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UNIVERSITY OF SARAJEVO

SCHOOL OF ECONOMICS AND BUSINESS

Coca Cola brands and their


share in the companys
profits
Students:

1. Mirza rndi 3361


2. Sabina Bostandi 3443
3. Medina Prelo 3530
4. Aida Mehi 3532
5. Aziza Sali 3445
Case study supervisor:

prof. dr. Srebren Dizdar

Contents
1. Executive summary............................................................................................3
2. About Coca-Cola Company..................................................................................4
2.1. Brands in Coca-Colas portfolio.......................................................................5
2.1.1. Non-carbonated Soft Drinks .....................................................................6
3. New opportunities for Coca-Colas brands................................................................8
4. Conclusion.....................................................................................................11
Literature..........................................................................................................12

1. Executive summary
The Coca-Cola Company is the worlds largest manufacturer, distributor, and marketer of nonalcoholic beverage concentrates and syrups. Based in Atlanta, Georgia, Coca-Cola sells
concentrated forms of its beverages to bottlers who then produce, package, and sell the finished
products to retailers. The Coca-Cola Company operates in over 200 countries and sells more than
400 different brands that produce over 3000 different products, including the famous Coca-Cola
and Sprite lines of soft drinks.
Everyone has heard of Coca-Cola, and you would be hard pressed to find somebody who was
unable to recognize the iconic white lettering against the bright red background of this global
brand. Various sources cite Coca-Cola as a billion dollar brand and that is not surprising, when
one considers it was rated by Interbrand as one of the most valuable brands in 2015, based on a
brand value amounting to 78.42 billion U.S. dollars.
The Coca-Cola Company is a global key player in the beverage industry. The firm comprises the
corporate division, headquartered in Atlanta, GA, and about 300 bottling partners worldwide.
According to its most recent annual report from 2015, Coca-Cola's net operating revenue
amounted to 44.29 billion U.S. dollars. Bringing in 49.2 percent of the global revenue in
2015 was the North America segment, making it the company's flagship market.
In the U.S., the Coca-Cola Company held a market share in the soft drink segment with 42.3
percent in 2014. The companys leading four brands in the U.S. market are Coca-Cola, Diet
Coke, Sprite, and Fanta. The Coca-Cola Classic brand itself, held a market share of 17.6
percent in the United States in 2014.

2. About Coca-Cola Company


The Coca-Cola Company is an American historical multinational beverage corporation and
manufacturer, retailer, and marketer of non-alcoholic beverage concentrates and syrups, which is
headquartered in Atlanta, Georgia. The company is best known for its flagship product CocaCola, invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia. The CocaCola formula and brand was bought in 1889 by Asa Griggs Candler (December 30, 1851
March 12, 1929), who incorporated The Coca-Cola Company in 1892. The company operates
a franchised distribution system dating from 1889 where The Coca-Cola Company only produces
syrup concentrate which is then sold to various bottlers throughout the world who hold an
exclusive territory. The Coca-Cola Company owns its anchor bottler in North America, CocaCola Refreshments.
Coca-Cola is the largest seller of non alcoholic beverages in the world. Theres no doubt CocaCola has generated tremendous growth since being founded in 1892, and the company figures
clearly show it, but some may expect that the growth is over nowadays.
Growing consumer preference for healthier drinks and increasingly saturated markets has
resulted in slowing growth rates for sales of carbonated soft drinks (abbreviated as CSD), which
constitutes 78% of Coca-Cola's sales.1 Coca-Cola's profits are also vulnerable to the volatile
costs for the raw materials used to make drinks - the corn syrup used as a sweetener,
the aluminum used in cans, and the plastic used in bottles. Furthermore, decreased consumer
spending in Coke's large North American market compounds the challenge of rising costs and a
weak economic environment.2 Finally, Coca-Cola earns approximately 75% of revenue from
international sales, exposing it to currency fluctuations, which are particularly adverse with a
stronger U.S. Dollar (USD).
Despite these challenges, Coca-Cola has remained profitable. Though the non-CSD market is
growing quickly, the traditional CSD market is still large in terms of both revenues and volume
and highly lucrative. The size and variety of Coca-Cola's offerings in the CSD category, coupled
with the unparalleled brand equity of the Coca-Cola trademark, has allowed Coca-Cola to
maintain its share of this important market. Coca-Cola has also responded to consumers

Coca-Cola

International

2008

Sales

Boost

Annual

Review

Coca-Cola's

Results

changing tastes with new, non-CSD product launches and acquisitions such as that of Glaceau 3.
Strong international growth has also more than offset a weak domestic market.

