Embed Size (px)
Citation preview
Coca-ColaThe global drink
Najmus Saqib Jahanzeb Siddiqui Waseem Usmani amp Mehdi Abbas
Our mission vision and values outline who we are what we seek to achieve and how we want to achieve it They provide a clear direction for our Company and help ensure that we are all working toward the same goals
Everything we do is inspired by our enduring Mission ndash To Refresh the Worldin body mind and spirit ndash To Inspire Moments of Optimismthrough our
brands and our actions ndash To Create Value and Make a Difference
everywhere we engage
Mission
Vision
bull To achieve sustainable growth we have established a Vision with clear goals ndash People Being a great place to work where people
are inspired to be the best they can be ndash Planet Being a responsible global citizen that
makes a difference ndash Portfolio Bringing to the world a portfolio of
beverage brands that anticipate and satisfy peoples desires and needs
ndash Partners Nurturing a winning network of partners and building mutual loyalty
ndash Profit Maximizing return to shareowners while being mindful of our overall responsibilities
Values
bull We are guided by shared Values that we will live by as a company and as individuals ndash Leadership ldquoThe courage to shape a better
futurerdquo ndash Passion ldquoCommitted in heart and mindrdquo ndash Integrity ldquoBe realrdquo ndash Accountability ldquoIf it is to be its up to merdquo ndash Collaboration ldquoLeverage collective geniusrdquo ndash Innovation ldquoSeek imagine create delightrdquo ndash Quality ldquoWhat we do we do wellrdquo
Coca-Cola Statistics
bull Coca cola owns more than frac12 of the worldrsquos beverages
bull Coke is affordable in all the countries we surveyed It was not out of the price range for an afternoon snack
bull Coke comes in a variety of sizes worldwide so you can use it for a crowd or as a personal snack drink
Advertisingbull Coke was first advertised
as a remedy for headaches and exhaustion
bull Coke has been advertising on television for 50 years
bull Songs used in coca cola commercials have become popular
bull They use catchy mottos such asldquoAdds a refreshing relish to every form of exerciserdquo
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Our mission vision and values outline who we are what we seek to achieve and how we want to achieve it They provide a clear direction for our Company and help ensure that we are all working toward the same goals
Everything we do is inspired by our enduring Mission ndash To Refresh the Worldin body mind and spirit ndash To Inspire Moments of Optimismthrough our
brands and our actions ndash To Create Value and Make a Difference
everywhere we engage
Mission
Vision
bull To achieve sustainable growth we have established a Vision with clear goals ndash People Being a great place to work where people
are inspired to be the best they can be ndash Planet Being a responsible global citizen that
makes a difference ndash Portfolio Bringing to the world a portfolio of
beverage brands that anticipate and satisfy peoples desires and needs
ndash Partners Nurturing a winning network of partners and building mutual loyalty
ndash Profit Maximizing return to shareowners while being mindful of our overall responsibilities
Values
bull We are guided by shared Values that we will live by as a company and as individuals ndash Leadership ldquoThe courage to shape a better
futurerdquo ndash Passion ldquoCommitted in heart and mindrdquo ndash Integrity ldquoBe realrdquo ndash Accountability ldquoIf it is to be its up to merdquo ndash Collaboration ldquoLeverage collective geniusrdquo ndash Innovation ldquoSeek imagine create delightrdquo ndash Quality ldquoWhat we do we do wellrdquo
Coca-Cola Statistics
bull Coca cola owns more than frac12 of the worldrsquos beverages
bull Coke is affordable in all the countries we surveyed It was not out of the price range for an afternoon snack
bull Coke comes in a variety of sizes worldwide so you can use it for a crowd or as a personal snack drink
Advertisingbull Coke was first advertised
as a remedy for headaches and exhaustion
bull Coke has been advertising on television for 50 years
bull Songs used in coca cola commercials have become popular
bull They use catchy mottos such asldquoAdds a refreshing relish to every form of exerciserdquo
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Vision
bull To achieve sustainable growth we have established a Vision with clear goals ndash People Being a great place to work where people
