks consumed worldwide every day.

The success of Coca-Cola has long and still possible because of its ability to connect with its
customers in meeting their desires and lifestyle preferences by the consumption of various
variety of beverages that is offers. It further is successful die to efficient teamwork of the
company’s people working effectively in serving the customers every day.

1
The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/ [Accessed: 20 August,
2015]

4
 COCA-COLA’S VISION (2020)

“Be the outstanding beverage company leading the market, refreshing the world, inspiring
moments of optimism and happiness, and adding value through excellence.”

COCA-COLA’S MISSION

“Build a sustainable and profitable business through refreshing consumers, partnering with
customers, delivering superior value to shareholders and being trusted by communities.”

COCA-COLA’S VALUES

PASSION

TEAMWORK VALUES ACCOUNTABILITY

INTEGRITY

COCA-COLA’S GOALS

Supply Chain Sustainability

Operational
People and Commercial Excellence
Organizational Leadership Ensure the long term
To be the best in
Leadership viability of our
class consumer
Create a culture of business by being
demand fulfillment
Profitably deliver Operational proactive and
organization that
Build a highly superior value to Excellence to innovative in
exceeds customer
capable consumers & support continuous protecting the
expectations highest
organization and customers at the improvement of environment and be
in quality, lowest in
be the employer of optimal cost to our business recognized as one of
cost, in a sustainable,
choice serve process and the most responsible
socially responsible
systems corporate citizens by
manner
all stakeholders

5
COCA-COLA HISTORY2

During 1886, a pharmacist in Atlanta, Dr. John Pemberton, created a unique flavoured drink
that could be sold at soda fountains. The flavoured syrup was mixed with carbonated water
and served to the customers. Coca-Cola was sold for 5 cents per serving then and sales during
the first year were on an average of servings per day. Today, daily servings of Coca-Cola
beverages around the globe estimates to be 1.9 billion per day. Frank Robinson was Dr.
Pemberton’s partner. He was his bookkeeper by profession but he is the one who named the
famous drink as “Coca-Cola”. He also designed the script of the way the name of the brand is
still showcased today3.

Dr. Pemberton passed away just two years after creating this world’s best-selling beverage in
1888. During these two years, he sold ports of his business to various businessmen, with Mr.
Asa Candler, a businessman of Atlanta, having the majority interest. His leadership skills
helped him to widen the distribution of Coca-Cola to soda fountain outside of Atlanta as well.
By 1894, demand for Coca-Cola increased dramatically because of which Joseph Beidenharn
installed a bottling machinery to make the drink more portable. He installed it just behind his
soda fountain in Mississippi. In just five years, Coca-Cola’s large scale production and
distribution began to take place. In 1899, three entrepreneurs, Benjamin Thomas, John
Luptan and Joseph Whitehead purchased the bottling rights from Mr. Candler for $1 to
exclusively sell and bottle Coca-Cola. This is when the worldwide distribution of Coca-Cola
began (Mattes 1994).

The biggest challenge faced then was the duplication and imitations of the Coca-Cola by
competitors who reflected inefficient packaging. Around 1000 bottling plants were operating
at that time among the competitors of Coca-Cola5. In 1916, Coca-Cola bottlers decided that
the unique drink needed a distinct and standard bottle and thus developed the famous
contour bottle. The new bottle was easily recognizable as a distinct brand and made Coca-
Cola a unique brand different from its competitors. In 1977, Coca-Cola trademarked its
contour bottle (Mattes 1994).

Early marketing efforts of Coca-Cola were put to action through the distribution of coupons
which promoted free samples of the Coca-Cola. As this type of promotion was innovative
during the late 1880s, following this, newspaper advertising and promotional items were also
distributed containing the Coca-Cola script to various participant pharmacies.

2
The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/ [Accessed: 20 August,
2015]
3
The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/ [Accessed: 20 August,
2015]

6
By 1970s, Coca-Cola started promoting its brand to reflect its connection with friends, fun and
good times. In 1971, Hilltop Singers performed “I’d like to buy the World a Coke” and in 1979
the commercial featured a young fan giving Pittsburg Steeler a bottle of Coca-Cola with the
slogan “Have a Coke and a Smile.” (Mattes 1994)

By the 1980s, memorable slogans like “Coke Is It!” and “Can’t Beat the Feeling” were featured.
In 1993, when computers became popular, Coca-Cola launched a campaign featuring
animated polar bears under the name of “Always Coca-Cola”. A series of these ads were
launched in which each animated ad took around twelve weeks to produce from start till end.
Polar bears were used in this ad to define the characteristics like mischief, innocence and fun,
which was also an attribute of Coca-Cola beverage. Consumers were also engaged in this
activity by giving them a chance to have their photos snapped with the seven-foot tall Coca-
Cola Polar Bear at the World of Coca-Cola. The most famous of the advertising slogans in Coca-
Cola’s history was “The Pause That Refreshes” which appeared in the Saturday Evening Post
in 1929.

In 2009, Coca-Cola launched its “Open Happiness” campaign globally which denoted the main
message of pausing to refresh with a bottle of Coke and then continuing to enjoy life’s little
pleasures. This message was displayed through all advertising tools; it was seen on billboards,
stored, TV spots and print advertising. It was also featured in the digital and music aspects,
especially a single song by Janelle Monae of 1980 called “Are You Getting Enough Happiness?”
(Mattes 1994)

The theme of Open Happiness also extended to games with “Open the Games”. In 2010, the
Winter Olympics in Vancouver featured this and this also extended in the social media under
the name of “Expedition 206”. In this three ambassadors of happiness traveled to 206
countries around the globe in 365 days with a mission of determining the reasons that make
people happy. This journey has been shared around social media through blogs, tweets,
pictures and videos.

Since many years, Coca-Cola is believed to be a brand signifying a bond between happiness
and wellness. Coca-Cola has been successful in sharing happiness around the globe at many
occasions through is Coca-Cola beverages.

7
COCA COLA PAKISTAN4

Coca-Cola established its facilities in Pakistan in 1953. It operates locally within Pakistan. Its
products are produced locally, thus providing employment to hundreds of Pakistani residents.
The company focuses its marketing and advertising specifically to Pakistani tastes and
cultures. Coca-Cola Beverages Pakistan Limited’s (CCBPL) major shareholder is Turkey’s Coca-
Cola Icecek (CCI). CCI is currently bottling and distributing alcohol-free beverages in Pakistan
along with 9 other countries.

With Coca-Cola’s introduction, the following products of the company came along:
Fanta

1965

Sprite
1972

Diet Coke
2001

Fanta Lemon
2001

Besides these, Sprite Zero, Rani Float and Kinley Bottled water are also in company’s product
portfolio. The company’s bottling plant is located in Pakistan in different regions, including
Karachi and Islamabad. Its local office is also engaged in the marketing and advertising
activities related to its products across Pakistan.

After arriving in Pakistan, Coca-Cola was bottles and distributed via independent franchisees.
In 1996, Coca-Cola took the initiate to consolidate and acquire all the bottling plants and
operate hem under the company’s own supervision. This process of acquisition was
completed in 2006 and CCBPL became the only organisation responsible to bottle and
distribute Coca-Cola products across Pakistan. CCBPL ensures that quality products are

4
The history of Coca-Cola Pakistan; Available at: http://www.coca-colajourney.com.pk/our-company/
[Accessed: 20 August, 2015]

8
delivered to its customers. This includes investment in the market, customer development,
timely order and cash collections. By 2013, CCBPL has 6 bottling plants and 13 warehouses
operating across Pakistan thereby serving its 180 million population via its vast distributors
and retailers.

