Bcg matrix of pepsi company

Introduction

Team x Consulting will be working with Coca-Cola to develop an analysis of their marketing strategies. We’ll discuss various facets of the industry and the company and provide a recommendation for their marketing department.

The specific product line that we will be focusing on in our marketing plan is on the Coca-Cola brand drink itself, or Classic Coke. Coca-Cola does have many varieties of Coke, such as Coca-Cola Life, Diet Coke, and Coke Zero that will be touched on throughout this report as well.

Market Profile

Coca-Cola (NYSE: KO) is the world's largest beverage company with over 500 brands and 3,900 beverage choices (Coca-Cola, 2017). They aim to continue their growth and “refresh the world” by starting within and making the company a better, more sustainable one. Their main competitors in the beverage industry are Pepsi and Dr Pepper Snapple Inc. (Reference.com, 2017)

Coca-Cola has strong values that guide their business philosophy: Coke supports ideas such as family, togetherness, happiness, and community. This is strongly reflected in their company vision statements.

Mission Statement (Coca-Cola, 2017):

Our Roadmap starts with our mission, which is enduring. It declares our purpose as a company and serves as the standard against which we weigh our actions and decisions.

· To refresh the world...

· To inspire moments of optimism and happiness...

· To create value and make a difference.

Coca-Cola mainly manufactures and sells Carbonated Soft Drinks (CSDs). As of December 2016 Coca-Cola led the CSD sector with a market share of 40.7% which resulted in approximate sales of $18,630.8 million (Mintel, 2017).

The CSD market is a multi-billion dollar industry seeing approximately $36 billion dollars in revenues each year (Stivaros, 2016). The industry has been in decline in recent years, with CSD sales forecasted to continue falling. The graphic below (Mintel, 2017) illustrates this decline.

Capture.JPG

Growth Strategy

Coca-Cola has two main growth strategies: strategic initiatives and product development.

Strategic initiatives:

James Quincey, President and COO of Coca Cola, has spoken recently about Coca-Cola’s growth strategy (Bailey, 2016), which is based on the following five initiatives to restore momentum and transform the business: focus on productivity, streamline organization, make disciplined investments, adapt a segmented approach to driving revenue, and focus on its core business model.

Coca-Cola’s business approach of segmenting its operations, such as outsourcing all of their bottling to partners (Coca-Cola, 2017), helps them keep costs low and increase their overall profits.

Product Development:

During a conference call during their 3rd Quarter in 2016 (Bailey, 2016) their Chief Operating Officer noted the following strategies:

· Expanding their sugar free range of sodas

· Working on reformulating existing products to contain less sugar

· Packing their soda in smaller containers

· Expanding their range of still beverages

Press releases listed on their corporate website (Coca-Cola, 2017) support a Product Development strategy with headlines such as “‘Share a Coke’ Returns with More Names, More Flavors” and “Gold Peak to Launch Ready-to-Drink Tea Lattes and Cold Brew Coffees in 2017.”

BCG Matrix

The BCG Matrix is a tool that helps analyze a company’s product portfolio. Coca-Cola’s BCG matrix is pretty straight forward. You can see from the graphic below how we classified their product line based on the perception of the product and market trends.

Cash Cow

Stars

Dog

Question Marks

Cash Generation

Cash Usage

Cash Cow: a cash cow is a product that has a high market share and low market growth. Coca-Cola has a cash cow with their Classic Coke. It’s the foundation that the company was built on and is a strong product. It sells well even with little to no room for market growth considering the high amount of competition in the CSD market.

Stars: a star product is an item that has high market share and high market growth. With the rise in demand for healthier beverages Coca-Cola has expanded their Coke line to include sodas with lower calories and lower sugar content, such as Coke Life.

Question Marks: a question mark is a product that has a low market share and high market growth. Flavored sodas as a segment of the CSD market is small, however according to a recent analysis (Bonnett, 2017), data shows that flavored soft drink sales have grown in the last year. This indicates that there is opportunity for market growth within the flavored soda segment of the CSD market.