are inspired to be the best they can be ndash Planet Being a responsible global citizen that
makes a difference ndash Portfolio Bringing to the world a portfolio of
beverage brands that anticipate and satisfy peoples desires and needs
ndash Partners Nurturing a winning network of partners and building mutual loyalty
ndash Profit Maximizing return to shareowners while being mindful of our overall responsibilities
Values
bull We are guided by shared Values that we will live by as a company and as individuals ndash Leadership ldquoThe courage to shape a better
futurerdquo ndash Passion ldquoCommitted in heart and mindrdquo ndash Integrity ldquoBe realrdquo ndash Accountability ldquoIf it is to be its up to merdquo ndash Collaboration ldquoLeverage collective geniusrdquo ndash Innovation ldquoSeek imagine create delightrdquo ndash Quality ldquoWhat we do we do wellrdquo
Coca-Cola Statistics
bull Coca cola owns more than frac12 of the worldrsquos beverages
bull Coke is affordable in all the countries we surveyed It was not out of the price range for an afternoon snack
bull Coke comes in a variety of sizes worldwide so you can use it for a crowd or as a personal snack drink
Advertisingbull Coke was first advertised
as a remedy for headaches and exhaustion
bull Coke has been advertising on television for 50 years
bull Songs used in coca cola commercials have become popular
bull They use catchy mottos such asldquoAdds a refreshing relish to every form of exerciserdquo
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Values
bull We are guided by shared Values that we will live by as a company and as individuals ndash Leadership ldquoThe courage to shape a better
futurerdquo ndash Passion ldquoCommitted in heart and mindrdquo ndash Integrity ldquoBe realrdquo ndash Accountability ldquoIf it is to be its up to merdquo ndash Collaboration ldquoLeverage collective geniusrdquo ndash Innovation ldquoSeek imagine create delightrdquo ndash Quality ldquoWhat we do we do wellrdquo
Coca-Cola Statistics
bull Coca cola owns more than frac12 of the worldrsquos beverages
bull Coke is affordable in all the countries we surveyed It was not out of the price range for an afternoon snack
bull Coke comes in a variety of sizes worldwide so you can use it for a crowd or as a personal snack drink
Advertisingbull Coke was first advertised
as a remedy for headaches and exhaustion
bull Coke has been advertising on television for 50 years
bull Songs used in coca cola commercials have become popular
bull They use catchy mottos such asldquoAdds a refreshing relish to every form of exerciserdquo
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Coca-Cola Statistics
bull Coca cola owns more than frac12 of the worldrsquos beverages
bull Coke is affordable in all the countries we surveyed It was not out of the price range for an afternoon snack
bull Coke comes in a variety of sizes worldwide so you can use it for a crowd or as a personal snack drink
Advertisingbull Coke was first advertised
as a remedy for headaches and exhaustion
bull Coke has been advertising on television for 50 years
bull Songs used in coca cola commercials have become popular
bull They use catchy mottos such asldquoAdds a refreshing relish to every form of exerciserdquo
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Advertisingbull Coke was first advertised
as a remedy for headaches and exhaustion
bull Coke has been advertising on television for 50 years
bull Songs used in coca cola commercials have become popular
bull They use catchy mottos such asldquoAdds a refreshing relish to every form of exerciserdquo
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
The Other Side of Cokebull There are 27
different varieties of coke made by Coca-Cola
bull First bottle of Coke was sold 120 years ago on May 8 1886 in Atlanta Georgia
bull Some of the other brands under the Coca-Cola Company arendash Spritendash Barqrsquos Root beerndash Dasanindash Dr Pepperndash Frescandash Hi-Cndash Minute Maid
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Marketing WorldwideMarketing Worldwide
bull In 1998 Coke international created its first ad for the celebration of the Muslim holiday of Ramadan It was run in 20 countries worldwide
bull Coke is a Kosher drink so it is sold internationally
This coke can is written in Hebrew
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Coca-Cola Recognition
bull Coca-Cola is recognized by 94 of the worldrsquos population