Figure 1: Source: Coca-Cola Icecek

9
PEST ANALYSIS
The PEST analysis is an important mean to determine and study the market growth and
decline in a given political and economic conditions, opportunities and barriers. It helps to
evaluate the position, potential and direction for a business. Despite being a strong brand,
Coca-Cola is influenced by the factors in which the business is operated. PEST Analysis
appraises the existing fundamentals of a business in strategic context and effect.

POLITICAL ANALYSIS

The political factor is the degree of political intervention in the economy, for example the
terms and conditions, laws and regulations, taxation policies, trade barriers and quality check
and control are some important dimensions for business support and survival. The following
factors affect the operations of the company in one way or another:

Political Instability and Strikes

CCBPL claims to have warehouses that stores cokes suffice to meet the demand in case of
series of strikes and political disruption for 1-3 months.

Effect of Labour Laws

The union of CCBPL possess a detailed past of struggle. It started in early 2000 when the
labour union was discouraged by the unfit management worthless negotiations. It was thus
banned. Later with the revival of the labour union since 2010, the management guaranteed
the effective social dialogue with the factory workers and took initiatives towards a
procedural and institutional framework. However, despite of these efforts, we observed the
unhealthy and unsafe working environment at Karachi plant. We found labours with no eye-
wears in the glass bottling area moreover; the noise was too much to bear. It can be said that
the management is nearly failed to attempt its procedural obligations.

Consumer Laws

It’s an essence of consumer law that a company should let its consumer know the content
and nutritional information of their product. Many preservatives like ascorbic acid, aspartame
and saponins are used in the manufacturing of the carbonated drinks, despite the fact that
most of the proportion of the drinks is composed of carbonated water and sugars. The Coca
Cola Company doesn’t reveal the composition of the concentrate it imports from USA and
hence, is in vulnerable position in this regard.

Ability to penetrate emerging and developing markets

The ability to penetrate in the market or discover new market has direct relation with the
political conditions, such as civil conflict and governmental changes. Coca-Cola's ability to
form an efficient strategic business alliance with local bottlers is a crucial approach in this

10
regard, along with its capacity to enhance their production amenities, distribution networks,
sales equipment, and technology.

ECONOMIC ANALYSIS AND FACTORS

Economic Factor is composed of the variables like inflation rates, interest rates, taxation
changes, GDP and exchange rates. Economic change have a major impact on a firm’s
objectives and revenues for example, higher inflation stimulates employees to demand high
wage. It also increases the costs of production. Similarly, a strong currency may hinder the
country to successfully export its products worldwide.

Job Creation

Though its value cycle, Coca-Cola claims to boost job creation. It acts as a responsible
organisation by contributing to the society by paying taxes, hiring local individuals, paying
suppliers on time and engaging in community welfare projects.

Changes in Non-Alcoholic Business Era

CCPBL has come up with the competitive pricing policy and ability to maintain or earn share
of sales in local market in order to compete its rivals specifically Pepsi.

SOCIAL ANALYSIS AND FACTORS

Social factors include the aspects like the reordering in social trends. Such amendments in
wants, lifestyles and even some of the values can impacts on the demand and therefore,
consumption for a firm’s product or any organization services and also the availability and
willingness of people to consume that product. Social factors that affect the sales of Coca-
Cola's products include the following:

Healthy Lifestyle Concerns

Media today, is fostering interest in healthy lifestyles. That has strongly influenced the sales
within non-alcoholic beverage sector as many customers switch to mineral water bottles
and fresh juices. In this regard, CCBPL has successfully come up with the products such as
Coca-Cola Light or Zero that addresses the healthy diet concerns. However, the attitude of
this segment of people towards the harmfulness of carbonated drinks doesn’t seem to be
altered for the diet cokes either.

Also, as the baby boomers are aging, they are getting more conscious and more concerned
about diet choices that will influence their life expectancy. This contributes to the increasing
demand for healthier drinks on the non-alcoholic beverage sector.

11
Adaption and cultural borrowing

Adaption plays a significant role in capturing the international markets. And willingness to
adapt is a crucial attitude. Adaptation is a key concept at smaller as well as bigger levels of
market accommodation. The Coca-Cola Company recognizes the need of affirmative action,
that is, open tolerance to concept of being different and equal. The company realises that
these differences exist and tries to understand and cope with them in a proper manner. The
advertisement campaigns focus on relationships, family events and gatherings, festive
occasions like Eid and music.

TECHNOLOGICAL ANALYSIS AND FACTORS

Following factors affect the company’s actual results which include:

Coke’s Marketing, Advertising, and Promotional Programs

The most evolving media for promoting the company’s products are through the TV, websites,
and social media. CCBPL possess mind-blowing strategy to effectively promote their products
through these channels that enhances its sales. It is reported that Coke Studio Session 8 raised
the company’s sales by 42%. Its “Share a Coke” campaign in which customized bottles was
introduced with various popular names created a buzz among consumers.

Access to the Internet

With the ease to access internet, social media has become a great mean to provide huge
growth in consumer awareness, brand identity, promotions and direct-to-consumer
Communication.

Packaging design

As the cans and plastic bottles were introduced, the sales volume increased with a great
margin for the company because of the ease in carrying and disposing the containers.

New Equipment

Because the technology is continuously advancing, new equipment is constantly being

introduced by CCBPL. Because of these new technologies, Coca-Cola's production volume has
increased sharply compared to that of a few years ago.

Reduced Cost of Production

With the up gradation of technology and high levels of automation in manufacturing, volume
production is being done that has reduced the cost of production.

12
INDUSTRY ANALYSIS (BEVERAGE INDUSTRY)

The highlights of Pakistan’s beverage industry analysis is summarized below:

 Pakistan’s beverage industry is emerging as a progressive sector

 About 170 units operating in this sector
 The beverage industry includes many divisions: Carbonated drinks, tea, milk-based
drinks, coffee, bulk water, juices and sports and energy drinks.
 Players in the beverage industry dominate different categories of these drinks based
on their specialization and target market.
 Based on gender classification, females are more inclined to consuming multiple
beverages than male5
 Tea is more preferred among the adult male segment in terms of higher consumption.
 Energy drinks are least consumed among both genders
 Healthy drinks (milk-based and fruit juices), which are regarded as ‘healthy’ are more
demanded by females
 Men (both age groups), consume greater quantities of soft drinks than females
 Tea is the most dominant sector in the beverage industry in Pakistan among all socio-
economic classes (Pakistan: 1kg per capita consumption compared to world’s 0.75 kg
per capita)6
 Serious competition is expected from emerging local players like Amrat and Gourmet
due their competitive pricing strategies
 Unlike tea, carbonated drinks like Pepsi and Coca-Cola are becoming a part of
Pakistan’s festivities and celebrations
 Fruits juices are emerging as a competing demand, as consumer are becoming more
health conscious. The removal of customs duty and local quality fruit production has
contributed to its growth. Majors players in this sector are Nestle Pakistan Ltd.,
Mitchells Fruits and Benz Industries

5
Pakistan Online Research Panel introduced by Dynamic Research Consultants; primary age groups-young adults
(aged 16-22 years) and mature adults (aged 22 years above)

6
http://www.maverickpakistanis.com

13
Opportunities in the Beverage Industry

 No doubt, there is a bundle of opportunities and scope in Pakistan for the growth and
development especially in the beverage industry.
 Certain sectors that have revealed computable growth and the increased escalation in
consumer markets are more likely to persist in the future as well.
 Thriving consumer aspects and establishment of stronger brands with innovative and
better-quality products has contributed towards the augmentation of beverage industry.
 New competitors and local players can make use of the available aspects of the market (i.e.
energy drink and juice) by strategically positioning their products and by going through
innovative and effective marketing strategies.
 By and Large, the coffee business remains idle.