3 http://www.reuters.com/article/idUSN2543044720070525 - Coke set to buy


Glaceau
for
$4.2
bln
-NYT

2.1. Brands in Coca-Colas portfolio


The Coca-Cola Company produces over 400 brands of non-alcoholic beverages, including
carbonated and non-carbonated beverages, such as ready-to-drink juices, coffee drinks, tea and
bottled water. Under these 400+ brands, there are more than 3,000 different beverage
products. Most of Coca-Cola's beverage portfolio is composed of CSD, though the company has
been expanding into the non-CSD category in response to a shift in consumer demand and a
greater emphasis on healthy options.
Coca-Cola is the best-selling soft drink in most countries, and was recognized as the number one
global brand in 2010. While the Middle East is one of the only regions in the world where CocaCola is not the number one soda drink, Coca-Cola nonetheless holds almost 25% market share
(to Pepsi's 75%) and had double-digit growth in 2003. Similarly, in Scotland, where the locally
produced Irn-Bru was once more popular, 2005 figures show that both Coca-Cola and Diet Coke
now outsell Irn-Bru. In Peru, the native Inca Kola has been more popular than Coca-Cola, which
prompted Coca-Cola to enter in negotiations with the soft drinks company and buy 50% of its
stakes. In Japan, the best selling soft drink is not cola, as (canned) tea and coffee are more
popular. As such, The Coca-Cola Company's bestselling brand there is not Coca-Cola,
but Georgia.
The Coca-Cola Company also produces a number of other soft drinks
including Fanta (introduced circa 1941) and Sprite. Fanta's origins date back to World War II
during a trade embargo against Germany on cola syrup, making it impossible to sell Coca-Cola
in Germany. Max Keith, the head of Coca-Cola's German office during the war, decided to create
a new product for the German market, made from products only available in Germany at the
time, which they named Fanta. The drink proved to be a hit, and when Coke took over again after
the war, it adopted the Fanta brand as well. Fanta was originally an orange flavored soft drink
which can come in plastic bottles or cans. It has become available in many different flavors now
such as grape, peach, grapefruit, apple, pineapple and strawberry.
In 1961, Coca-Cola introduced Sprite, a lemon-lime soft drink, and another of the company's
bestsellers and its response to 7 Up.
It was announced on August 14, 2014, that Coca-Cola Co is making a cash payment of $2.15
billion for a 16.7 percent stake in Monster Beverage Corp to expand its market for energy drinks.
Coke's ownership in Full Throttle and Burn will be transferred to Monster. In return, Monster
will transfer its ownership in Hansen's Natural Sodas and Peace Iced Tea to Coke. Muhtar Kent,

Coke's Chief Executive Officer, stated that the company has the option to increase its stake to 25
percent but cannot exceed that percentage in the next four years.4

2.1.1. Non-carbonated Soft Drinks


During the 1990s, the company responded to the growing consumer interest in healthy beverages
by introducing several new non-carbonated beverage brands. These included Minute Maid Juices
to
Go, Powerade sports
beverage,
flavored
tea Nestea (in
a
joint
venture
with Nestle), Fruitopia fruit drink and Dasani water, among others. In 2001, Minute
Maid division launched the Simply Orange brand of juices including orange juice.
In 2004, perhaps in response to the burgeoning popularity of low-carbohydrate diets such as
the Atkins diet, Coca-Cola announced its intention to develop and sell a low-carbohydrate
alternative to Coke Classic, dubbed C2 Cola. C2 contains a mix of high fructose corn
syrup, aspartame, sucralose, and Acesulfame potassium. C2 is designed to more closely emulate
the taste of Coca-Cola Classic. Even with less than half of the food energy and carbohydrates of
standard soft drinks, C2 is not a replacement for zero-calorie soft drinks such as Diet Coke. C2
went on sale in the U.S. on June 11, 2004, and in Canada in August 2004. C2's future is uncertain
due to disappointing sales.
Starting in 2009, The Coca-Cola Company invested in Innocent Drinks, first with a minor stake,
increasing to 90% in the first quarter of 2013.
The remaining 23% of Coca-Cola's total volume is composed of non-carbonated soft drinks,
which include a variety of beverages such a fruit juices, waters, sports drinks, and teas. This nonCSD segment has been showing higher growth rates than the CSD category, resulting from
higher demand for healthy alternatives to traditional CSD.
The Coca-Cola Company's major non-CSD offerings (>$1 billion in annual sales) include:

Dasani bottled water

Glaceau VitaminWater

POWERade sports drinks

Minute Maid and Minute Maid To Go juices

4
ATHAVALEY, ANJALI (August 15, 2014). "Coca-Cola pays $2.2 billion for major
stake in Monster Beverage". Reuters.
7

Aquarius sports drinks

Nestea

Sokenbicha

Odwalla

3. New opportunities for Coca-Colas brands


Coca-Cola is benefiting from the growing global beverage industry more than any other
company.
The worldwide beverage industry (excluding the US) is expected to increase in value by $300
billion from 2014 to 2020.
Coca-Cola has 30% market share of the global beverage industry. If the company maintains its
global market share up to 2020, it will add $90 billion to its market cap based on the expected
increase in global beverage value.
Coca-Cola had a market cap of ~$150 billion at the beginning of 2014. This gives the company
an expected compound growth rate of 6.9% (not including dividends and share repurchases) up
to 2020 if the company does not gain any market share.
Coca-Cola has positioned itself very well to take advantage of growing non-alcoholic beverages
worldwide.
The image below shows the companys strong competitive position around the world.