bull Approximately 10450 Coca-Cola brand drinks are consumed around the world each second of every day
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
International Coca-Cola
bull In Hong-Kong heated Coke is served as a cold remedy
bull Coke advertises 200 in countries around the world
bull In Japan people use money chips on their cell phones to pay for drinks
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
In the Old Days
bull Coca-Cola sold only 25 bottles in the first year
bull Nowadays they sell over one billion bottles per day
bull A single share in Coke that was bought in 1919 would be worth $92500 in 1997
bull 1919 is when the Coca-Cola went public
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
INTRODUCTION
The company is the largest manufacturer distributor and marketer of nonalcoholic beverage concentrates and syrups in the world
Finished beverage products bearing its trademarks sold in the United States since1886 are now sold nearly 400 brands in more than 200 countries and include the leading soft drink products in most of these countries
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
BUSINESS OBJECTIVES
bull Coca-Cola Company articulates its missions as a promise Our Company exists to benefit and refresh everyone it touches
bull The project generalizes companyrsquos basic objectives as six items and how they can be achieved are as follows
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
CONTDhellip
bull Accelerate carbonated soft-drink growth led by Coca-Cola
bull Selectively broaden companyrsquos family of beverage brands to drive profitable growth
bull Grow system profitability and capability together with the bottling partners
bull Serve customers with creativity and consistency to generate growth across all channels
bull Direct investments to highest-potential areas across markets
bull Drive efficiency and cost effectiveness everywhere
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
From Vegees to a Chilling glass of Coca Cola
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Valuation Ratios
Company Industry Sector SampP 500
PE Ratio (TTM) 2209 2069 1996 1952
PE High - Last 5 Yrs 2879 2795 2843 3404
PE Low - Last 5 Yrs 1859 1820 1748 1418
Beta 068 062 060 100
Price to Sales (TTM) 453 352 242 265
Price to Book (MRQ) 592 589 589 393
Price to Tangible Book (MRQ) 1311 1231 1600 817
Price to Cash Flow (TTM) 1833 1650 1567 1431
Price to Free Cash Flow (TTM)
4168 5250 3985 2850
Owned Institutions 6661 5960 5589
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Dividends
Company Industry Sector SampP 500
Dividend Yield 257 234 298 241
Dividend Yield - 5 Year Avg -- 193 222 179
Dividend 5 Year Growth Rate 1120 1651 1182 1438
Payout Ratio (TTM) 5210 4507 4032 2680
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Growth Rates
Company
Industry
Sector
SampP 500
Sales (MRQ) vs Qtr 1 Yr Ago
2091 1730 1492 1344
Sales (TTM) vs TTM 1 Yr Ago
2070 1733 1284 1506
Sales - 5 Yr Growth Rate 808 910 839 1560
EPS (MRQ) vs Qtr 1 Yr Ago
1734 1107 1269 1108
EPS (TTM) vs TTM 1 Yr Ago
1893 1142 1433 1004
EPS - 5 Yr Growth Rate 989 1317 981 2356
Capital Spending - 5 Yr Growth Rate
1413 1258 997 1343
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Financial Strength
Compan
yIndustry Sector
SampP 500
Quick Ratio (MRQ) 080 074 056 112
Current Ratio (MRQ) 096 111 121 163
LT Debt to Equity (MRQ)
014 030 068 060
Total Debt to Equity (MRQ)
046 053 090 078
Interest Coverage (TTM)
NM 2156 1329 1452
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Profitability Ratios
CompanyIndustr
ySector
SampP 500
Gross Margin (TTM) 6388 5783 4630 4466
Gross Margin - 5 Yr Avg 6442 5872 4452 4402
EBITD Margin (TTM) 2896 2318 1998 2336
EBITD - 5 Yr Avg 2979 2366 1949 2256
Operating Margin (TTM) 2489 2068 1728 1860
Operating Margin - 5 Yr Avg
2576 2104 1680 1926
Pre-Tax Margin (TTM) 2685 2187 1522 1675
Pre-Tax Margin - 5 Yr Avg 2769 2225 1628 1842
Net Profit Margin (TTM) 2064 1653 1199 1240
Net Profit Margin - 5 Yr Avg
2118 1671 1150 1282
Effective Tax Rate (TTM) 2315 2446 2902 2945
Effective Tax Rate - 5 Yr Avg
2353 2552 2993 3066
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Management Effectiveness
Company
Industry
Sector
SampP 500
Return On Assets (TTM) 1552 1525 949 851
Return On Assets - 5 Yr Avg 1653 1537 1210 802
Return On Investment (TTM) 2334 2164 1351 1213
Return On Investment - 5 Yr Avg
2416 2154 1711 1165
Return On Equity (TTM) 3091 3136 2586 2038
Return On Equity - 5 Yr Avg 3138 3095 2960 1946
