The coca cola company

Coca-Cola’s top competitor only holds 20.3% of market share, indicating that Coca- Cola has a competitive advantage within the industry.. Since Coca-Cola owns the largest sector of nearl

The Coca-Cola Company

Sia Kwimbere, Alexander Messados, Helen Zhao

AEM 2200 Fall 2014

TABLE OF CONTENTS Table of Contents 0.0.0 000 occ cece cee cee cee cee cae cee cab cae cab ses tastes ees aes aes aes asses assess Memorandum cab tessa b ces sab nes sae nesses bes aes assess wen eens Ïntroduction c cc cà c2 21 21 ng ng ng ng k ng nàn nh nh kh vn n rà ciy Financial AnalyS1s .L Cà cọ 22 nee ene anne a bee tne tae bee bee nee Liquidity Analysis

Global Presence Issues

Sustainability and Triple Bottom Line Issues

Current Events

Social Environment

Legal and Regulatory Environment

Productivity Initiatives 2.00.0 0.0 0000 coe cee cee cen ee cee ee cee cee nee ee cee ben nh Tre Chromocell

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of New Entrants

Threat of Substitute Products

Sources Cited oo ccc ee cee cee cee cae cee cab cee eb cae Cob sab spss KT nền k nà nh kh hy xa Appendix cà nà nà se nhe nh

Financial Analysis Ratio Calculations

Stock Price Valuation

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.pàe 8

pape 14 page 17 page 20

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To: Professor Perez and AEM 2200 TAs

From: Sia Kwimbere, Alexander Messados, Helen Zhao

Subject: The Coca-Cola Company

The Coca-Cola Company is viable in the short term for several reasons including a healthy current ratio

compared to its industry and top competitors This ratio has increased from 2011 to 2013, indicating that the company holds relatively more assets than liabilities and is able to settle its short-term obligations This ratio is also higher than the industry average and on par that of top competitor PepsiCo, demonstrating its financial well-being as one of the dominant players in its industry In addition, the company currently holds the largest market share in its industry of about 29.5% This provides the company with greater sales, allows it to achieve economies of scale, and improves profitability overall Coca-Cola’s top competitor only holds 20.3% of market share, indicating that Coca- Cola has a competitive advantage within the industry Furthermore, the company holds a substantial amount of inventory, which may seem detrimental However, this is appropriate for a company of Coca-Cola’s size, influence, and geographical reach, which most other producers in the industry lack The large inventory satisfies its need for quick distribution, which enables time utility, adding value to its products for customers

Coca-Cola’s viability on the long run is portrayed through its high profitability ratios, including good return

on sales and return on equity percentages Their average return on sales over the past five years is 22.2%, which doubles the industry average of 10% and PepsiCo’s average of 10% Since Coca-Cola owns the largest sector of nearly one third of market share, this ratio accurately describes the company’s level of profitability The return on equity ratio does the same because Coca-Cola’s percentage is twice the industry average of 15.7% over the past five years In addition, its diverse portfolio of beverages and product lines enable it to attract as many types of consumers

as possible across different demographic and social environments Despite recent health concerns that have negatively impacted the demand for sodas, the company’s extensive product line includes beverages ranging from carbonated soft drinks to juices to bottled water As a result, consumers can substitute healthier alternatives for sodas while still consuming Coca-Cola’s products Brand loyalty ensures that the company has a consumer base in the long run, which the rest of the industry except PepsiCo does not share Furthermore, Coca-Cola’s fostering of a good reputation grants it a competitive edge in differentiation, since it is a pioneer of sustainability in the industry Due to recent sustainability drives, the company’s good reputation encourages consumers to buy their products Coca-Cola’s strategy involves exploiting massive economies of scale to earn profits to be used for research and development, innovation, and promotion They also lower production costs, allowing Coca-Cola to implement its cost-leadership strategy The strategy also entails diversification of products, as consumer preferences have recently shifted away from carbonated beverages to healthier options Product diversification aligns with Coca- Cola’s values of customer satisfaction by fulfilling the customer’s desires Another strategy employed by the company includes expanding its geographical reach and improving its distribution networks, particularly in developing nations In 2014, Coca-Cola established a partnership with SABMiller, a South African brewing company, to create Coca-Cola Beverages Africa and transfer bottling operations to eastern and southern Africa This strategy allows the company to face lenient legislation in these countries The cost of labor is lower than that in Coca-Cola’s existing markets, allowing for lower production costs when they expand This is an optimal strategy because economies of scale are not available to other competitors, which makes their product costs and overall prices relatively higher compared to Coca-Cola’s Some may argue that Coca-Cola should develop healthier alternatives instead of diversification of already established products However, healthy alternatives are too expensive because they require completely new plants, more distributors, and an increased marketing budget Even