Threats in the Beverage Industry

Like every business, Beverage Industry also has some major threats. The most intimidating
threats are Political unsteadiness and unremitting militant movement because these are not
only creating hindrances in foreign direct investment but also generating negative impacts in
this industry.7

Competitive Landscape

The Pepsi and Coca-Cola are continuously investing in Marketing and promotional campaigns
across Pakistan but if we talk about distribution network, as compared to Coca-Cola, Pepsi
has the very strong distribution network. It is extensively available not only in the
supermarkets or large grocery stores but also available in local shops, the Coca-Cola has a
weak distribution network as compared to Pepsi, and this is the main reason that Pepsi is the
largest soft drinks brand with a retail value sales share of 28%. Pepsi is the largest player in
carbonates in Pakistan with the off-trade value sales share of 46% in 2014.

7
A recent report on Pakistani Food and Beverage Industry, dated January 20th 2014.

14
STRATEGIC ANALYSIS OF COCA-COLA PAKISTAN (PORTER’S FIVE FORCES)

Porter’s Five Forces Model is used to scrutinize the exterior aggressive pressure to the Coca-
Cola in this section. The five forces suggested by Porter that determine the profitability of the
industry are:

1. New entrants to the industry

2. Competitive rival sellers within the industry
3. Strong threat of substitutes
4. Low threat of suppliers
5. Bargaining power of buyers.

A firm’s competitive actions and competitive responses are directly influenced by these five
factors.

LOW
Threat of
New
Entrants

STRONG
STRONG
competitive
Threat of
Rivalry
Subtitutes
PORTERS'
FIVE FORCES

MODERATE
Bargaining LOW
Power of Threat of
Buyers Suppliers

15
Low Threat of New Entrants8

There is backward integration in Coca-Cola and PepsiCo, therefore new entrants can’t locate
bottlers to distribute soft drinks. The soft drink industry has low threat of new entrants
because the cost of production including the cost of warehouses, trucks, labour and
marketing activities is very high. The existing bottlers who have privileges in a certain
geographic area in eternity are forbidden to captivate on new entrants in the soft drink
industry because the existing bottlers have made agreements with the Coca-Cola and PepsiCo
that they will not provide the bottles to the new entrants. The Coca-Cola and PepsiCo offered
retailers the major margin of 15% to 20% to place their product in the front of the shelf. It is
very difficult for the new entrants to persuade retailers to place their products in the shelf.
Also the Coca-Cola and PepsiCo invests heavily in advertising from decades, so this is nearly
impossible for a new entrant to advertise such heavily.

Strong Threat of Substitutes

There are various substitutes for Coca-Cola products including bottled water, sports drinks,
coffee and tea. As in present, consumers are more conscious about their health, bottled water
and sport drinks are becoming more demandable. This trend is exemplified in the beverage
consumption pattern of the ageing baby boomers.

Low Threat of Suppliers

Commodity ingredients providers and bottlers are the major suppliers of Coca-Cola. The
bargaining power of commodity ingredients suppliers is low. Moreover, the profitability of
the Coca-Cola’s products are directly affected with an increasing rates of sugar and packaging
material.

Coca-Cola is outsourcing the services of the independent bottlers in spite of bottling itself.
The Coca-Cola Enterprises is the largest bottlers in the world. In the earlier 2010, the Coca-
Cola Enterprises is incorporated by the Coca-Cola. As the company keeps up with the changing
taste of people, it can have an enhanced distribution network and more rapidly marketing of
products. Over the next four years, the Coca-Cola expects to save $1400 million. Therefore
the suppliers have weak bargaining power.

Moderate Bargaining Power of Buyers

The buyers of coca cola have a larger bargaining power. The company sales its products to
the large grocery stores such as Metro, Makro, Imtiaz, Naheed, Chase etc. Convenience
stores, restaurants in bulk for reselling purpose. Therefore the buyers have strong bargaining
power. As grocery stores, supermarkets, convenience stores, restaurants buy the soft drinks
in larger quantity therefore they bargain at lower price.

8
Brand Keys, Inc. (2010), Brand Keys Customer Loyalty Leaders 2010. http://www.brandkeys.com/awards/leaders.cfm

16
Strong Competitive Rivalry9

The greatest challenge that Coca-Cola face is the competitive pressure from rival sellers.
PepsiCo is the main competitor for Coca-Cola and these two brands have been in a power
struggle for more than a century.

Although Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta,
and Sprite), PepsiCo dominated North America with sales of US$22billion, while Coca-Cola
only had about US$7billion, However, Coca-Cola has higher sales in the global market than
PepsiCo.

If we consider brand loyalty, Pepsi has more loyal customers than Coca-Cola. Diet Pepsi has
highest ranking in diet soft drinks. Pepsi coke has highest ranking in regular coke. Whereas
diet coke which is the highest ranking brand of Coca-Cola has very low ranking as compare
to Pepsi according to the Brand Keys Customer Loyalty Survey.

9
Interbrand (2010). Best Global Brands 2010. http://www.interbrand.com/en/best-global-brands/best-global-
brands-2008/bestglobal-brands-2010.aspx

17
STRATEGIC INDUSTRY ANALYSIS (SUMMARISED)

Competitive Firms: Pepsi Co, Gourmet (Emerging)

Barriers to Entry and Success: High fixed costs of warehousing, production, marketing and
distribution; supplier contracts.

Industry Concentration Level: Very concentrated; global market share dominated by Pepsi
Co, and Coca-Cola.

Influence of Industry Capacity on Pricing: Very little. Pricing of Coca-Cola’s products are not
determined by their level of production, rather their level of advertisement and the strength
of their brands,

Industry Stability: Stable; market share adjusts gradually.

Business Life Cycle: The industry is in maturity stage; population change contributes to
increasing growth of the company.

Level of Competition: Pepsi remains the strongest competitor to Coca-Cola’s brands.

Government Influences: Not much. Prices and delivery of products remain mostly stable;

Social Influences: Consumers are becoming more health conscious and are becoming aware
of consuming excessive amounts of carbonated drinks. Inclination towards healthy juices and
drinks is expected.

Influence of Technology: Moderate; Continuous supply chain upgrading and tracking

mechanisms will keep the company on top of the competition.

Sensitivity of the Business Cycle: Non-cyclical. Demand for Coca-Cola’s products are stable.

18
COMPANY ANALYSIS
Stakeholder Participation in Management

Coca-Cola’s stakeholders are defined any person or group that if affected by the operation
and activities, decisions and policies of the company. Several platforms have been establishes
by the company to take its stakeholders’ opinions into considerations when making important
decisions.
Table 1: Source: Coca-Cola Pakistan (CCBPL)

Stakeholders Dialog Platforms

Employee Engagement and Satisfaction Survey, press

Employees reports, training programs, leadership development
trainings,

Distributor meetings, Process improvement studies,

Distributors/Sellers regular visits, training programs, plant visits, Distributor
portal, Call Centre

Public Disclosure Platform (PDP), General Assemblies,

Shareholders
website

Trainings, support programs, regular visits, plant visits,

Customers Coca-Cola Customer Road Show, Customer Satisfaction
Survey, CCI Call Centre, Focus group studies

Training programs, improvement audits, plant visits,

Suppliers supplier days, supplier performance scores, supplier
surveys, cooperation portal

Annual report, investor conferences, analyst meetings,

Investors
website, webcast, e-mail distributions, feedback forms

Union representation, collective labour agreements, visit

Union
to plants

Media regular visits, website, plant visits

Coca-Cola Call Centre, website, informative publications,

Consumers
plant visits, product labels

Donations, website, plant visits, support programs,

voluntary practices, Coca-Cola Call Centre mass
Society
communication, product labels, advertisement and
marketing activities, environmental training sessions.

