Strengths and weaknesses of coca-cola in 2020
Coca Cola is the largest non-alcoholic beverage brand in the world. Its products sell across more than 200 countries and its leading rival is Pepsi. The company owns or markets and licenses more than 500 brands of nonalcoholic beverages. According to its 2019 annual report, more than 2 billion servings of Coca Cola products are consumed daily around the world. The company has established an extensive and global distribution network to support its global sales. Coca Cola also invests a large sum each year in marketing and has differentiated itself from the crowd of beverage brands. Four of the globally best selling non-alcoholic beverages are owned by Coca Cola or licensed to it. However, apart from the competition, several more challenges have risen before Coca Cola including water management related problems.
Coca Cola has got a strong competitive edge and is well known for its marketing techniques. However, it has got a very aggressive rival Pepsi and to stay competitive, the company must focus on diversifying its product mix. Despite a strong competitive position in the beverages segment, it is lagging behind its rival in other areas which has diversified its product mix successfully. The demand for health-friendly products has grown among people globally and their changing preferences also pose a challenge before Coca Cola.
Read more about Coca Cola in this SWOT analysis and how the business is readying itself for key challenges ahead of it.
Well Established Brand:
Coca Cola is an established brand of nonalcoholic beverages. The company has maintained a strong brand image and has earned heavy recognition for its products as well as marketing. Apart from its leading position in the soda industry, the company is also recognized for its focus on marketing. Incorporated in 1892, in Atlanta, Georgia, the company has grown to become a global soda brand with a heavy fan following worldwide and a large product range. It serves customers across 200 countries and the brand can be easily recognized by its name and logo in every corner of the world. Some of the main factors that have helped Coca Cola build a distinct identity include product quality, marketing, and branding.
Strong Distribution Network:
As a soda giant with global sales, Coca Cola depends on its extensive network of independent bottlers, distributors, and retailers for the sales and distribution of its soda products. Its distribution network is one of its core strengths and a major source of a competitive advantage which has helped it manage its global presence successfully. The distribution network of Coca Cola is comprised of independent bottlers, distributors, wholesalers, and retailers as well as company-owned or controlled bottling distribution systems. According to Coca Cola, it is the largest distribution system of nonalcoholic beverages in the world. The bottling partners of Coca Cola combine sweetener or syrup with still water or sparkling water to produce finished beverages. In 2019, the entire Coca Cola system sold 30.3 billion unit cases of Coca Cola products and according to the company, consumers enjoy more than 2 billion servings of Coca Cola each day.
Large Product Portfolio:
Coca Cola has a large product portfolio which includes still and sparkling beverages, waters, juices, dairy-based products as well as coffee and tea. It sells more than 500 brands worldwide and offers around 3900 beverage choices. In the US alone, Coca Cola offers more than 800 varieties of drinks. Its product portfolio also features 21 billion dollar brands of which 19 are available in low-calorie options. The company has a Taste It! Beverage lounge in Atlanta where the customers can sample more than 100 varieties of beverages. A large product portfolio that includes several globally famous brands and flavors is also among the leading sources of competitive advantages for the brand.
Branding and Promotions:
The way Coca Cola markets its brands and products is also one of the leading strengths of the company. It sets itself apart from the competition in a highly competitive industry through a unique marketing strategy. It is a well-recognized brand in almost all corners of the world. The Coca Cola name and logo can be recognized anywhere and imply the strong brand recognition Coca Cola has built over time. Despite its leading position in the soda industry, the company spends a large sum on advertising each year. In 2019, the company spent $4.1 billion on advertising. It heavily uses digital marketing channels for promotions and apart from its websites, engages its fans and followers from around the world on social media networks. The sheer size of its social media follower base is a reminder of the strong position of the company worldwide and its customer connection. On Facebook alone, there are more than 106 million followers of Coca Cola. The company continuously strives to drive brand awareness higher through regular marketing campaigns. It is also known for having launched some of the most iconic marketing campaigns in the world like the Taste the Feeling campaign.
Coca Cola is a truly global brand enjoying high brand recognition in all corners of the world. In nearly all corners of the globe, people are familiar with the brand. The company sells its products across more than 200 countries of the world. While the US is its largest market, the company also attracts strong sales from other parts of the globe including Europe, Asia Pacific, and the Middle East. It manages its business based on geographical regions. The company has divided its business into the following groups or segments:
• Europe, Middle East and Africa • Latin America • North America • Asia Pacific • Global Ventures • Bottling Investments.