if the company pursues production of healthier beverages, the public will not necessarily believe that Coca-Cola’s

products have nutritional value Therefore, it is better for the company to adhere to its original production of

carbonated soft drinks and emphasize its existing healthier alternatives, such as Simply Orange Finally, Coca-Cola

should turn its attention to global expansion because increased global presence provides opportunities within new markets for a larger consumer base, and within different social environments

The Coca-Cola Company’s stock price value is appropriate because it is within the same range as most of its viable competitors, especially PepsiCo Both have a valuation of around $22 despite the fact that PepsiCo’s current stock price is more than twice Coca-Cola’s Dr Pepper Snapple Group is very close with a valuation of $23, while Mondelez International is worth $17 Mondelez’s financial state is not very good, as indicated in its ratio analysis, so Coca-Cola’s value should be much higher than that Even though Monster Beverage has a high valuation

of $54.6229, it focuses more on energy drinks rather than carbonated soft drinks and is therefore not directly related

to Coca-Cola Since PepsiCo and Coca-Cola are very similar companies, direct competitors, and the dominating

I Introduction

Company Name: The Coca-Cola Company

Date of Incorporation: September 1919

Main Business: The Coca-Cola Company is the world’s largest beverage company It owns, licenses, and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and energy and sports drinks Coca Cola owns and markets four of the world’s top five nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Fanta and Sprite Finished beverage products bearing Coca-Cola’s trademarks, sold in the United States since 1886, are now sold in more than 200 countries (The Coca Cola Company, 2013)

Throggh its network of company-owned or company-controlled bottling and distribution operations as well as independent bottling partners, distributors, wholesalers and retailers, Coca- Cola makes its branded beverage products available to consumers throughout the world — the world’s largest beverage distribution system Beverages bearing trademarks owned by or licensed to the company account for 1.9 billion of the approximately 57 billion beverage servings

of all types consumed worldwide every day (The Coca Cola Company, 2013)

Mission Statement: “To refresh the world, to inspire moments of optimism and happiness and to create value and make a difference (The Coca Cola Company, n.d.).”

I Financial Analysis

Coca-Cola Five-Year Ratios

Activity Ratios

Inventory Turnover 5.6213 5.8373 162 5.8913325 4.7898113 4.7102804

Coca-Cola’s current ratio hovers around 1.14 from 2009 to 2013 The difference by which the company’s assets

exceeds the company’s liabilities is not substantial because the current ratio barely exceeds one This means that the

company has relatively more assets than liabilities and may be able to pay off its short-term liabilities in a timely

manner However, this ratio does not guarantee the company’s ability to settle long-term debt and would reflect better on Coca-Cola if it were closer to two This ratio decreases from 2009 to 2011 and then increases from 2011 to

2013, indicating that the company is viable in the short run It is currently trending towards more assets and fewer

liabilities, which is healthy because the company is losing debt

Coca-Cola’s quick ratio hovers around 0.85 over the past five years, showing that the company holds a relatively

large amount of inventory because its quick ratio is smaller than its current ratio Without taking into account

inventories, the company has an uncertain ability to meet its short-term financial obligations It is probably over-

leveraged, or it is paying bills too quickly while collecting receivables too slowly This ratio would reflect better on

the company if it were closer to one, at which liquid assets are equal to current liabilities and the company is

financially secure in the short term

Coca-Cola’s debt-to-equity ratio hovers around 1.44 from 2009 to 2013 Since the company has more debt than equity, it is moderately leveraged Though the ideal ratio is a bit lower than Coca-Cola’s, this number does not reflect poorly on the company because it is not high enough to prove that the company holds a harmful amount of

has steadily increased from 0.96 in 2009 to 1.71 in 2013, indicating that the company may be slowly losing solvency

compared to its financial health in previous years Using large amounts of debt to finance operations can either

generate more earnings than the company would have with a different strategy, or outweigh the return and lead to failure In Coca-Cola’s case, debt financing has been slowly yielding less return over these past five years