19
Human Resources Policy

Building of highly capable organization is the main aim and policy of CCI human resource. It
also aims to become the employer of choice. Due to continuous development of CCI Human
Resources Policy, it lies in the below mentioned strategic priorities:

 Building of key organizational capabilities systematically

 Encourage the development of high performance of workforce
 Develop a nursery of highly talented and skilled workforce in order to fulfill future
leadership bench strength
 Building of one company culture in an inclusive way

Possible Role Assumed by HR Function

Figure 2: Strategic Role of HR at Coca-Cola

By doing analysis with the help of above diagram Coca-Cola places themselves in the quadrant
of change agent. They are initiators, rather than followers. They are highly focussed and
aimed on their employees in the strategies which they have made in order to sustain their
growth in the market.

20
MANAGEMENT OF COCA-COLA PAKISTAN

Figure 3: Organizational Structure of Coca-Cola

The whole Pakistan has been divided by CCPBL in two regions. First one is southern business
unit (SBU) and central business unit (CBU). SBU General Manager monitors Karachi, Rahimyar
khan and Multan plants while CBU General Manager aims to monitor Lahore, Gujranwala,
Rawalpindi and Peshawar plants.

The whole Pakistan is divided on the basis of its geographical regions and both the units
including SBU and CBU are controlled and monitored by a Country Manager.

Supply Chain

In order to be the best in class consumer demand CCPBL tries to deliver highest in quality with
lowest cost in a most socially responsible and sustainable way.

Operational Excellence
CCPBL tries to develop a culture of operational excellence in order to support continuous
improvement in their business system and process.
Sustainability
Coca Cola is listed in New York Stock Exchange with the abbreviation of “KO”.

21
CCPBL also ensure the reliability of their business by acting proactively and implement
innovative ideas in protecting environment and tries to recognise their brand name as one of
the most responsible corporate citizen by all stake holders.
In New York Stock Exchange Coca Cola company is listed with the name of “KO”.
CCBPL CAPABILITY DEVELOPMENT WING
One of the main pillars of CCI’s Vision 2020- People and organization Leadership is the CCBPL
capability development. This capability development wing of CCBPL focuses on the
organizational competencies in order to meet the requisite bridge of skill and talent which
aims to create superior performance and also to create training and design such type of plans
for their employees which enhance their development, experience and required skills.

Figure 4: CCBPL Capability Development

TYPE OF ORGANISATION
A top down approach is followed in Coca Cola in order to maintain a quick communication
among the members.
Formal Communication
At all levels of organization there lies a proper flow of information in a systematic way
Top-Down Communication
Downward flow of information is maintained in Coca Cola
Top Management Makes the Decision
All important and necessary information is passed among the group member through the
head of department.

22
(SWOT ANALYSIS (Coca-Cola SWOT Analysis for the Year 2015)

1. It is the number one 1. Traces of pesticides found

beverage in terms of
distribution and sales and value
($77,389 billion).
2. Its portfolio comprises of
famous brands like Coca-Cola,
Kinley, Fanta, Minute Maid,
Limca, Maaza, etc.
3. Globally present and has
reach in almost 200 countries.
4. It has more than 500 brands
to offer
5. Employees almost more than
150,000 people globally
6. Coca-Cola carries an effective
STRENGHTS
in the cola beverages had
damaged the image of the
brand.
2. PepsiCo is a strong
competitor in the aerated
drinks industry and thus
constant competition runs
between them for market
share.*
3. Absence in the food and
snacks industry.

and strong supply chains which

ensures that its products are
delivered and available even in
the most remote places. 4. Negative publicity
7. Financially strong

WEAKNESSS
8. Maintains strong brand recall
by associating their brands with
brand ambassadors and
celebrities through advertising
and marketing.
9. Socially responsible: Taken
CSR initiatives in the avenues of
education, recycling and water
conservation, health, etc.
10. Gives emphasis recycling
and reusing through its efficient
and effective packaging and
disposing techniques.
11. The brand has long been
associated with scholarships,
donations and international
sports.
12. Customer Loyalty
13. Bargaining power over
suppliers

23
 1. Takeover and acquire other
companies to enter other
industries.
2. Reach untapped markets
and countries where Coca-
Cola has not been introduces
OPPORTUNITIES
1. Health reports claim Coke
is harmful to health;
Consumers have become
health conscious.**
2. Compliance with
regulations and laws of

yet. various countries in which

3. Market and promote the
less known products of the
portfolio.
4. Diversify into other
they operate and distribute.
3. Economic slowdown,
inflation, currency
instability, etc.

THREATS
industries like snack market 4. Head-to-Head
to beat PepsiCo. competition with PepsiCo.
5. Lower threat of forward
integration due to the strong
supply chain network, high-
cost manufacturing
machineries required.

6. Advance technological
progression

The SWOT analysis of Coca-Cola highlights the company’s major strengths, weaknesses
opportunities and threats. A critical reason for conducting a SWOT analysis is to observe in
one go the strengths of the business that it can utilize effectively to manage the opportunities
in the environment. In addition to this, a company can gauge its weaknesses and try to work
on them to make it their strengths. Threats highlight the areas where a business needs to take
careful measures when making business decisions.

*How Coke Pushed Rivals Off the Shelf, New York Times, Aug 6, 2000.

**Coke Adds Life to Sales, Profit after Losing Fizz in Late ’90s; Outlook for drink company brightens with
restructuring and U.S. economic recovery. The Los Angeles Times, Apr 10, 2002.

24
BCG MATRIX

HIGH
STAR QUESTION MARK

RANI FLOAT SPRITE 3G, KINLEY

“MARKET GROWTH RATE”

BCG
MATRIX

DOG
CASH COW
MINUTE MAID
TROPICAL, MINUTE
COKE, SPRITE (RGB),
MAID NIMBU, FANTA
LOW FANTA ORANGE
CITRUS
HIGH “RELATIVE MARKET SHARE” LOW

25
GAP ANALYSIS (ANSOFF’S MATRIX)

Market Penetration Product Development

EXISTING

Regular Glass Bottle

(RGB) Kinley
“MARKETS”

ANSOFF'S
MATRIX

Market Extension Diversification

NEW

Diet Coke Rani Pulpy, Rani Float

EXISTING “PRODUCTS” NEW

26
FINANCIAL ANALYSIS

Coca-Cola believes in its strategic initiatives to create consistent value. The key value drivers
for the company are: Growth profitability, efficient leveraging of marketing and operating
expenses, and efficient capital structure.

Growth Profitability

Coca-Cola focuses on its marketing and innovativeness to support its strong brands in the
markets targeting to the huge numbers of customers base for promising growth. The
company is on continuous improvements to increase its brand portfolio matching to its
relevant markets. The company aims to achieve both volume and value growth to create
profitable margins in the lower-margins countries. But partnering with its bottlers, Coca-Cola
aims to harness its tailored channel, brands, prices and packaging strategies to achieve
profitable growth.