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Efficiency
Company Industry Sector SampP 500
RevenueEmployee (TTM) 332961 316003 500203 980385
Net IncomeEmployee (TTM)
68718 51935 51196 119421
Receivable Turnover (TTM) 959 919 1185 1033
Inventory Turnover (TTM) 500 680 630 1244
Asset Turnover (TTM) 075 097 089 096
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Technological Environment1048707 Innovations in computerized technology could affect the bottling
process which involves specialized high-speed lines1048707 Hot-fill reverse-osmosis or other specialized equipment is
necessary to bottle the noncarbonated beverages that have higher profit
margins than the carbonated soft drinks (CSD)
Social Environment1048707 Consumer trends shifting away from original product lines for
health reasonsndash from diet soda to lemon-line to tea-based drinks to
other popular non-carbonated beverages1048707 An increasing trend in teen consumption of CSDs1048707 Metal and Plastic containers commonly used by bottlers are
recyclable are viewed as environmentally friendly1048707 Cultural differences across international markets are challenging
when it comes to daily operations and marketing cola industry products
Industry Dynamic
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Industrial Outlookbull Leading national amp global soft drink manufacturers were challenged
by small no-frill no-advertising brands in marketbull Being a developing economies informal business were easier to start
amp growbull Global brands loosing market share to so called B brands across
many product categoriesbull Leading brands in Brazil are threatened due to the rapid proliferation
of the Private brandsbull Major problem for established brands in Brazil was the unfair
competition from companies that had no legal existnce amp from those who were registered but did not pay taxes
bull 90 of 750 regional brands of soft drink do not pay the taxbull This is the reason why tubainas can compete on the basis of pricebull Taxes amounted to 40 of the Soft Drinks sale pricebull Use of promotional tools also seemed to impact the share of
traditional brandsbull To fight price competition leading brands increased their trade
promotional activities
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Competitors
- Pepsi- AMBEV- Tubainas- RC cola
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Demographic Environment1048707 Explosive population growth in foreign countries intoexplosive
growth potential for those markets1048707 Aging baby boomer population in United States may lead to a
decrease in cola product demand
Political and Legal Environment1048707 Soft Drink Interbrand Competition Act of 1980 secured the right of Concentrate Producers (CPs) to grant exclusive territories to
bottlers1048707 Anti-trust legal suit against Coca-Cola by Pepsi over fountain drink monopolization in the domestic market was dismissed in 20001048707 Pressure from the scientific community for the FDA to research the
affects of caffeine consumption and to enforce caffeine labels warning of
the dangers of caffeine consumption1048707 Obstacles in international operations included political instability regulations price controls advertising restrictions foreign
exchange controls and lack of infrastructure
Industry Dynamic
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Industry Dynamic
Industry Dominant FeatureGrowth rateThere is a huge potential for the Baverage industry with a forecast of7 annual growth rateMarket SizeExperts expect that the volume to cross 12 billion litres and per
capitaconsumption to increase to 112 litresScope of CompetitionThe competition is not limited to domestic region and is extenden to
globalmarketNumber of RivalsMore than 3500 brands and 700 manufacturesBuyer Needs and RequirementsDifferent taste preferences low priced and high perceived value
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
S FORCES COMMENTS
1 Increase in Globalization As industry is moving to internationally so competition is not limited and industry is on his maturity stage
2 Changes in cost amp efficiency
The industry is its maturity stage and competition is getting tuff therefore pricing is the main essence so in order to compete in this environment cost amp efficiency is very much important
3 Quality control and Technological enhancement
Through out the industry key player and other known manufacture are investing in technology and process improvement
4 Lack of regulatory influence and weak government policies
