group project topic coca colas global supply chain analysis

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATION PROGRAMS

GROUP PROJECT: GROUP 1

TOPIC: COCA-COLA’S GLOBAL SUPPLY CHAIN ANALYSIS

Lecturer: Dr Nguyen Bich Ngoc

Class: International Business Administration 60A

Course: Supply Chain Management Member: Nguyén Ngoc Quynh

Nghiêm Thị Như Y

Nguyễn Hương Thảo Lê Anh Tú

Tạ Thanh Diệu

I Overview about Coca-Cola Company 1 Introduction about Coca-Cola Company

1.1 Overview

The Coca-Cola Company was formed in Atlanta in 1892 and has its headquarters there The Coca-Cola Company is the world's largest beverage company It controlled 48 percent of the worldwide market share, and the Franchise is responsible for over 160 distinct beverages over 200 countries Coke, Sprite, Dasani, and a variety of other beverages are among their offerings Sports Beverages, Juices, Tea, Coffee, and Water are among its offerings

- Leadership: “The courage to shape a better future” - Collaboration: “Leverage Collective Genius” - Integrity: “Be real”

- Accountability: “Ifit is to be, It is up to me” - Passion: “Committed in Heart and Mind” - Diversity: “As inclusive as our Brands” - Quality: “What we do, We do well”

1.2 Mission

The Coca Cola Franchise Mission statement: “To refresh the world - To inspire moments of optimism and Happiness - To create value and Make a difference”

1.3 Vision

What Their Vision and Objectives are:

- “Be a great place to work where people are inspired to be the best they can be.” - “Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people’s desires and needs.”

- “Nurture a winning network of customers and suppliers, together we create mutual, enduring value.”

- “Be aresponsible citizen that makes a difference by helping build and support sustainable communities.”

- “Maximize long-term return to shareowners while being mindful of our overall responsibilities.”

- “Be a highly effective, lean and fast-moving organization.” 2 Organizational Structure

The Board of Directors occupies the first level of the hierarchy Muhtar Kent is the company's Chairman of the Board of Directors and Chief Executive Officer The Operations Leadership executives are at the second level of the hierarchy Presidents of international division structures such as Latin America Group, Europe Group, North America Group, Eurasia and Africa Group, and Asia Pacific Group are represented in this sector In the Coca-Cola Company's organizational chart, the Marketing job is at the third level of hierarchy The Coca-Cola Company's Executive Vice President and Chief Marketing and Commercial Officer The Vice President is responsible for global marketing, customer management, and commercial leadership, as well as leading the Company's efforts to satisfy the requirements of consumers and customers across the world

- Dominant Market Share Coca-Cola has the greatest market share among the only two largest soft drink producers in the beverage category, Coca-Cola and Pepsi Coca- top Cola’s growth drivers include Coke, Sprite, Diet Coke, Fanta, Limca, and Maaza

3.2 Weaknesses

- Competitive rivalry with Pepsi: Coca Cola’s main competitor is Pepsi Coca-Cola would have been the obvious market leader in the beverage if it hadn’t been for Pepsi

- Product diversification Coca-Cola has a limited range of products Coca-Cola is trailing in this category, while Pepsi has launched several snacks such as Lays and Kurkure It offers Pepsi a competitive advantage over Coca-Cola

- Health concerns: Carbonated beverages are a major source of sugar consumption Obesity and diabetes are two serious health problems as a result Coca-Cola is the world’s largest carbonated beverage producer Many health professionals advise

against drinking these soft drinks For the firm, it is a contentious subject Coca-Cola, on the other hand, has yet to come up with a health alternative or answer to this problem

3.3 Opportunities

- Product innovation and diversification Coca-Cola, like Pepsi, has the chance to launch new offerings in the health and food categories It can help them increase income and diversify their product line beyond fizzy beverages