Efficient Leverage of Marketing and Operating Expenses

Efficient leveraging of marketing and operating expenses by Coca-Cola will be achieved by

efficiently harnessing its supply chain. With the implementation of its integrated supply chain
system in 2003, by partnering with its bottlers, Coca-Cola centralized its logistics and
production activities and realized efficient procurement in Japan, China and North America
by 2004. The lower costs incurred due to supply chain efficiencies improved the companies
supply economics. The company is focused on the future to consolidate its operations,
thereby reducing redundancy in its efforts and transactions, and improving in-market
executions. This will simply its decision making procedures thereby increasing its reactions to
market changes.

Efficiency of Coca-Cola’s Capital Structure

One of the strategic objectives of the company is also to efficiently utilize its cost of capital.
Being a well-recognized company since more than 100 years, the company gains from low
transactions costs when it comes to raising additional funds and borrowing. The increase in
the company’s cash flows enables it to increase its frequency of share repurchases. The
company intends to promise increase in dividends in the future as well.

27
MARKETING ANALYSIS

COCA-COLA’S PROMISE

Coca-Cola’s main theme is to live on the concept of togetherness which brings families and
friends close to each other, celebrating festivals and rejoicing. It focuses on relationships and
friendships, creating bonds of love and togetherness.

TARGET MARKET

Coca-Cola’s main target customers are families units and individuals enjoying their time with
friends.

PRODUCT RANGE

In Pakistan, Coca-Cola offers eight products namely, Coke, Sprite, Sprite Zero, Diet Coke, Fanta
Orange, Fanta Lemon, Rani Pulpy and Ran Float.

It offer its products in the following quantities:

 1 and 1.5 liter Plastic bottles and

 Standard sized glass bottles (returnable)
 Disposable or non-returnable bottles
 Cans (330ml)

PRICE STRATEGY

When the company commenced, it followed “cost-based pricing”. Currently, Coca-Cola’s

pricing strategy is “competitive pricing”.

PACKAGING

Coca-Cola offers its customers various packing sizes for different quantities of the drink:
 1.5 liter bottles in packs of 6
 Pack of 24 cans
 Pack of 12 bottles (600 ml- disposable)
 24 regular bottles pack

MAJOR COMPETITORS

In Pakistan, Pepsi Co. is the only large scale competitor against Coca-Cola. Product to product
competition is witnessed among them. For example, Coke competes with Pepsi, Sprite with
7UP, and Marinda with Fanta.

28
SALES PROMOTION ACTIVITIES IN PAKISTAN

Coca-Cola caries out extensive promotional activities across the country. These include
concerts, cricket, Food Mela, Basant Festival, Ramzan Campaign, Shopping Festival and a lot
more. It also includes joint-promotional campaigns with Nokia, McDonald’s, OPTP and Maaza.

DISTRIBUTION CHANNELS

The Coca-Cola Company operated its distribution in two ways: Direct selling and indirect
selling. Through selling, the company uses its own transportation facilities to distribute its
products to its customers. Currently, 450 registered vehicles are operating on Coca-Cola’s
distribution channels. Through indirect selling, the company hires its own agencies and
wholesalers to reach far-off localities. Company’ major earnings are derived from direct
selling.

ADDITIONAL FACILITATION TO ITS CUSTOMERS AND RETAILERS

The company also provides additional facilitates to it retailers and customers to enjoy
refreshingly cold beverages:

The facilities include:

 Shells and free empty bottles

 Cooling freezers
 Faculty of display racks
 Visi Coolers

29
MARKETING STRATEGY

Coca-Cola’s local marketing strategy is to create the essence in the minds of consumer to
recall Coke’s soft drinks for every occasion and which satisfies a range of taste buds.
Consumers look for personification; a brand that reflects who they are, their lifestyle, where
they exist and their mediums of relaxation. Coco-Cola’s motive is to make best quality
beverages and along that, also contribute towards the societies through its commitment in
wellness, education, health and fitness.

Coca-Cola’s marketing budget made up 15.2% of the total revenues in 2014. This accounted
for one of the largest budgets compared to its competitors4. PepsiCo, however, used its
marketing budget very effectively as it generated $66.4 billion in revenue from only $3.4
billion expenditures in marketing7. The following table shows the marketing expenses of
major beverage producing companies in 2014:

Marketing expenses for major beverage companies in the year 2014

Company Marketing expenses Total revenue % of total revenue
The Coca Cola Company $7 billion $45.998 billion 15.2%
PepsiCo Inc. $3.9 billion $66.683 billion 5.8%
Dr. Pepper Snapple Group Inc. $3.7 billion $6.121 billion 60.4%
Nestlé S.A. $19.8 billion $92.3 billion 21.5%

The company, however, faces several challenges in terms of its products being not healthy.
Obesity has been a major problem among its consumers. Consumers are becoming more
health conscious and carbonated beverages are causing obesity among consumers. This is
causing a serious threat to Coca-Cola’s sales and future production as a major portion of Coca-
Cola’s production is based on carbonated beverages. Coca-Cola has also faced several lawsuits
due to vast amount of water consumption to produce Coke in water-deficient areas.
Furthermore, the company has also faced opposition and accusation from the public for
mixing pesticides in the waters to decontaminate it.

30
COCA-COLA’S MARKETING STRATEGIES10,11

Marketing places a major role in getting the product from the manufacturing shelves to the
retailers’ shelves. It is to transfer the right product to the right consumer and at the right place
and time. In creating a proper marketing mix strategy, Coca-Cola has always been successful.

Coca-Cola’s journey dates from being a cocaine-infused medicine in 1886 to a unique sugary
drink by 1929. Having being recognized as brand reflecting fun, friends and good times, Coca-
Cola has adopted several design and marketing strategies from the 1920s onwards.

Coke remained with its distinct flavour, although cocaine was

removed from the Coke in 1903. Besides the “New Coke”
mistake that took place, the recipe remains a secret and
unchanged still. This is the reason consumers prefer Coke due
to it long connection from that time till today.

Coca-Cola’s logo stays with the enduring fancy font. The

Spenserian script, which was used by accountants back then,
distinguishes the Coke from its competitors. The logo was
finalized and standardized in 1923 and was decided that it
remained unchanged. The packaging, however, has changed
with the passing time. The logo is still imprinted on the minds
of consumers since 100 years till today.
Figure 5: The "New Coke"
mistake of 1903

Coca-Cola differentiated itself from the

competition by selling its beverage in a unique-
shaped bottle. The shape of the bottle was
inspired from the shape of the cocoa plant. Coca-
Cola promotes the design of the bottle as much as
the logo and the product itself.

Figure 6: Evolution of Coke glass

bottle

10
Staff J. (2015) “Responsible Marketing” Available at: http://www.coca-cola.co.uk/about-us/responsible-
marketing/
11
The Coca-Cola Website (2015). “Programs and Promotions” Available at:
http://www.cokesolutions.com/MarketingTools/Pages/Site%20Pages/Programs%20and%20Promotions.aspx

31
The Coca-Cola Company effectively incorporates the efforts of its entire supply chain to bring
the best product to its customers. It educates its retailers to serve the drink at not more than
36-degrees. This is an attempt to make Coke a premium product and thus attract more
consumer attention.

Coca-Cola associated its product more closely into people’s lives. The brand developed a
personality which spoke for itself. The company provided its retailers with posters,
pamphlets, and imprinted its designs on calendars and decorations and giveaways. This was
a technique of word-of-mouth marketing.

The company adopted a franchise model approach to penetrate the market and eventually
go global. It issued bottling rights to bottling plants which then further added soda water and
sweetener to the drink. Today, more than 250 independent bottlers are operating around the
globe. The company claims itself as a system of small companies rather than one big giant
company.