Unofficial side of the brazilin economy was quiet high
5 Changing societal concerns attitudes and life style
Increasing health consciousness among consumers Brazilian economic stabilization restore the purchasing power of the low income segment of the population
Drivers of Change in Industry
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Core Competencies
- Company more then 100 year old
- Largest commercial fleet
- Strong distribution network
- Among the few companies with proper legal status
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Coca Cola FactsComprises of -Coca Cola Industries Ltda
- Recofarma Industries do Amazonas Ltda- 39 bottling plants operated by 16 independently managed companies
Head Count 25000 (Direct) amp 250000 (Indirect)
Commercial Fleet
9000 Vehicles
Market Share 50 of soft drink market
Per Capita Cons
342 Ltrs
Product Lines Bottled Water Iced Tea Juices Energy Drinks
Market Share Coca Cola Regular amp Diet
356 market share
Combined Sales
500 market share
Competitor AmBev Soft Drink 170 market share
Others Soft Drink 330 market share
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Brazilian Soft Drink MarketEconomy - Top ten largest economies
Issues1- Majority population resided in urban Areas2- Several millions lived in small communities spread through out the country3- Due to cost amp accessibility related issues few consumer products reached these areas4- Super markets being primary distribution channels foe Soda account for only 25 amp still untapped market account for 75 5- Soft drinking vending machines are not widely available6- Soft Drink market could be easily developed by simply improving amp expanding distribution
Population - 180 million
Packing - Glass Bottles PET amp Aluminiun
Capacity - 200ml to 25ml
No of Brands - More than 3500 brands
No of Plants - More than 700
Market Consumption
1986 49 Billion Liters
1994 64 Billion Liters
2002 116 Billion Liters
Forecast 2004 120 Billion Liters
Per Capita Consumption
1986 828 Liters
1994 953 Liters
2002 1049 Liters
Ranking (Flavour) Cola 418
Guarana
239
Orange 114
ForumThe Brazilian Association of Soft Drink amp Non-Alcoholic Beverages Manufacturers
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
AMBEV ndash A MAJOR COMPETITOR Formed in 1999
Issues1- Formed as a merger between Brahma amp Antartica two leading beer amp soft drink companies2- Realized the threats amp opportunities posed by globalization amp join forces3- With merger became the 2nd Largest in soft drink market 5th largest beer manufacturer 7th Largest beverage company 70 of the Brazilian beer market4- Developed impressive market in Argentina Bolivia Paraguay amp Uruguay5- In 2004 a grand alliance between 6 companies amp a new company InterbrewAmBex emerged6- Became largest brewery company in the world7- Began production amp distribution in Europe also
No of Facilities 49
Head Count 18000
Merger BetweenInterbrew Beckrsquos Stella Artois Labat
amp other brands sold in 140 countries
Competitive Advantage
Superior Distribution Structure
Product LinesBears Soft drinks Bottled Water Iced tea Isotonic Beverages
Popular Brands Brahma Antarctica Skol Bohemia
Product Reach 1000000 points
Located in 6000 municipalities
New Co Sales US$ 119 Billion
Sold Beer 195 Million Hectoliters
Soda 25 Million hectoliters
Famous Brand Guarana Antartctica
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
TUBAINAS ndash A MAJOR COMPETITOR
Formed in 1940 since more than 70 years
Issues1- In 1950rsquos Tubainas was allowed to be used as suffix with an aim to promote brand name2- Tubainas become general term for low- profile soft drink3- Different categories of manufacturers exist from those who do not have a legal business or pay taxes to quite structured companies with regional coverage considerable revenues amp sizeable market share4- Market ignored their existence till 19905- By 2004 some manufacturers owned modern plants amp latest bottling technology6- In the past mostly sold through small point of sales is now available in leading super markets 7- Historically using cheap prices to attract customers now manufacturers are investing in quality control product development packaging advertising amp marketing8- Some brands have gained customer trust amp loyalty
No of Facilities
More than 700 manufacturers of Tubainas
Market Share
32 of soft drinks market
Competitive Advantage
- Sold at price significantly lower than nationally marketed soft drink- Sold in various flavors