- Expanding presence in emerging countries: Cold drink consumption is higher in many places with hot climates As a result, expanding one’s presence in such places may be beneficial — Middle Eastern and African countries are prime examples - Advanced supply chain Coca-business Cola’s relies totally on logistics and supply chain management Transportation and gasoline expenses are constantly rising As a result, coming up with some sophisticated and enhanced distribution methods might be an opportunity

3.4 Threats

- Water management dispute Coca-Cola has been chastised for its water management practices Many social and environmental organizations allege that the firm consumes a lot of water in water-scarce areas Furthermore, it has been claimed that Coca-Cola pollutes water and mixes pesticides with water to remove pollutants - Packaging issue: In a 2017 report, Greenpeace chastised Coca-Cola for using single-use plastic bottles It’s also been chastised for its recycling and use of renewable energy sources

- Direct and indirect competition: Although Pepsi is a direct competitor in the market, there are several other firms who compete with Coca-Cola indirectly Starbucks, Costa Coffee, Tropicana, Lipton juices, and Nescafe are Coca-indirect Cola’s competitors who may pose a danger to the company’s market share

4 Coca Cola’s business current situation

The Coca-Cola Company today announced excellent second-quarter and year-to date results for 2021 “Our results in the second quarter illustrate how our company is rebounding quicker than the broader economic recovery, powered by our rapid transformation”, said James Quincey, Chairman and CEO of The Coca-Cola Company

- Revenues: Net sales increased by 42% to $10.1 billion

- Margin: Operating margin was 29.8% vs 27.7% in the preceding year, while comparable operating margin (non-GAAP) was 31.7 percent versus 30.0 percent in the previous year.

- Cashflow: Strong business performance, five more days in the first quarter, and working capital measures drove year-to-date cash flow from operations to $5.5 billion, up $2.7 billion over the prior year

- The business anticipates organic sales growth of 12 percent to 14 percent (non GAAP)

II Global Supply Chain of Coca Cola

In their journey, Coca-Cola beverages go through the following destinations:

- Supplier - Manufacturer - Distributor - Retailer - Consumer

Raw Materials

Manufacturing

Consumer

Figure 1: Coca-Cola journey The typical workflow within Coca-Cola supply chain:

- The concentrated syrup is manufactured at the Coca-Cola Company headquarters in Atlanta and sold to Coca-Cola Enterprises (CCE) or another bottling partner, who is responsible for distributing the product across North America and Canada.

- The syrup is sent to a manufacturing facility, where it is combined with additional components including purified water and sweeteners The bottler then packages and delivers the finished product to retail partners

- The Coca-Cola Export Corporation (TCCEC) works with local bottlers all over the world to supply the beverage to the appropriate markets

1 Purchasing process

Coca-cola sources a diverse range of ingredients from complicated worldwide supply chains, including sugarcane, sugar beet, corn, fruits, coffee, tea, and soybeans, as well as a growing range of additional components like nuts, herbs, and dairy It is critical to ensure that these components are produced in a way that respects farmworkers and their communities while also safeguarding ecosystems They don't acquire agricultural raw materials directly from farmers; instead, they rely on suppliers for processed and refined components As a result, it's critical to collaborate with suppliers in order to realize the goal of sustainable agriculture and to engage the farm base, with a focus on cooperation and continual development

They're also dedicated to working together with the rest of the industry and supporting reputable third-party standards to make assurance and certification easier for farmers throughout the supply chain They also work directly with farmers in key sourcing areas to address material concerns in the agricultural supply chain Here is a list of suppliers:

I Sugar Cane & Beet Supptiers

1 Orange Juice Supptiers

Figure 2: List of suppliers 2, Operation

Coca-Cola is a multinational corporation with a local presence As a result, there are presently about 225 bottling partners across the world The supply chain starts with the acquisition of raw materials, which include agricultural goods (sugar cane or fruit) and water in the case of Coca-Cola The most crucial elements (water and sugar), are

supplied locally, with the partners having just the sort of sugar to select from Beet sugar is utilized mostly in Europe, cane sugar in Asia, and corn syrup sugar in America