The latest marketing strategy unveiled by Coca-Cola in for 2015 was its shift from producing
brand-specific ads to promoting all its variant products under one brand name. It is planning
to bring all its four distinct brands under one marketing label: Coca-Cola. The four distinct
brands are Classic Coke, Coke Zero, Coke Life and Diet Coke. With this strategy, the portfolio
of Coca-Cola will tend towards unification rather than diversification of brands. The reason
behind this shift in marketing strategy is more towards raising the sales of Coke’s low calorie
and less-sugared brands. Instead of spending a separate amount of the budget to market
these products, if brought under a single roof of Coca-Cola’s marketing label, all four brands
can be promoted at once. Coke is in way to increase the brand equity for its other related low
sugar beverages as well.

Figure 7: Unification of Coca-Cola's Brands

32
Since May 2015, Coca-Cola’s advertising campaigns have started featuring all four products
of its portfolio. In the adverts, the final frames display the lower and no sugar variants of
Coca-Cola, while the tagline of “Open Happiness” has also been replaced by “Choose
Happiness.” This campaign has been launched in Great Britain to increase consumers’
awareness about the complete range that Coca-Cola offers to them. This strong association
of the four brands under one master umbrella of Coca-Cola will help to boost sales and
increase shareholder wealth in the coming periods.

Coca-Cola has successfully implemented its “Share a Coke”

campaign around the globe. The company distributed
bottles of coke having names of people printed on the
label to share with one another. This was a great way of
engaging customers towards buying Coke for one another.
The common names included Mom, Dad, Father, Mother,
Brother, Sister, Husband, Wife, BBF, John, Susan, Albert,
Joseph, Brian, etc. This was launched all around the world
with great response received for the public. A recent
television commercial in Pakistan is featuring the same
“Share a Coke” campaign but with lines of songs printed
on the bottle. The mission behind this is to say what the
heart has to say through songs.

Figure 8: "Share a Coke" Campaign (Pakistan)

Coca-Cola has based its business functioning from the beginning on a universal strategy which
is based on three underlying principles of acceptability, affordability and availability.
Acceptability principle guide Coca-Cola to effectively market its brands and make them a part
of the daily lives of people and make Coca-Cola the most preferred beverage around the
globe. Coca-Cola, under its affordability principle, promises that it offers the best price to its
consumers for the value they deliver. Under the acceptability principle, Coca-Cola ensures
that its brands and products are available wherever people want to feel refreshed and share
happiness among one another. This type of strategy can be termed as pervasive penetration
strategy for the marketplace.

33
ADVERTISEMENT

One of the greatest strengths of Coca-Cola are its marketing and advertising capabilities. The
annual spending of Coca-Cola on advertising in 2014, 2013 and 2012 was $3.499 billion,
$3.266 billion and $3.342 billion respectively. Coca-Cola put up as the largest advertiser in the
beverage industry for the year 2014 around the world. It advertising expenses accounted for
6.9% of the total revenues each year12.

The following tables compares the advertising budgets of largest beverage producing
companies:

Yearly advertising budget for major beverage companies during the years 2012 to 201413
Company 2014 2013 2012
The Coca Cola Company $3.499 billion $3.266 billion $3.342 billion
PepsiCo Inc. $2.3 billion $2.4 billion $2.2 billion
Dr. Pepper Snapple Group Inc. $473 million $486 million $481 million

Coca-Cola’s huge advertising budget gives the company an edge over its competitors in
the following ways:
 Promotion of brands and products can be done more effectively
 New products can be brought to the market and company can develop greater reach
 New product features can be communicated to the consumers via various marketing
and promotional mediums
 Company’s brand message reaches the public efficiently and accurately
 Sales increase progressively
The company uses various mediums to carry out its advertising activities; Billboards and
holdings, regular television commercial, POS materials, Give-Aways, and Print Media (posters,
stickers and banners).

12
Investopedia. (2015) “A Look At Coca-Cola's Advertising Expenses”. Available at:
http://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-expenses.asp

13
http://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-expenses.asp

34
COMPETITIVE ANALYSIS
This section explains the Coca-Cola Company’s competitive analysis with its competitors
which includes internal competitive analysis and external analysis as well.

COKE’S COMPETITIVE ADVANTAGE

The unique features that a company’s product may have or any set of skills or abilities in the
form of technology or other factor that are perceived by the target market as significant and
superior to the competition is termed as competitive advantage. It is the reason behind brand
loyalty and why consumers prefer one product or service over another. Companies may be
enjoying one of the three different types of competitive advantages. These are product or
service differentiation and cost advantages.

Coca-Cola enjoys sustained competitive advantage in terms of its innovativeness and huge
business model. It also includes its integrated wide distribution networks. Even after 120
years of survival, Coca-Cola’s stocks are most traded and sought stocks that are listed on the
New York Stock Exchange.

Key factors that can be considered as the company’s competitive advantage are listed below:

 Coca-Cola’s secret recipe tastes better than most carbonated drinks.

 The company has 500 brands operating in almost 200 different markets. Its vast reach
and continuous products improvements and developments retain customers.
 Its wide and extensive network to distribute products to billions of people. The data
and supply remains well integrated.
 High profits margins due to efficiency production techniques applied.

35
COMPETITOR PROFILE (PEPSI CO.)
ABOUT PEPSICO

PepsiCo started its operations in Pakistan in 1967. By 1980s, it was dominating Pakistani taste
buds with successful, brands such as Pepsi, Mountain Dew, Mirinda and 7-UP. Today, Pakistan
is consider to be the sixth largest global platform for its brands. PepsiCo’s Frito-Lay
introduction in 2006 made the company the leader in potato snacks production and
distribution as well by adapting to the country’s local flavours like Chaat Masala, Kurkure
Chutney Chaska, Red Chilli, etc.

ORGANISATIONAL DIFFERENCE

Table 2: Source: Coca-Cola Pakistan

COKE PEPSI
Parent Company Coca Cola Company Pepsi Co
Total Sales 450 Million (globally) 324.58 million(globally)
Products Coca Cola, Fanta, etc. Pepsi, 7 Up, etc.
Distribution Through retail malls, grocery Through retail malls, grocery
shops shops
Sponsorship Various events such as Various events such as
cricket matches, movies, cricket matches, movies,
festivals festivals
Production Company produce syrup Contains carbonated water,
concentrate which it sells to high fructose corn syrup,
bottlers throughout the sugar, calories, phosphorus
world acid and natural flavors
Founder Originated in 1886 in US by Caleb Bradham, a
Dr. John S. Pemberton pharmacist and industrialist
from New Bern, North
Carolina
Market Share14 36% 60%

14
Estimated.

36
 Figure 9: Brand Wars

PRODUCT COMPETITION

Table 3: Source: Coca-Cola Pakistan

Features COKE PEPSI

Bar weight 10 Fl OZ (200ml) 10 Fl OZ (200ml)
Calories 121.5 150
Carbohydrates (gm) 33.75 34.5
Flavors 2 2
Price/Bottles Rs. 25, 35 etc. Rs. 25 , 35, etc.
Product Claims All foods and beverages can Offers beverages that
fit into the healthy balanced resorts to the customer’s
diet when consumed in expectations and make it
appropriate proportion more enjoyable for them to
lead healthier lives
Target Consumer Children, adults, younger People from younger
generation and sports generation, sports
personality and celebrities personalities and celebrities
Distribution Grocery stores, shops, malls, Grocery stores, shops, malls,
etc. etc.
Brand Positioning Refreshing, family Freedom, individualism.
togetherness.
Source: Coca-Cola Pakistan

Results for 2015

In fiscal year 2015 PepsiCo is expecting growth of 7% constant-currency core earnings-per-
share. It has been a trend in PepsiCo over the past years of understating its growth. In 2013
PepsiCo expected a growth of 7% in constant-currency core earnings-per-share as well but in
2014 company earned growth of 9% in constant-currency core earnings-per-share.
PepsiCo did well in growing its revenue per share and dividends per share at around 9% over
the last decade. We believe on the base of its 2015 Guidance of PepsiCo (which is likely
understated) will continue to grow at around 9% a year.