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Successful Tubainas Manufacturer
Refrigerantes XeretaDistribuidora
Guararapes de Bedibas
Bebidas Dom
- Present in the market for more than 30 years- To avoid competition introduced soft drink XERETA in aluminium cans- Xereta became 3rd best selling brand competing with Coca Cola amp Guarana Antarctica- 30 of canned Xereta is exported - Even available in US Lebanon amp China
- Leading distributor of beer- Develops new line of soft drink lsquoFREVOrsquo- Low priced than traditional competitors- Available in four flavors- After 2 years gained 25 share in Recife Brazils largest metropolitan area- Production increases from 11 million liter to 214 million liters- Distributed in 7 of the 9 states
- 40 years old operations in Sao Paulo- Achieved impressive market share mostly through word of muth
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Pepsi Cola amp AmBevs Partnership Available in Brazil For over 50 Years
Issues1- 1997 signed a franchise contract with Brahma to produce amp distribute2- Baesa handled 80 Pepsi volume before bought by Brahma3- Despite significant marketing investment by Pepsi the brand failed to appeal to younger upper class consumer5- Pepsi distribution was also rather limited amp concentrated 6- Failed to compete cheaper brands 7- By 2004 AmBev was the largest bottler amp distributor of Pepsi in Brazil6- Pepsi started gaining access to new points where Ambev had a strong position7- Pepsi helped Ambev to distribute its Guarana Antarctice in overseas market8- Launched lsquoMountain Dewrsquo targeting young Brazilians9- Most of the growth attributed to launch of new Pepsi Twist10- Launched in differentiated bottle taller amp easier to handle
No of Facilities None
Head Count NA
Market standing Fourth Best selling Brand
Market Share 6 of soft drinks market
Competitive Advantage
Differentiation strategy wide
market distribution
Product Lines Cola light drinks
Popular Brands Pepsi Cola Pepsi Light Teem
Diet Team Seven Up
diet Seven Up Mountain Dew
Product Reach 60000 points
Located in 600000 outlets
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
B Brands in Brazil
1- Attacked established brands in the territories they had ruled for ages2- Having lean operations allowed them to offer products at half of the proces3- Brand leaders in 57 product categories lost 63 market share4- Holds 17 of super market sales
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Coca Cola fights Back
1- Markets share declined to 48 from 50 it took several action2- It froze its product prices3- Cuts its prices from R$ 180 to R$ 1254- Promoted changes in distribution channel by bying back its franchise operations5- These actions brought back its share to 506- Expanded its number of brands to confront hard hitting competition 7- Expanded the output of soft drink lsquoGuarana Kuatrsquo to take over huge segment of Guarana Market8- Renovated production facilities amp planted 200 hectare of guarana9- The above secured 11 of the guarana market
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
10- Expanded Fantarsquos mix11- Incorporated new flavors such as citrus amp strawberry12- Took over a few competitor in order to stop tubainas growth13- Buying competitor brands could not prevent former owners from reentering markets or new competitors from emerging14- Coca Cola own bottler distributed a Tubaina called lsquoJESUSrsquo a sweat shocking pink beverage holding 20 of regional market15- Lastly Coca Cola attempted to build closer ties with consumer to improve image amp goodwill16- Increasingly sponsored amp participated in local regional amp national events amp celebrations
Coca Cola fights Back
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
The Unfair Competition Controversy
1- Coca Cola deeply harmed by tubainas unfair competition2- Price advantage taken through tax evasion practices3- Disappointed attitude of Brazilian authorities4- A two liter bottle of tubainas sold for 50C Vs 150C of Coke5- Coca Cola lobbied to persuade federal law makers amp tax agencies to exert more rigid control6- Local competition accused the Giant of economic abuse amp unfair business practices threatening smaller competitors bribing public authorities amp coerced retailers to restrain them from selling tubainas7- Coca Cola fight back amp won many court judgments
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Strategic Factors WeightCoca-Cola AMBEV TUBAINAS
Rate Wt Rate Wt Rate Wt