Dog: a product is a dog if there is both a lower market share and low market growth. Vitamin Water was one of the first “healthy” beverage options to hit the market in 1996, then owned by Glaceau, and was purchased by Coca-Cola in 2007 (Sorkin & Martin, 2007). Unfortunately it’s come out over the years that Vitamin Water is not as healthy as it was purported to be and actually has a very high sugar content (Cherney, 2015) which has caused a decline in sales as consumers generally seem to have a negative perception of the product. Vitamin water has seen its market share fall from 9.6% in 2012 to 6.8% in 2013 with this trend continuing in the present market (trefis, 2014)

Ansoff’s Matrix

A frequency analysis of Coca-Cola’s recent press releases gives us an idea of what their growth strategy is by determining the direction the company is heading based on their actions. Below is a chart showing the number of press releases in each of these four categories:

· Market development: which involves taking existing products and selling them in new markets

· Product development: developing new products and introducing them to existing markets

· Market penetration: selling a larger quantity of existing products in existing markets, usually with tactics like sales or promotions

· Diversification: developing new products and introducing them to new markets

Coca-Cola’s frequency analysis shows that their marketing strategy leans towards product development with a small amount of diversification.

PESTEL Analysis

Shown below is an analysis we’ve completed of the external marketing environment surrounding Coke.

Political:

· President Trump is said to be seeking a cut to the corporate tax rate down to 15% (Davis & Rappeport, 2017) which could be favorable for Coca-Cola.

· President Trump and his team are also discussing a proposal to add a 10% tariff on imports (King & Diamond, 2016) which could impact Coca-Cola when they import their raw ingredients.

Economical:

· Coca-Cola manufactures and sells their products all over the globe, they need to be aware of changing economic factors in various countries to see how it could impact local sales. Events such as a depression, a war, or trade sanctions could impact a local market.

Social/Cultural:

· Consumers are demanding less CSDs, an IBISWorld report (Stivaros, 2016) anticipates that sales will continue to decline over the next five years due to growing health concerns among consumers.

Technological:

· Coca-Cola has a strong bottling operation and has worked hard to obtain partnerships with independent bottlers who can help the Coca Cola “drive long-term growth in critical markets and affect major structural or investment challenges” (Coca Cola, 2017).

Environmental:

· Coca-Cola needs to be aware of the impact their facilities have on the environment. Issues like clean water being available, pollution from bottling plants, or even making sure they’re using food safe materials to package their products.

· Environmental factors dealing with the production of cocoa leaves, sugar, or other raw ingredients used in the production of soda is a potential concern as well.

Legal:

· Coca Cola needs to focus on legal aspects regarding their production and sale of beverages; which can vary from country to country.

· Coca Cola takes the secret recipe for their product very seriously and has pursued litigation against misappropriation of this trade secret (Mitchell, 2011).

SWOT Analysis

Coca-Cola is a successful corporation with many strengths, from their product line to their brand recognition. There are a few areas they could work on improving, with one of the biggest factors being a need for products that appeal to consumers wanting healthier beverages.

Strengths

· Coca Cola has the largest foreign market in the world, with locations in over 200 countries. (Coca-Cola, 2017)

· Leader in innovation in numerous fields, making Coke a fierce competitor

· Diversity of products; nearly 3,900 beverage choices including waters, juices, energy drinks, etc. (Coca-Cola, 2017)

· One of the most recognized global brands in the world, due to strong and efficient marketing strategies; “In 2015, The Coca Cola Company was the largest advertiser in the beverage industry in the world” (Ovidijus, 2017).

Weaknesses:

· Declining Revenue due to decrease in US soda consumption; US soda consumption is at its lowest point in the past 30 Years. (Kim, 2016)

· Revenue decline of $48.017 Billion in 2012 to $41.863 Billion in 2016 (Financials.morningstar.com)

· Soda declines have been driven by an explosion of beverage alternatives -- everything from energy drinks to cold brew coffee -- and some consumers’ desire to cut sugar or artificial sweeteners from their diets. (Kim, 2016)

· Absence of health-conscious drink options. (ThinkProgress, 2015)

· Lack of Market share in Asia-Pacific markets, which is a huge untapped market. (sourcepremium, 2015)

2012

2013

2014

2015

2016

Revenues

48,017

46,854

45,998

44,294

41,863

(http://financials.morningstar.com)

Opportunities

· The opportunity to expand into health centered products, which may result in an increase of sales/profits and rejuvenate the beverage market.

· “According to a survey conducted by an industry source in 2014, about 70% of the consumers in the US (as compared to about 60% in 2012) acknowledged that healthfulness was a major determining factor when buying food and beverages.” (sourcepremium, 2015).

· Potential to enter the Asia-Pacific Markets and expand the brand into new, untapped markets.

Threats

· Strong competition from main competitor, PepsiCo. PepsiCo is a Food distributor as well as a beverage company, so there brand may be more diverse and widespread.