37
There are 22 brands of PepsiCo which generate over $1 billion per year in sales. If we divide
these brands then they will fall in 3 categories.
1) Carbonated beverages
2) Non- Carbonated beverages
3) Snacks
The following tables shows each of PepsiCo’s billion dollar brands by category.

Non-Carbonated
Carbonated Beverages Snacks and Food
Beverages

Pepsi, Mirinda Gatorade Lay’s

Mountain Dew Lipton Doritos

Diet Pepsi Aquafina Cheetos

7 Up Fritos

Almost 50% of the revenue that Coca-Cola generates comes from its snacks and foods and
while the rest from its beverages sector. PepsiCo owns the markets most recognizable and
marketed brands within the snacks sector. PepsiCo has partnered with several brands to
jointly sell its products in the market. The company occupies large shelves at many locations,
including gas stations, convenience stores, supermarkets and groceries.
Efficient Capital Structure
Keeping in mind the popularity of PepsiCo’s snack brands in emerging markets, this company
is surely positioned for growth in the future. PepsiCo’s total shareholder returns are expected
to increase by 11.6% per annum of which shareholder value and dividend yield will be around
9% and 2.6% per year respectively.
While everything may seem good regarding PepsiCo’s shares, its valuation is a drawback. The
share value is not extremely high, but the price-earnings ratio (21.6) is greater as compared
to its historical average. At current, shares of PepsiCo are being traded at roughly 10%
premium to the whole S&P 500. This is perhaps why PepsiCo experiences robust growth and
a low amount of risk.
The two biggest corporations in the beverage industry (non-alcoholic) are PepsiCo and Coca-
Cola. PepsiCo has a market capitalization of $147 billion while Coca-Cola has that of $186
billion. The focus of PepsiCo is on both food items and beverages while Coca-Cola completely
concentrates on selling beverages.

38
2014 Results

The growth of PepsiCo can be defined as constant currency with 9% adjusted earnings-per-
share in 2014 where as Coca Cola constant – currency adjusted earnings-per share 7.9% in
2014.

In 2014 both the companies took similar initiatives and mainly focussed on efficient running
of operations. As a result both the companies grew in developing and emerging markets of
the world.

Due to Frito-Lay chips brands of PepsiCo it has an edge over its competitor Coca-Cola. The
volume of company’s chips brands of PepsiCo has increased constantly in stagnating
developed markets.

But this growth of chips brands is in contrast with the growth of trends in drinks. Surveys
depicts now consumers are slowly approaching towards healthier beverages rather than
consuming unhealthy sodas. For instance, every morning a consumer may switch from Coca-
Cola soda to an honest tea. Either way, he is still buying from the same company. Interestingly,
health logic has not yet applied by the consumers which is causing soda sales to remain
constant than to chip brands. In 2014 the volume of PepsiCo’s Frito-Lay division grew 2% in
North America.

39
CHALLENGES AND RISKS
Being a global company there has been significant opportunities for Coca-Cola but at the same
time it has risks and challenges. We have discussed around 5 key risks and challenges in the
Management and discussion analysis (MD&A).
Obesity and Inactive Lifestyles

Concerns on the increasing health problems have been associated with obesity and inactive
lifestyles resulting in significant challenge to the beverage industry as a whole. However Coca-
Cola can present its point quite smartly that it possess a very broad portfolio containing
beverages that match every calorific and hydration need. Those consumers whose health
concerns are related to obesity and inactive lifestyle can choose low or no- calorie beverages
from a vast expanding portfolio of more than 800 beverages which are around 25% of Coca-
Cola's global portfolio.

Water Quality and Quantity

WATER is considered as the main ingredient in all of the entity’s products and is also essential
in producing the agricultural ingredient on which its business relies. But water is a limited
natural resource and it’s facing serious challenges due to huge demand, pollution, climate
change and poor management. Coca-Cola has now started a management program in order
to improve water use efficiency and is working towards attaining the goal of replenishing the
water that it and its bottling partners’ source and use it in the best possible form as their
finished products.

Evolving Consumer Preferences

Like other companies Coca-Cola has been affected by shifting its consumer need and
demographics ageing populations in developed markets, on-the-go lifestyles, and also those
consumers who possessed more information than ever. However, they are more committed
to generate new ways for growth and development through their core brands with a high
focus on sugar-free, light products and also through innovative packaging. They are also
committed to continue expanding the variety of choices for their consumers in order to meet
their needs, desire, value and lifestyle choices.

Increased Competition and Capabilities in the Marketplace

Many global companies and local participants are a major threat for Coca-Cola and they face
a strong competition from them. Therefore Coca-Cola has understand the importance of
strengthening its capabilities in innovation, value creation and marketing in order to maintain
and continue to build its brand loyalty and market share. Coca-Cola also aims to expand
selectively into other profitable segments of the soft drink beverage industry.

40
Food Security

Problems such as decrease in agricultural productivity and increased demand for

commodities in certain regions of the world as a result of global warming and acid rain may
limit the availability or increase in the cost of important key agricultural commodities such as
sugarcane, corn ,tea and coffee all of which are important ingredients for Coca-Cola's
products. However, Coca-Cola is focussed on implementing such programs based on
economic opportunity and environmental sustainability by which it helps in addressing these
agricultural challenges.

41
CORPORATE SOCIAL RESPONSIBILITY (PAKISTAN)
In Pakistan, Coca-Cola has undertaken several CSR initiatives for the prosperity and
sustainability of the country. The company has been proactively engaged in strategically
identifying existing needs of the population and society and empowering lives of its
stakeholders.

Farming Launch of Coca- Nature Trip Coca-Cola Literacy

Certifications Lectures Cola’s on World into Day: Old
to Farmers Series in Women Environment providing Book
(2014) Pakistan- Empower- Day by Coca- Flood Collection
EMPOWER ment Cola (2015) Relief
(2014) Support Support
(2015) (2015)

Farming Certifications to Farmers (2014)

Coca-Cola has been undertaking many developmental projects within Pakistan. The Coca-Cola
Foundation partnered with International Relief and Development (IRD) to issue certificates to
farmers for the produce they release to the market. This initiative was taken to support
farmers in Sargodha, Pakistan to become certified with the Global GAP (Good Agricultural
Practice) certification by providing best quality citrus fruits in the market using minimal
pesticide techniques. The farmers’ supply chain is effectively monitored from the sowing of
the seed to the harvesting of the fruit, including the use of sustainable methods of production,
water conservation, food safety and plant propagations materials. This certification was
initiated for Pakistani farmers to produce and sell best quality fruits in the international and
domestic markets at higher prices.

Launch of Lectures Series in Pakistan- EMPOWER (2014)

The lecture series, titles “EMPOWER” started in 2014 by the company, was aimed to facilitate
university students towards extra-curricular learning opportunities which will motive them
through inspirational conversations and discussion what the experts from various
backgrounds of the industry. These sessions were aimed at identifying and resolving issues
arising among the youth related to personal and career development paths and then assisting
them to resolve these matter through multiple series of talks with individuals who have been

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successful in similar matters in the past.15 These sessions will cover a wide range of topics in
the future, ranging from marketing, HR, Finance to CSR and supply-chain and self-discovery.