High customer loyalty:
As a leading soda brand, Coca Cola enjoys very high customer loyalty. There are several reasons behind it including a heavy focus on product quality, a large range of flavors as well as marketing and brand strategy and global presence. The pricing strategy of Coca Cola has also helped it manage high customer loyalty. In the soda industry, the level of competition is intense. While the main rival of Coca Cola is Pepsi, the company is facing increased competition from other juice, water, and energy drink brands. Despite that, the company has built a very unique identity and distinct position for itself in the industry which has led to high loyalty and strong sales as well as market-leading position. Moreover, the company invests a major sum in advertising each year to keep its fans and followers from around the world engaged. With more than 106 million Facebook followers, the company is one of the most successful marketers in the world.
High market value:
Overall, Coca Cola has maintained a strong financial position with a high market cap. Despite a somewhat high debt level, the company is overall in a financially strong position. Coca Cola is worth a massive $230 billion (approx.). It has a debt to EBITDA ratio of 2.6. As of September 2019, it had debt totaling around $41.1 billion and total liabilities of around $49.4 billion. However, for a business of its size that is pretty reasonable. Coca Cola can easily raise enough capital to support its balance sheet. Here is how its revenue has grown over the past three years:
Water management related issues:
Water is one of the most heavily used raw materials in the supply chain of Coca Cola but also a limited resource. Coca Cola has faced several legal issues and a lot of criticism over its water management practices in the past. While Coca Cola claims that it replenishes the water it uses, the company has faced a lot of protest over causing water scarcity in several parts of the world including India.
Lower product diversification:
Compared to its leading rival, Pepsi, the level of product diversification of Coca Cola is low. While Pepsi diversified its product portfolio to include snacks, cereals, chips, pasta and more of dairy-based products, the product portfolio of Coca Cola has remained limited largely to drinks. Coca Cola is also facing increased competition from Pepsi whose sales and revenue have grown faster as compared to Coca Cola.
For faster growth and expansion, Pepsi must expand its product portfolio to make it more diverse. Despite Coca Cola’s large product portfolio, its level of diversification is low. The company should add more health friendly products to its portfolio as well as make it more diverse by adding snacks, chips, and other edible products.
Health friendly products:
Consumers have grown increasingly health-conscious in the recent decade. They are now looking for more health friendly products like low-calorie products and energy drinks. Coca Cola can grow its sales faster by growing its product portfolio of health-friendly products. This will help the company tap into a large segment of health-conscious consumers and thus generate extra revenue.
Partnerships with other brands can also help the company with marketing and sales. By partnering with other brands including beverages and snack brands, the company will be able to grow its sales. Coca Cola can use its partners’ resources to grow its reach and penetrate new or existing markets deeper. For example, Starbucks and Nestle entered a partnership to grow the sales of their products and expand their market share. Coca Cola can also enter new partnerships to reduce competitive pressure.
The threat of competition has grown heavily against Coca Cola in recent years. Apart from its leading rival Pepsico, the company is also facing higher competitive pressure from other sports and energy drinks brands like Red Bull or Monster energy drinks. While Coca Cola has retained its leadership position in the beverages segment, the company is experiencing growth in operating expenses including marketing due to higher competition. Pepsi is a close second in terms of market share in the US market in the beverages segment.
The level of regulatory pressure on soda brands has kept growing. Apart from the laws in the US, Coca Cola has to remain compliant with the laws in the markets where it operates. There are several laws affecting Coca Cola including tax, labor laws and laws and regulations related to the environment that the company is required to remain compliant with. Moreover, the level of fines for noncompliance has also increased leading to higher pressure on the company.
Demand for health-friendly products:
The demand for health-friendly products around the world has grown while soda products are largely seen as unhealthy and a cause of obesity. These trends have affected the sales of soda products. Companies are offering low-calorie options for health-conscious consumers. Despite that, there is more pressure on Coca Cola to cater to the changing preferences of the consumers. People are consuming juices and other health-friendly drinks instead of soda drinks which are calorie-heavy and not so health-friendly. Maintaining a high level of demand now requires more investment in marketing and customer engagement.
|APA||Pratap, A. (2020, March 1). A SWOT Analysis of Coca Cola for 2020. Retrieved March 1, 2020, from https://notesmatic.com/2020/03/strengths-and-weaknesses-of-coca-cola-in-2020/|
|MLA||Pratap, Abhijeet. A SWOT Analysis of Coca Cola for 2020. 1 Mar. 2020, notesmatic.com/2020/03/strengths-and-weaknesses-of-coca-cola-in-2020/. Accessed 1 Mar. 2020.|