The manufacturing of the concentrate, which is combined with water, sugar, and carbon dioxide by the bottling plant, is one of the initial phases in Coca-supply Cola’s chain Other plants generate the concentrate themselves The secret recipe is said to be stored in a safe in Atlanta According to the tale, only two people should have access to it and know the specific recipe The completed beverages are subsequently packaged, marketed, and distributed to grocery shops, restaurants, and movie theaters, among other places As a result, the firm places a high value on supplier relationship management and regular supplier monitoring

3 Logistics

Any supply chain relies on logistics, and Coca-logistics Cola's expertise is critical to the company's supply chain performance Coca-Cola has established a number of logistical best practices, including:

- Producing items on a more regular basis

- Organizing weekly meetings amongst teams all across the world - Bringing the manufacturing plants closer to the customers

- Interaction between the primary sites on a daily basis 1s being introduced - Introducing a set of processes that are shared by all players in the supply chain

4, Market channel:

The company has the greatest distribution system in the globe Through a powerful distribution infrastructure, the firm continues to increase its market in emerging, developing, and developed markets Direct selling and indirect selling are the two types of product distribution techniques used by the company Restaurants, cinema halls, retail stores, and other businesses get items straight from the corporation Furthermore, Coca

Cola has developed an indirect sales strategy, partnering with distribution agencies, wholesalers, and independent bottling partners, who then make the goods available to retailers and consumers The company sends its products to distributors, who subsequently convey them to smaller distributors and retailers via the indirect approach When items are to be delivered in locations with fewer people or in rural areas, smaller distributors are provided The company has contracts with the majority of the independent bottlers To reach clients in different parts of the world, the company employs a variety of distribution strategies (pre-sale system, conventional route system, telemarketing system)

III Global Business Strategy

Coca cola has implemented a Transnational business strategy to create high local responsiveness and high global integration By cost leadership strategy, costs are reduced to fit in local market pricing By differentiation , branding, market development strategy, Coca cola can remain high quality products, adapt to foreign markets demand

On the official website of Coca Cola, they stated that “We are a global business that operates on a local scale, in every community where we do business”

- Besides, Coca cola also takes advantages in the brand logo to set the foundation in differentiation

- Other than these, the brand logo is also used to set the differentiation basis The standing out and unique brand emblem has created a powerful brand impression in the minds of customers Despite several changes, the essence of the brand has stayed consistent, which acts as a powerful differentiating element

1.2 Cost leadership: The objective of executing this strategy is to maintain the market leadership position through efficient value chain management - This approach enables Coca-Cola to increase its market share by focusing on the middle class, which accounts for the majority of the overall targeted consumer Middle-class customers perceive a great value on pricing, and cost leadership is the ideal method for meeting the demands of this market category

- Coca-Cola puts much attention on “affordability” and easy “accessibility” of the offerings around the world, which contributes to great brand recognition and sales growth, as well as a strong competitive advantage

- Coca-Cola regularly gives discounts and coupons to accomplish sales objectives and deal with competitive pressure from its nearest opponent, in addition to charging cheap prices through decreasing manufacturing costs and maximizing supply chain efficiency These discount and promotional efforts are meant to promote brand popularity and stimulate purchasing

- The results are shown in quick brand recognition among customers, expanded customer base, high consumption and high sales.

2 Intensive Strategy 2.1 Market development:

This 1s a strategy for expanding into new markets or areas and selling to new clients It is yet another important approach that has aided Coca-Cola in becoming a worldwide brand Coca-Cola products are available in over 200 countries The brand has expanded to virtually every corner of the globe Apart from the flavor of Coca- Cola drinks and their inexpensive rices, credit for worldwide expansion also belongs to the use of marketing and promotions The strategy has proven to be very effective, allowing Coca-Cola to take the lead in the beverage sector

2.2, Product development:

Product development is the strategy of introducing more offerings to the market to target higher sales and revenue Coca-product Cola's line has expanded significantly over time Its extensive product range includes 500 sparkling and still brands, and it offers over 3900 beverage options Its portfolio now includes 21 billion-dollar brands Coca Cola has grown significantly as a result of product development