Coca-Cola’s return on sales percentage hovers around 22.2% over the past five years, but falls to 18.5% from 2011

to 2013 This ratio indicates that the company is financially healthy because it is earning a good amount of profit for

every dollar of sales The company is most likely operating efficiently to achieve such a high percentage, which is

an advantage that the rest of the industry may not enjoy Since the ratio remains around 18.5% over the past three

years, the company is currently neither growing nor deteriorating Though this is a dip from a return on sales of 33.6% in 2010, it still reflects profitability of the company because it is high compared to the industry

Coca-Cola’s return on equity percentage hovers around 29.2% from 2009 to 2013 This is a very high percentage

indicating that the company is very profitable because it generates a good amount of profit with the money shareholders have invested Shareholders of Coca-Cola are most likely very pleased with their investments in the company and its ability to give back to them This percentage has fluctuated throughout the past five years without a

steady trend, but as a leading player in its industry, Coca-Cola is no doubt profitable

Coca-Cola’s earnings per share hovers around $1.94 over the past five years This is a decent number representing

the worth of one Coca-Cola share Even though the company is certainly profitable, its share price is only commonplace The company’s high ROS and ROE percentages would make one expect a larger earnings per share value Even so, Coca-Cola’s share price is still higher than the industry average, reflecting its profitable status as a

dominant competitor in the industry All three profitability ratios spiked in 2010 due to a one-time accounting event

in which the company revalued its ownership of Coca-Cola Enterprises to comply with required accounting

standards, resulting in a large one-time increase in net income Without taking this event into account, Coca-Cola’s profitability ratios have been steady over the past five years

Coca-Cola’s inventory turnover hovers around 5.4 between the years 2009 and 2013 This is an almost healthy

5.89 in 2011 to 5.62 in 2013 This ratio demonstrates overall well-being for Coca-Cola because consumers buy their

goods in a timely fashion Although the ideal inventory turnover rate is higher than 5.4, this rate is appropriate and healthy for the company because of its sheer size Coca-Cola distributes globally and holds substantially more inventory than the rest of its industry, so the ratio will not be as high as that of a small company

Coca-Cola’s current ratio is higher than the industry average, which steadily hovers around a nearly satisfactory

1.11 This demonstrates Coca-Cola’s financial well-being compared to the entire industry PepsiCo’s average current ratio over the five years nearly the same as Coca-Cola’s, at 1.17 Pepsi’s ratio follows the same trend as Coca-Cola’s, dipping from 2009 to 2011 and increasing from 2011 to 2013 Both companies are healthy and becoming more

stable in the short term However, Mondelez has a disappointing average current ratio over the past five years of 0.99, showing that it will not likely resolve its short-term debts which could destabilize the company

Coca-Cola’s quick ratio is nearly the same as Pepsi’s, but lower than Mondelez’s It is also much lower than the industry average of around 2.66 over the past five years Though it seems like an unhealthy ratio, this comparison can be explained by the great size of the two leading companies in this industry Because they are global distributors,

they must hold substantial amounts of inventory relative to smaller companies, so Coca-Cola’s quick ratio compared

to the industry is acceptable

Coca-Cola is solvent in the long run, with a debt-to-equity ratio that is very close to the industry average of 1.47 from 2009 to 2013 Pepsi, however, has a ratio hovering around 2.13, which is too high to be healthy This number designates a substantial amount of debt owed by PepsiCo, which is more highly leveraged than it should be Though

debt financing can yield great returns, the cost of doing so is exceeding returns in Pepsi’s case

Coca-Cola’s return on sales greatly exceeds that of its competitors and industry, indicating great profitability and

reflecting the amount of market share the company owns Both the industry average and Pepsi’s average over the five years are around 10%, but Mondelez has an even lower ratio of 8.4% Since Coca-Cola owns the largest sector

of nearly a third of market share, this ratio accurately describes the company’s profitability Return on equity does

the same, as the industry’s ratio hovers around 15.7% from 2009 to 2013 Pepsi’s percentage is around 30.4% which

is very close to Coca-Cola’s, and both are nearly twice that of the industry This ratio accurately reflects the fact that

average of $2.06 is above Coca-Cola’s Even so, Coca-Cola’s share price is still higher than the industry average of