Coca-Cola’s Women Empowerment Support (2015)

Coca-Cola Foundation, with an approval of a grant relating to an environmental project

amounting to $90,500 during 2015-16, has reinforced its success and that of WWF’s efforts
to encourage environmental conservation. This has benefited local communities and has led
to a major difference in the ecosystem of project zones.

Coca-Cola has also supported a women empowerment programme (started in 3 years back)
by issuing a grant of $100,000 to the Kashf Foundation. Through this, more than 3,350 women
have benefited themselves and their families by establishing small enterprises. Prior to this
grant, Coca-Cola has already issued a total of $380,000 to Kashf Foundation in grants.

Nature Trip on World Environment Day by Coca-Cola (2015)

On the World Environment Day, June 8, 2015, Coca-Cola Pakistan organized a trip to Ayubia
National Park, Nathiagali where one hundred people were accommodated. These included
media representatives, nature lovers, social media activists, environmentalists and others
from civil societies. This nature trip sort of connected it to the worldwide celebrations of Coca-
Cola’s Contour Bottle (100 years anniversary). The participants experienced the Watershed
Management Project of Coca-Cola and WWF which has been operating for the past 6 years.

Coca-Cola into providing Flood Relief Support (2015)

Pledging goods of value PKR 3 million, Coca-Cola has stepped forward to provide assistance
to flood affected regions of Chitral. These goods include food items like lentils, rice and other
staple and dry food items. Since 2010, Coca-Cola Pakistan has always been into providing
flood relief to the affected. In fact, PKR 42 million have been donated by Coca-Cola Pakistan
alone to flood affected zones in Pakistan that has benefited 50,000+ flood victims and has
provided an opportunity to stress on self-employment and education through the initiation
of long-term rehabilitation projects.

Literacy Day: Old Book Collection (8th Sept, 2015)

In partnership with The Citizen’s Foundation, Coca-Cola invited Pakistan’s citizens to donate
their old textbooks to the less privileged students of the country. The company initiated
mobile book banks which collected these books from all around the country and handed it
over to The Citizen Foundation for distribution. This type of initiative was the first of its kind
that was undertaken in Pakistan.

15
Fahad Qadir, Director, Public Affairs & Communications, The Coca-Cola Export Corporation, Pakistan and
Afghanistan

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CONCLUSION AND EVALUATION
Since 1886, when John S. Pemberton started off with selling Coca-Cola, this company has
been constantly growing and has leaped forward to becoming the biggest beverage
company in the world. Though Coca-Cola has not experienced a substantial rise in revenue
figures in the past 10 years, yet it hits the top spot in sales of non-alcoholic beverage across
the world. It seems as Coca-Cola will tend to hold this position as it successfully satisfies
customer needs and specific markets. Coca-Cola has been determined to increase its
revenues by 200% by the year 2020. Keeping in mind the obesity and other health concerns,
Coca-Cola aims to devise a strategy that would take the company to greater heights. That
strategy is to develop into an internationally recognized business.

The first area where Coca-Cola’s strategy focuses on is concerted growth. Being dominant in
the beverage industry enables the company to secure a larger percentage of the non-
alcoholic section. The second area is product development; Coca-Cola’s penetration in the
fluid milk market in recent months reinforces this point.

This strategy of Coca-Cola is in-line with both the industry and remote environment. Within
the industry environment, the company has brand equity and effective marketing strategies
that enables it to control the carbonated drinks market. In the remote environment, Coca-
Cola can grasp the opportunity of introducing healthier products in its portfolio considering
the health trend popularity. With gradual recovery from recession and an expected 3% rise
of overall global growth, Coca-Cola can follow this growth trend and magnify its revenue.

Coca-Cola’s strategies are designed carefully so as to be harmonious with its culture,

leadership and structure. Since Coca-Cola’s organisational structure is a divisional one, this
enables effective communication throughout the entity allowing the goal of doubling its
revenue to be achieved. Muhtar Kent (CEO) believes in diversity which leads to team
members communicating effectively.

The company utilized marketing and product innovation to implement its functional
strategies. Campaigns such as “Share A Coke” was primarily developed to boost sales and
increase customer value, leading to higher revenues.

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REFERENCES

Coke Adds Life to Sales, Profit after Losing Fizz in Late ’90s; Outlook for drink company
brightens with restructuring and U.S. economic recovery. The Los Angeles Times, Apr
10, 2002.

How Coke Pushed Rivals Off the Shelf, New York Times, Aug 6, 2000.

http://www.maverickpakistanis.com

Interbrand (2010). Best Global Brands 2010. http://www.interbrand.com/en/best-global-

brands/best-global-brands-2008/bestglobal-brands-2010.aspx

Investopedia. (2015) “A Look At Coca-Cola's Advertising Expenses”. Available at:

http://www.investopedia.com/articles/markets/081315/look-cocacolas-advertising-
expenses.asp

Mattes R. (1994) “Dietary compensation by humans for supplemental energy provided as

ethanol or carbohydrate in fluids” Physiological Behaviour; 59:179–87.

Pakistan Online Research Panel introduced by Dynamic Research Consultants; primary age
groups-young adults (aged 16-22 years) and mature adults (aged 22 years above)

Shafaat A. (2014) “A Market not for Faint-Hearted” DAWN NEWSPAPER— Published Mar 10,
2014 07:40am. Available at: http://www.dawn.com/news/1092090

Staff J. (2015) “Responsible Marketing” Available at: http://www.coca-cola.co.uk/about-

us/responsible-marketing/

The Coca-Cola Website (2015). “Programs and Promotions” Available at:

http://www.cokesolutions.com/MarketingTools/Pages/Site%20Pages/Programs%20
and%20Promotions.aspx

The History of Coca-Cola; Available at: http://www.coca-colacompany.com/history/

[Accessed: 20 August, 2015]

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APPENDIX
REQUEST LETTER FOR INTERVIEW

5th October, 2015

Dear Mr. _______________
We are writing to request for an interview with your relevant representative to obtain some pertinent
information regarding the strategic position of Coca-Cola Company in Pakistan.
We are 4th year MBA students at the Karachi University Business School (KUBS), Karachi. We are
required to submit a project report and case study as part of the completion of our Strategic
Management course.
It would be our honor and of great help if your company can assist us in providing this information for
our reports. The information we require for our reports will be helpful in answering our following
questions:
1. Which product in your portfolio raises the greatest amount of revenue?
2. As an assumption, if consumers become increasingly health conscious, which brands would
Coca-Cola rely on to maintain its position in the market?
3. Evidence has been published about pesticide traces being found in Coca-Cola. What do you
probably suggest reasons for such traces?
4. Health reports and research claim Coke to be causing obesity among consumers. What do
you have to say about this?
5. If we talk about your competitor Pepsi, they primarily focus on sports theme where as your
marketing perspective focuses on love, friendship, and family. Why is this so? Please define
particular in reference to Karachi, Pakistan marketing.
6. What is your present market share in Pakistan and future targets?
7. What challenges does the beverage industry and in particular, your organisation face in doing
business in Pakistan?
8. How do you manage your distribution services?
The information which you provide us shall be used in the strictest confidence.
We look forward to hearing positively from you soon.

Thanking you in advance.

4th year MBA Students
Karachi University Business School (KUBS)

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