Comparison of Coca-Cola & Pepsi’s Revenues (in millions)

2012

2013

2014

2015

2016

Pepsi

$65,492

$66,415

$66,683

$63,056

$62,799

Coca-Cola

$48,017

$46,854

$45,998

$44,294

$41,863

(http://financials.morningstar.com)

· Strong competition from other competitors, that saturate the market and can negatively affect customer awareness for Coca Cola.

SWOT ANALYSIS TABLE

Strengths

Weaknesses

· Largest foreign market.

· Innovation in products.

· Strong, efficiency marketing strategies.

· Best recognized global brand.

· Lack of presence in Pacific markets.

· Decrease in revenues.

· Absence in health beverage.

Opportunities

Threats

· Focus on healthy products.

· Entry into new markets

· Facing with many strong competitors, such as PepsiCo Inc., Monster Beverage Corp., etc.

· Changes in customer preferences.

Competitive Landscape

Coca-Cola’s top competitor is PepsiCo Inc., with total revenue of $62.799 Billion in 2016. PepsiCo is Coca-Cola’s top competitor because is PepsiCo is a multinational food and snack company as well as a beverage company, which gives it the opportunity to have more products in more locations, which gives it a very competitive strength, sentiment, passion, and reach compared to Coke (socialmention.com). The Dr. Pepper/Snapple Group is also a main competitor with 21.9% of the market share (Stivaros, 2016).

The CSD industry is highly competitive and has high barriers to entry (Stivaros, 2016) which means that it will be very challenging, if not impossible, for new competitors to come into the market. Coca-Cola’s main concern is keeping Pepsi from “stealing” any of their market share.

MARKET CHARACTERISTICS

Coca-Cola’s industry is nonalcoholic beverages and their portfolio is primarily soft drinks with Classic Coca-Cola being the “most popular and biggest-selling soft drink in history” (Coca-Cola, 2017). We’ve chosen to focus our marketing strategy towards Classic Coca-Cola being as that is their main product. We’re also focusing more on the U.S. market versus the global soft drink industry.

The soft drink industry as a whole is a multi-billion dollar industry seeing approximately $42.8 billion dollars in revenues each year. Annual growth from 2011-16 saw a decline of 0.9% and annual growth is projected to continue to decline by 1.3% from 2016-21 (IBISWorld, 2016).

Coca-Cola currently has a market share, within the global soft drink & bottled water manufacturing market, of 11.2% with their main competitor, PepsiCo, with a market share of 13.9%(IBISWorld, 2016). Just within the U.S. Coca-Cola has a 32.4% market share within the soda production market (IBISWorld, 2016).

Per capita soft drink consumption, according to this IBISWorld report, has declined steadily since 2006 and this trend is expected to continue - in large part due to the higher demand for healthy products (see graphic below).

coke graphic market decline.JPG

This decline in the soft drink industry as a whole has had an impact on Coca-Cola’s as well. From their 2016 10k filing they say, “All of these challenges and risks - obesity; water quality and quantity; evolving consumer preferences; increased competition and capabilities in the marketplace; product safety and quality; and food security - have the potential to have a material adverse effect on the nonalcoholic beverage segment of the commercial beverage industry and on our company…” (Coca-Cola, 2017).

Their financials agree: net operating revenues have declined in recent years. Coca-Cola saw a 4% decline from 2014-15 and another 5% decline from 2015-16. Their gross profit margin has only seen a small decrease of .04% overall since 2014 but in terms of a multi-billion dollar corporation this totals approximately a billion dollar decline in profits. However, despite being a main player in a declining industry Coca-Cola still manages to to have consistent profit margins that are often above 20%, which compared to the industry average of 12% (IBISWorld, 2016), is a good sign that Coca-Cola is doing something right.

TARGET MARKET

Coca-Cola has a wide array of products aimed at multiple consumer markets. With a trend towards more healthy products Coca-Cola has introduced off-shoots of their main product, Coca-Cola Classic, such as Coke Zero, Coca-Cola Life, and Diet Coke.