$1.73, reflecting the profitability that the company enjoys

Industry Average Five-Year Ratios

IH Environmental Analysis

Due to its global presence in more than 200 countries, the Coca-Cola Company has a social environment that varies

from country to country Complicating matters further, the social environment is continuously changing, and without

adapting to it, Coca- Cola cannot survive The changing social environments provide both risks and opportunities for Coca-Cola Attitudes towards consumerism and environmentalism also affect Coca-Cola

Despite very high levels of consumerism in developed countries, changing consumer preferences- increased health

awareness and concerns about obesity- resulted in a decline in soda consumption “In the US, per capita consumption of Coca-Cola beverages declined from 426 8-oz servings in 2002 to 401 8-oz servings in 2012 (Report,

2014) In reaction to this, in early 2012 France, Coca- Cola introduced Sprite and three varieties of Nestea

sweetened with a combination of stevia (plant derived sweetener) and sugar (Report, 2014) All four beverages

contain calorie contents that are 30% lower than Sprite and Nestea sweetened with sugar alone (Report, 2014) In

mid-2012, Coca-Cola began test marketing Fanta Select and Sprite Select in several U.S cities (Report, 2014) Both are reduced-calorie beverages sweetened with stevia and sugar (Report, 2014) Coca- Cola also removed and

reduced use of artificial ingredients (Report, 2014)

Coca-Cola is currently exploring other opportunities to rapidly expand their portfolio of stevia- sweetened products

Through a partnership with Chromocell Corporation (Atlanta Business Chronicle, 2010), Coca-Cola is developing flavors that enhance the sweet taste of sugar, natural sweeteners and other ingredients that will help offer great-

tasting beverages with fewer calories (Report, 2014) Innovative strategies in packaging such as variety in serving sizes help consumers manage their calorie intake and energy balance (Report, 2014) In 2011, Coca-Cola began

offering more beverages in the United States in 7.5-ounce, 90-calorie mini-cans (Report, 2014) Coke, Diet Coke,

Coke Zero, Sprite, Fanta and Seagram’s Ginger Ale are now all available in mini-cans (Report, 2014) Some products are also available in mini-cans in Australia, Canada, Korea and Thailand (Report, 2014) While a reduction

in sales of its primary product was not favorable for Coca-Cola, it provided an opportunity for innovation in making its product healthier and increased the production of non-sparkling beverages such as juice (Minute maid) and more recently milk, which are perceived by consumers as healthier (Wong, 2014)

Contrastingly, in developing countries, (such as China and India) consumption of Coca-Cola is increasing due to

rising (Ward, 2014) consumerism and may overtake that of developed countries The social environment can also

The Food and Drug Administration (FDA) regards non-alcoholic beverages such as Coca-Cola as within the food

category The government regulates the manufacturing procedure of these products Companies that fail to meet the government's standards are subject to fines Coca-Cola is also subject to the Occupational Safety and Health Act and

to local, state, federal, and foreign environmental regulation “Following the adoption of soda taxes in Hungary and France in 2011 and 2012, a number of new soda tax proposals have been put forth and implemented, while others

have been eliminated Of note is the January 2014 initiation of the 1 peso (USD 0.08) per litre of soda tax in Mexico,

which is the highest per capita Coca-Cola consuming country in the world (accounting for an estimated 5% of the Coca-Cola group’s sales)” (Report, 2014) In addition, St Helena in May 2014 imposed a new tax of USD 1.17 to the cost of sugar-sweetened carbonated drinks with more than 15 grams of sugar per litre (Report, 2014) Proposed

taxes in the US “Sugar-Sweetened Beverage Safety Warning Act, tax of USD 0.01 per teaspoon of sugar, high- fructose corn syrup or other high caloric sweeteners used in sugar-sweetened beverages” and the passed taxes in

California, June 2014 “warning label on bottles and cans of sugar-sweetened drinks sold in the state that contain 75 calories or more per 12 fluid ounces” as well as proposed taxes by the Department of Health in South Africa In

August 2013, (a 20% tax on sugar- sweetened beverage to reduce the rate of overweight and obesity), may lead to a further decline in consumption of Coca-Cola products (Report, 2014) However, Denmark abolished its USD 0.29

tax per litre on sugar-sweetened soft drinks and the ban on sodas over 16 ounces in New York City was ended which

may counteract the negative impact the taxes would have on The Coca-Cola Company (Report, 2014)