As per capita income increases in Eurasia, Africa, and the rest of the developing world, CocaCola stands to gain.
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Rising personal income throughout the world gives consumers more disposable income to
purchase non-essential items like Coca-Cola.
Coca-Cola is enjoyed on a per capita basis much more in some countries than in others. This
gives Coca-Cola the opportunity to focus on countries with low levels of per capita
consumption as the market is less saturated.
About 50% of teens and young adults have not enjoyed a Coca-Cola in the last 30 days. CocaCola still has a long growth runway ahead.
Here are two facts that show Coca-Colas growth potential:

Coca-Cola sells just 3.5% the amount of beverages in India as it does in the US on a per
capita basis.

China only consumes about 10% the amount of Coca-Cola products as a US citizen does
on a per capita basis.

These 2 countries alone are each about 4 times the size of the United States.
Keep in mind, Coca-Cola is much more than just a soda company. The company currently has
20 brands with more than $1 billion in annual sales. Of these 20 brands, 14 are non-carbonated.
If Coca-Cola can increase its per capita beverage consumption in these emerging markets, it will
greatly expand revenues. In both developed and emerging markets, consumption of still (noncarbonated) beverages are rising.
International still beverage growth will drive Coca-Colas growth for the future.
The company has 14 still brands that do over $1 billion per year in sales. Coca-Cola has grown
still volume 5% over the last 12 months. This is on top of 8% international still volume growth
in the previous year.

The company has excelled in still beverages over the last several years. Coca-Cola has captured
about 1/3 of global juice growth since launching its global juice center in 2007. The company has
a more than 2 to 1 lead on its nearest competitor in still beverages. Coca-Cola is focused on
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expanding its tea portfolio. The companys Fuze Tea brand recently joined the $1 billion a year
in sales brand club.
In addition to the companys 20 $1 billion brands, Coca-Cola has around 20 up and coming
brands that do between $500 million and $1 billion per year in sales. Of these brands, over half
are still beverages. Coca-Cola is looking to partnerships with innovative companies to bolster
its strong brand portfolio.
Coca-Cola is also expanding by partnering with businesses in key categories. The company
partnered with Keurig to offer branded sparkling and still beverages on the companys cold
beverage dispenser.
In addition, Coca-Cola will release a hot Keurig Honest Tea product in the near future. The
companys partnership with Keurig opens up a new growth market for Coca-Cola.
Coca-Cola also partnered with Monster in a deal that transfers energy brands between the two
companies and gives Monster access to Coca-Colas extensive distribution network. The move
gives Coca-Cola a stake in Monster and its world class energy soda brand. Coca-Cola has had
limited success in the energy category, and the move is a capital efficient way for Coca-Cola to
better position itself to gain from the quickly growing energy beverage industry.

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4. Conclusion
Coca-Cola is the gold standard in non-alcoholic beverage companies. Coca-Cola has significant
growth potential ahead in developing markets, especially India and China. The companys long
dividend streak makes it a Dividend Aristocrat and a Dividend King.
As consumer preferences slowly shift from sparkling to still beverages, Coca-Cola has
positioned itself as the dominant still beverage company in the world. Coca-Colas repositioning
is part of broader efforts to evolve in a challenging operating environment. The company is
shifting its focus from volume to value, leveraging premium and affordable packaging options to
drive transactions and revenue rather than cases. Coca-Cola also has implemented a new One
Brand strategy and marketing campaign, uniting Coca-Cola, Coca-Cola Light/Diet Coca-Cola,
Coca-Cola Zero and Coca-Cola Life under the same iconography and heading of the flagship
beverage to increase sales of the lower-calorie variants.
In the still beverages category, the company is taking steps to capture share such as building a
fit-for-purpose juice supply chain. Since 2010, Coke has captured one-third of the juice and
juice drink category value growth, driven by its four billion-dollar juice brands. The company
will also continue to invest in the profitable premium bottled water category through brands like
smartwater, which became a billion-dollar brand in 2015.
Going forward, Coke will do more to experiment with new products and ideas.

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Literature
1. Coca-Cola 2008 Annual Review, http://www.thecocacolacompany.com/investors/pdfs/2008_annual_review/2008_annual_review.pdf
2. International Sales Boost Coca-Cola's Results,
http://online.wsj.com/article/SB122405368590635855.html?mod=wsjcrmain
3. Coke set to buy Glaceau for $4.2 bln, http://www.reuters.com/article/consumerproductsSP/idUSN2543044720070525
4. Soft Drinks, By: The Coca-Cola Company, http://www.coca-colacompany.com/brands/softdrinks/
5. Statistics and facts on the Coca-Cola Company, http://www.statista.com/topics/1392/cocacola-company/

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