2.3 Diversification

Coca-Cola has mastered the art of diversity in the bottled drink industry Regardless of the various commercial concepts that Coca-Cola pursues, the corporation can discover what the consumers in the area like and adapt the beverages appropriately For example, in India, where bottled water is in high demand, Coca Cola offers a line of bottled water that people associate with the brand and quality

3 Sustainable business:

It includes not just bottling factories and distribution, but also our raw material supply (agricultural raw material source for components.) includes social and environmental issues, as well as agricultural management systems All bottling facilities have environmental and safety management systems in place, as well as goals for improving energy and water usage, waste reduction, safety, and so on

3.1 A world without waste

Coca cola has set the goal by 2025 to make all products approximately 20% less virgin plastic and to make 100% of packaging recyclable globally by 2025

3.2 Water security strategy

The company focuses on three priorities: “Reducing shared water challenges around the world; enhancing community water resilience with a focus on women and girls; and improving the health of priority watersheds Localized, context-based targets, will support the global framework.”

3.3 Product quality:

The Coca-Cola Company endorses the current recommendations of numerous prominent health experts that people consume no more than 10% of their total calories from added sugar Coca-Cola is taking steps to reduce added sugar, change the recipe throughout our portfolio, and reduce sugar by at least 30% in some of the major brands in foreign market, including Coca-Cola, Fanta, Sprite, and Fuze Tea IV Global Supply Chain Management Analysis

Before starting the analysis of the supply chain management, in this part we will base on the SCOR (The supply chain operation reference) model to define the process of supply chain management The top-level of this model has 6 different processes, which are also known as 6 components of supply chain management - Plan, Source, Make, Deliver, Return, and Enable Therefore, we will use these components to analyze the contribution to implement the company’s global business strategy

1 Planning

1.1 Forecasting

Forecasting is a crucial challenge for manufacturing, and it influences the company’s sales and promotion policies The Coca-Cola Company utilizes the entrepreneurship Collaborative Planning, Forecasting, and Replenishment (CPFR) system CPFR aims to enhance supply chain integration by supporting and assisting joint practices CPFR seeks cooperative management of inventory through joint visibility and replenishment of products throughout the supply chain These policies were established to allow each component of the supply chain to be a partner in the success of fulfilling customer demand This practice was created so that suppliers could have greater visibility into retailer's sales forecasts This allows each business component to have better control over their respective inventories

The Coca Cola Company has applied the Collaborative Planning, Forecasting, and Replenishment (CPFR) system in its forecasting activity CPFR expects to improve store network coordination by supporting and helping joint practices This practice was made with the goal that providers could have greater visibility into retailer’s expected sales This permits every business part in the supply chain to have better control over their respective inventories

The CPFR system is planned and constrained by a centralized planning team This system depends on an interactive platform that guarantees concurrent work in all distribution areas Coca Cola Company utilizes this system to serve and facilitate the forecasting activity of some largest company’s clients After gathering all appropriate data, the centralized planning team creates a customer demand model and tests it utilizing out-of-sample data Such testing permits working on the model and uncovers conceivable negative situations Lastly, the team will link the customer demand forecast to the supply chain of the company

1.2 Product Innovation

Product innovation presents an essential part in Coca Cola business to implement their transnational strategy It is crucial for Coca-Cola to make new items, new drinks to improve its competitive advantage and to penetrate to the foreign markets Presently, customers' awareness of health problems is increasing day by day Besides the basic aspects of a drink such as taste, packaging, price, customers will care more about the ingredients and potential harms of that drink as to whether it is harmful to their health or not Coca Cola is also facing such problems with its customers Currently, many Coca Cola customers are concerned about possible negative health effects of Coca Cola such as obesity and inactivity