In addition to soda taxes, there have been additional cases unfavorable for Coca-Cola concerning violations of

wastewater regulations The first of these violations was found in Plachimada India, where in 2005 the Kerala State Pollution Control Board ordered Coca-Cola to permanently close down one of its plants as a result of pollution

caused by heavy metals (a high concentration of cadmium), wastewater, sludge and an overdrawing of water

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confirmed that the Plachimada plant had contaminated local groundwater with dangerous levels of cadmium, chromium, and lead Water samples collected from nearby wells and hand pumps failed to meet government safety

standards and were deemed unsuitable for human consumption (Research, 2014).” “In 2011, the Kerala Assembly

unanimously passed the Plachimada Coca-Cola Victims Relief and Compensation Claims Special Tribunal Bill 2011

to secure compensation for the inhabitants of Plachimada for ecological damage caused by Coca-Cola’s unit in the

village (Research, 2014).” On “19 Feb 2014, the UN petitioned for an early nod to Plachimada bill, protesting against the alleged inordinate delay in granting presidential assent for the 2011 Plachimada compensation bill

(Research, 2014).” Another situation was in Atlanta where Coca-Cola’s syrup plant violated the city’s wastewater regulations in February 2013 (Bouckley, 2013) The Nigeria Bottling Company linked to Coca-Cola was also asked

to review its supply chain over various consumer complaints by Nigeria’s Consumer Protection Council due to

consumer complaints of defective and contaminated products The allegations proved to be true by the CPC

investigation and NBC was given 90 days to comply with demands of findings All these scenarios are indications of

The Coca-Cola Company’s failure to comply with legal requirements in the respective areas mentioned

The Coca-Cola Company has a Human Rights Policy, which determines the way the business is managed around the

world “The Human Rights Policy applies to The Coca-Cola Company, the entities that it owns, the entities in which

it holds a majority interest, and the facilities that it manages The Company is committed to working with and

encouraging bottling partners to uphold the principles in this policy and to adopt similar policies within their businesses The Supplier Guiding Principles apply to bottling partners and suppliers and are aligned with the

expectations and commitments of our overarching Human Rights Policy (The Coca-Cola Company, n.d.).”

The policy focuses on fostering open and inclusive workplaces based on human rights and includes ten components,

one of which is valuing diversity within the workplace (The Coca-Cola Company, n.d.) “At The Coca-Cola

Company, it is every employee’s responsibility to maintain a work environment that reflects respect and is free from all discrimination and harassment If any employee believes that someone is violating the Human Rights Policy or

the law, they are asked to report it immediately to their manager, Human Resources, Company legal counsel or EthicsLine (The Coca-Cola Company, n.d.).”

Coca Cola uses a geocentric staffing approach (Banutu-Gomez, 2012), which enables it to “deal with cultural

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complement different markets and through staffing by valuing international assignments and giving our best people

exposure to different cultures and ways of conducting business (Veale, 1995, p.77).”

However there has been flouting of these rules and policies indicated by the allegations of discrimination against female job applicants Great Plains Coca-Cola Bottling, a Coca-Cola unit, “has agreed to pay $475,000 in back

wages and interest to settle allegations of sex discrimination affecting 1,293 female job seekers OFCCP

investigators determined that Great Plains Coca-Cola Bottling unfairly rejected these qualified women for merchandiser, driver, driver trainee, production and warehouse positions at the company's bottling and distribution

facility in Oklahoma City (McGinnis & Trupo, 2014).”

Nevertheless, Coca-Cola has put in a huge effort to encourage diversity, amongst many other notable things Coca-

Cola has done, as of December 31, 2013, 44% of its U.S workforce was multicultural (The Coca Cola Company, 2013) In 2013, it hired 1,010 military veterans and increased its target with a five-year goal of 5,000 veterans hired

within the North America system (The Coca Cola Company, 2013) The Coca-Cola Company and The Coca-Cola

Foundation directed $30.7 million (or 46%) of U.S community giving to ethnic, veteran, disability and LGBT nonprofit organizations in 2013 (The Coca Cola Company, 2013) Finally, the Coca-Cola system spent $952 million

with diverse suppliers in 2013, a 14.8% increase over 2012 (The Coca Cola Company, 2013)