150305_coke_cans_560.jpg

Image: brandchannel.com

Below are some examples of their advertising throughout the years and there’s one common theme: Coke is for everyone. Coca-Cola does acknowledge a commitment to responsible marketing and states that they do not advertise to children (Coca-Cola, 2016) in order to help parents with their desire to provide nutritious beverage choices to their children.

coca-cola-advertisement-case-study-2015-7-638.jpg jxhs4tjw9izau9.jpg 421472b63a7a439fb34b9808546eddad.jpg coke_connect_land.jpg SpecialFamilyTimes-604-st-604-337-6ef738bc.jpg

Images all owned by Coca-Cola

Coca-Cola maintains that with their “one brand” approach to marketing (Coca-Cola, 2017) they are “reinforcing that Coca-Cola is for everybody,” however I would argue that marketing seems focused on millennials, likely for two reasons; millennials make up a large portion of social media use, such as Instagram, and they are a “newer” group of consumers that Coke wants to become lifelong customers.

Coca-Cola’s Instagram is full of vibrant and fun images that seem to be the most popular (and well shared) amongst their social media platforms. The highest number of social media users are people ages 18-29, followed by 30-49 year olds (Pew Research Center, 2017). The fact that Coca-Cola heavily advertises on platforms such as Instagram and Twitter leads me to believe that Coca-Cola is focused on creating hype surrounding their product with two main goals in mind: increased brand awareness and gaining younger customers who, ideally, will become lifelong Coca-Cola drinkers. If you’re thirsty, they want you to remember Coke, and creating vibrant advertising that’s literally at your fingertips (via your tablet or smartphone) is a great strategy.

Capture.JPG

Image: Pew Research Center, 2017

Considering Coca-Cola is for everyone there is no real set “target market”, Coca-Cola markets to anyone who is a decision maker when it comes to purchasing soft drinks. This customer might be a college student who likes a little afternoon pick me up in the form of a cold caffeinated beverage. It might also the be the 35 or older mom who does the grocery shopping for her household.

According to a mintel report (Bonnett, 2017) “consumption of the full range of Carbonated Soft Drinks (CSDs) is highest among iGeneration and Millennials, who are also more likely to be increasing their CSD usage rather than reducing it. Parents and Hispanics – especially Hispanic Millennials – also post heavy CSD usage…”

Customer profile: The College Student Comment by Kaula Schadle: Customer persona needs to be expanded upon: add supporting data to demonstrate conclusions are based in reality. Use images to bring the customer to life and demonstrate their lifestyle.

4e5565178aab2.image.jpg

Image source: The Poly Post

Name: Steven Villa

Demographics:

· Early to mid 20s

· Single; no children

· College student

· Earns < $25k working part-time

· Urban location

Psychographics:

· Spends a lot of time on social media

· Likes going out with friends

· Is a procrastinator and spends a lot of late night studying

Buying Habits:

· Is on a budget so usually chooses less expensive products

· He is pressed for time and likes quick convenient purchases

COMPETITIVE POSITIONING

Coca-Cola has a “competitive edge over its competitors in terms of operations, cost control, brand portfolio, channel marketing, and collaborative customer relationship” (Bhasin, 2017). Listed below are some highlights from the article regarding Coca-Cola’s strategy.

Operations: outsourcing has allowed Coca-Cola the ability to jointly acquire companies with their franchisee FEMSA (which is “the largest bottling franchisee of Coca-Cola products in the world.) Having a larger portfolio of products has helped Coca-Cola capture “important growth opportunities.”

Cost Control: outsourcing has allowed Coca-Cola cut operational costs and therefore increase their profitability.

Brand Portfolio: Coca-Cola offers a wide variety of products across the globe, allowing them to market products to a variety of consumers based on what their needs are. We’re focusing primarily on Coca-Cola Classic but it’s important to note that Coca-Cola does offer more beverages outside of soft drinks and they are exploring growth opportunities in these markets.

Customer Relationship: an extensive portfolio of products helps Coca-Cola tailor its marketing depending on the specific product or market they are selling. Their entire portfolio consists of soft drinks, juices, waters, energy drinks, and more.

Convenience

Easy

Limited

Brand

Youthful

Mt. Dew

Coke

Dr. Pepper

Pepsi

Old

When consumers think about their beverage choices some key phrases come to mind. Coke might be seen as more “traditional” or “old” even though they have a strong top of mind awareness with consumers. Pepsi is thought of as more of a “hip” brand, it’s “youthful” and fun. Mt. Dew is aimed towards a “younger” more “exciting” demographic but doesn’t have the same reach that Pepsi and Coca-Cola have. Dr. Pepper has a more “limited” reach as well, it’s popular in many areas but appears to have some geographic limits as well as a brand that seen as more “traditional” or “old.”

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