To face this problem, Coca Cola has invested heavily in RnD (Research and Development) activities to be able to develop innovative products that satisfy the wants and needs of customers To eliminate the negative effects of Coca Cola, the company launched Diet Coke products After its launch, Diet Coke received the attention of many customers and created a great success for the company With this in mind, the company continues to develop other innovative products based on Diet Coke with different flavors to suit different customers with different tastes That series of flavour extensions include Diet Coke with Lemon, Diet Vanilla Coke, Diet Cherry Coke, and Diet Coke with Lime In addition, in 2005, Coca Cola succeeded in launching another innovative product that can satisfy customers’ need for health related issues - The Coca Zero with no calories

Product innovation is considered as one of Coca Cola's most important activities in implementing its transnational strategy through product development This activity helps the company expand its product portfolio, extend its product lines, provide customers with a variety of options, increase market dominance, and stay innovative and creative to suit rapidly changing needs, lifestyles of customers

1.3 Product strategy

Coca Cola always focuses on product diversity in the countries where they operate They want to guarantee a high degree of local adaptation and modification in each foreign country It means that for each different country, Coca Cola will always try to have products suitable to the lifestyle and preferences of customers in those countries This helps Coca Cola have higher local responsiveness, increasing competitiveness when entering a new market This product strategy helps the company to realize the core global business strategy of the company, which is transnational through diversification This may be due to the fact that the countries in which Coca Cola is operating have customers with very different tastes and cultures So if you want to continue to succeed in penetrating the market, local adaptation is a must-do job Furthermore, by executing product strategy, Coca Cola Company will diversify its products further, expand its product portfolio, extend its product lines and expand choices for customers For example, Samurai, a caffeinated drink, is just created and sold in Asian nations Additionally, Vita is a juice of Coca Cola Company, which is only available in Africa Sprite Green is a sparkling drink from the United States which is just accessible in some selected areas in New York and Chicago.

2 Purchasing

2.1 Focus on local sourcing

The supply chain starts with the purchasing of raw materials, which include agricultural products such as sugar cane or fruit and water in the case of Coca-Cola The most crucial elements, such as water and sugar, are sourced locally, with the partners having just the sort of sugar to select from Coca-Cola always prioritizes purchasing and manufacturing locally, resulting in a widespread and powerful local environment for Coca Cola Coca-Cola already sources the majority of its raw materials locally wherever possible Only the sort of sugar can be chosen by the local partners Sugar derived from maize syrup is utilized in the United States Beet sugar is mostly utilized throughout Europe Cane sugar is utilized in Asia There are 3 main reasons why Coca Cola chooses to source locally

First, Coca Cola Company wants to optimize the supply chain The company needs to locate the production plant close to where the sugar is grown in each country to shorten the shipping time Because agricultural products are very susceptible to spoilage and mold if not stored and transported carefully, shortening the shipping time is one way for the company to reduce the risk of raw materials being damaged or spoiled in the transportation process because during transportation, it will not be possible to guarantee the quality of preservation as good as in the factory or in the warehouse Besides, local sourcing also helps the company keep its supply chain short and fast, which is critical for meeting quick changing demands of different countries Once agricultural products such as sugar cane or fruit and water are transported to the production plant, it will be processed immediately without needing to be stored for too long in the warehouse or transferred to another production plant in a different country This helps ensure the freshness of raw materials and produces high-quality drinks in the right quantity and at the right time With an efficient supply chain like this, Coca Cola can get its drink done within 2 days and deliver it to Coca Cola's distribution partners

Second, Coca Cola Company wants to contribute to and develop the socio economic environment of countries in which they are operating Local sourcing and local manufacturing will certainly create a lot of jobs for local citizens Farmers can sell more agricultural products such as sugar cane, fruit, and workers have more chances to get jobs in factories Additionally, being coached by one of the largest MNCs in the world and having access to the company's advanced technologies will help broaden employees' knowledge and provide opportunities for them to learn

Last, shortening the transportation distance of ingredients will help Coca Cola reduce GHG emissions emitted from transportation This is tied to one of the company's strategies which is sustainable business In every process, Coca Cola always wants to minimize negative impacts on the environment to create a sustainable business And with local sourcing, Coca Cola is able to optimize the number of shipments while lowering the CO2 impact.