Coca-Cola enlarges its global presence through branding, differentiation and cost leadership Cost leadership is

particularly effective for international markets, especially those in developing countries in Asia and more specifically its expanding market in Africa Coca-Cola also uses social responsibility as part of its marketing strategy

in these countries, which is very effective in giving Coca-Cola a good reputation and increasing consumption of its product Although branding is a strategy primarily considered successful in the United States of America (its local

environment) due to its patriotic representation for Americans, branding also works on an international front by

making the product seem more desirable and fashionable Coca-Cola’s branding strategies in international markets include changing its name to suit the social environment “When Coca-Cola entered the Mainland China market, it

used a revised name, which appealed more to the ideographic sense than the original English sound The same problem also occurred when Coca-Cola first entered the Hong Kong and Shanghai markets The Cantonese based

brand name chosen emulated the original English sound translated to "pleasant to mouth and wax" in Mandarin

across the country (Agence France-Presse, 2014) In addition, the Spanish High Court ordered Coca-Cola to re-hire

over 800 workers it laid off The Court ruled that the plant closures and workforce reductions were not done lawfully (FERNANDEZ, 2014)

Coca-Cola’s 2020 Vision focuses on people, planet, profit, partners, portfolio and productivity (Coca-Cola corporate website 2010) The vision is meant to ensure long-term viability and growth for the Coca-Cola Company Coca-

Cola’s priority areas for sustainability are the three Ws: women, water and well-being Its goals are to provide

economic empowerment and entrepreneurship opportunities for women (five million by 2020), access to clean water for communities without it and engage in water conservation and recycling For well-being, Coca Cola plans to encourage active healthy living, education and youth development

Coca- Cola considers women as “pillars of the communities as they invest a sizable portion of the money they earn

on the health and education of their children and in their local economies, creating a tremendous economic impact

As such, women are critical to local and global business success and are an essential cornerstone of our progress towards our 2020 Vision, our long- term system wide plan for growth (The Coca Cola Company, 2013).” Through

multiyear Golden Triangle partnerships like the STAR program, women around the world and especially in Asia are receiving business training and upon graduation, the opportunity to apply for business support, including access to

resources such as microfinance, merchandising and peer mentoring (The Coca Cola Company, 2013) The STAR

Program originally started as a pilot in 2011 and was scaled in 2013 to enable a cumulative total of 21,150 women

“In 2013, 5by20 programs enabled more than 26,000 women entrepreneurs in India, who are often challenged by a

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Cola helped them address barriers by leveraging product-cooling technology from the Coca-Cola system in India to

provide income-generating opportunities for female retailers in rural areas where electricity is intermittent These

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charging ports for mobile phones and solar lanterns Solar coolers reduce the cost of doing business by eliminating the costs of electricity and/or ice, the charging ports draw more potential customers to the store, and the lantern allows her to stay open after sunset Through 2013, more than 1,000 eXOCool units have been installed in women-

run outlets across five states in India (The Coca Cola Company, 2013).”

The availability of water is vital for Coca-Cola’s business sustainability, since it is the main ingredient in the

production of beverages Coca-Cola has fostered NGO partnerships and community projects globally, devoted to the sustainable use of water that involves reducing, reusing and recycling it, to replenish the water it uses across its

supply chain Coca-Cola had the goal of improving its water efficiency by 20% in 2012 It also has a goal of becoming water neutral by 2020, by safely returning to nature and society the equivalent of the water used in Coca-

Cola beverages and production “Coca-Cola has participated in more than 250 community water partnerships in over

70 countries to provide safe drinking water to communities in water-stressed areas of the world (Coca-Cola

2008/2009, Sustainability Review).” Coca-Cola’s involvement in Kaladera India is an example of one of its water

stewardship and sustainability initiatives (Ward, 2014) Despite protests, Coca-Cola persevered in implementing

strategies towards sustainability and community engagement to overcome the challenges of water scarcity in the region (Chaklader & Gautum, 2013)

In regards to the environment, Coca Cola “introduced PlantBottle™ packaging — the first-ever fully recyclable PET plastic bottle made partially from plants — in 2009 and has since distributed more than 15 billion of the breakthrough

bottles in 25 countries Approximately 8% of the company’s PET plastic bottles last year contained Plant Bottle technology (The Coca Cola Company, 2013).” “In addition to eliminating the equivalent of approximately 140,000

metric tons of CO2 emissions from the company’s PET plastic bottles, to date, the innovation has boosted sales of key brands like Dasani PlantBottle also has strengthened Coke’s competitive advantage with key customers, racked

up headlines and sustainable and innovation awards, and caught the collective eye of the supply chain and investor

community (The Coca Cola Company, 2013).”

considerations, obesity and artificiality concerns among many other things (such as shifting consumer demographics

which include aging populations in developed markets, changes in consumers tastes and needs, changes in consumer

lifestyles, competitive product and pricing pressures) are causing a change in the preference for consumers to

healthier non-alcoholic alternatives (The Coca Cola Company, 2013) These shifts away from what is Coca-Cola’s main product gives way for competitors in the highly competitive beverage industry to try gain more market share

and overtake Coca-Cola Some of this competition is from international beverage companies like PepsiCo that are similar to Coca-Cola and some, is regional or local (The Coca Cola Company, 2013) Coca-Cola’s “beverage products also compete against private label brands developed by retailers, some of which are Coca-Cola system

customers (The Coca Cola Company, 2013).” Its ability to gain and maintain market share both globally and locally may be impeded upon due to actions carried out by competitors Without marketing and innovation to maintain

brand loyalty and market share, Coca-Cola will face extremely negative consequences and outcomes of the business,

and find itself unable to keep up with the social external environment (The Coca Cola Company, 2013) This may

cause Coca-Cola to have less liquidity and profitability and possibly even shut down in the long run In reaction to the importance of the social environment, Coca-Cola has developed various healthy beverage alternatives that align

better with consumer preferences Coca-Cola Life is the Coca-Cola Company’s first reduced-calorie sparkling beverage sweetened with cane sugar and stevia leaf extract which has 35 percent fewer calories than other leading

colas at 60 calories per 8-oz glass bottle (The Coca Cola Company, 2013) The use of the green label in branding also satisfies the current social focus towards sustainability, awareness and considering the effect for future

generations (The Coca Cola Company, 2013) Although Coca-Cola risks cannibalisation with Coca-Cola Life due to other previously low calorie innovated products such as Coke Zero, product line extensions can recruit new consumers and increase the brand's market share (Cornil, 2014) The health labels such as those used by Coke Life are strategic and have a powerful impact on consumers’ product perception (from symbolic to physical perception), giving the product a halo effect (Cornil, 2014) “Research has shown that consumers generally underestimate

damageable contrast effects (Cornil, 2014) However, Coke Life's health halo may also reflect on the whole Coca- Cola brand, indirectly benefitting the other Coca-Cola products (Comil, 2014) As a result of an increase in

disposable incomes, consumers are now more selective about the quality and impact of their purchases and consumption In reaction to this, Coca- Cola also developed Fairlife (the product of a joint venture formed by Coca-

Cola and dairy co-op Select Milk Producers in 2012) “Coke saw the partnership as an opportunity to develop

“higher quality value-added health and wellness beverages,” particularly what it calls value-added dairy with more

protein and calcium than standard milk, half the sugar, and no lactose (Wong, 2014) It is also expensive, with initial

prices (in test markets) running 65¢ more per quart than conventional milk (Wong, 2014) Premium Milk could

boost profitability for Coca-Cola if it manages to achieve high volume sales in the future, and the product’s high prices and economies of scale could boost the company’s net profitability (Trefis Team, 2014) “Bottled water is

another high volume market, but Coca-Cola does not derive meaningful profits from this category mainly due to competitive pricing (Trefis Team, 2014) In addition, Coca-Cola has been criticized for selling “bottled tap water,”

which forced the company to withdraw its water brand Dasani from the U.K in 2004 However, enhancing the quality of regular milk might not meet the same fate Coca-Cola’s Simply brand of juice and juice drinks grew 7% in

North America last year (94% U.S., 6% Canada), despite the 1.9% decline in the overall fruit beverage segment in the domestic market (Trefis Team, 2014) Even though the high amounts of sugars and calories have dissuaded

consumers from juice consumption, especially orange juices, the Simply brand enjoys strong sales as it is marketed

as healthier, all-natural, and contains no added sugar or preservatives (Trefis Team, 2014).” Fairlife could boost the company’s beverage portfolio and sales, and very well shake-up the overall U.S fluid milk market (Trefis Team,

2014) Nevertheless, Coca-Cola’s venture into healthier products has not been without criticism There have been

cases with false advertising for its vitamin water (Brison, 2012) Furthermore there has been a case of fraud and

seeking of a class action status against Coca-Cola’s Simply Orange juice brand over claims that it is misleading ()

In spite of this, sales for the healthier products are increasing (Coca-Cola in US legal fight, 2012).