Technology
01
01
4
4
04
04
3
3
03
03
2
2
02
02
- Ability to improve production
- Expertise in technology
Manufacturing
01
02
01
4
4
4
04
08
04
2
4
4
02
08
04
3
4
4
03
08
04
- Economies of Scale
- Learning Curve
- Ability to manufacture according to customer specification
Distribution
01
01
3
3
03
03
4
3
04
03
3
2
03
02
- Strong network of wholesale distributordealer- Ability to secure favourable display space on retailer shelves
Marketing
01
01
3
4
03
04
4
3
04
03
3
2
03
02
- Breadth of product line and product selection
- Brand Name
Total 10 37 34 29
Competitors Profile Matrix
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
20
17
15
13
10
9
7
5
3
1
20 10x 05
BC
G M
atri
x C
oca-
Col
a
Stars Problem Child
Cash
Cows
Dog
Energy
Drinks
Fruit Based Drink
sBottled
Water
Soft
DrinksTeas
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Coca-Cola Company at this stage matches in the Cash Cows as its huge annual cash flow and its the highest market share compared to its competitors
Second it has a high growth rate due to its variety of other brands and its mass advertising
Third as its large scale of profits it invests heavy money to advertise and to keep their product on the No1 position
BCG matrix recommends investing profits to produce new products and sell them in the market
Cash Cows
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
FactorsStatus(LowHigh)
HUFA MUFANeutra
lMFA HFA
Comments1 2 3 4 5
Composition of Competitors Unequal X
More than 3500 Brands amp 700 plants
Market Growth Rate High X Industry Growth rate is unstable
Scope of CompetitionDomesti
cX Large number of
competitors
Capacity Increases large XConsumption per capita is on a constant rise
Degree of Differentiation
Commodity X Almost Similar
features
Strategic Stake High xKey players have been In the market
2 2 3 4 5
Competitive Rivalry
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments
1 2 3 4 5
Economies of Scale Low x Market easily
accessible
Capital Required Low x Low initial
investments
Access to Distribution Channel
Ample x Distribution channel
Expected Retaliation Low x
Growing number of manufacturers
Differentiation Low x Almost similar feature
Brand Loyalty Low x Least important
3 4 3
Threat of New Entrants
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Factors Status(LowHigh)
HUFA MUFANeutr
al
MFA HFA
Comments1 2 3 4 5
Number of ImportantSupplier Many x Many supplier
available
Switching Cost Low x Easy to switch
Availability of Substitutes Many x
Number of supplier in the market
Importance of Buyer Industry to Supplier Low x Buys high
proportion
Suppliers Product an important input to buyerrsquos business
Less imp
x As many supplier available
8 15
Power of Supplier
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Specialized Assets Low X Simple mfg process
Fixed Cost Exit Low XInexpensive machinery involved
Strategic Interrelationship Low x
There is no strategic relationship with the supplier as many are available
Government Barriers Low XUnofficial side of the economy was quiet large
3 2
Exit Barriers
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
FactorsStatu
s(LowHigh)
HUFAMUF
A
Neutral
MFA
HFA
Comments1 2 3 4 5
Threat of Obsolescence of
Industry product Low X Not possible in
Carbonated drinks
Aggressiveness of Substitute Product inPromotion
Low X
No major substitutes are available in the market
Switching Cost Low X Easily move to another product
Perceived Price Value Low XThe brand image of soft drinks is high
1 6 4
Substitutes
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
ANALYSIS BASED ON PORTERrsquoS MODEL
Unfavorable Neutral Favorable
Exit Barriers 125
Rivalry among existing firms
267
Entry Barriers 167
Power of Supplier 46
Threat of Substitute 275
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Strategic Groups
PRICE
AMBEV
Tubainas
Coca Cola
Geographical Coverage
Low
High
High
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
OpportunitiesSoft drink market on a continuous growth trendBrazil among the Top ten economies of the worldAvailability of Sophisticated technology enabling the company to
servelarge geographic marketsStill 60 of the market is untapped Declining growth rate of TubainasMajority of the competitors have weak legals status or are into tax
evasion practices implementation of good corporate governance can be a
major threat to such competitors
ThreatsIncreasing awareness of health consciousnesAllegation on big brands for unfair competition practices
Entry barrier are low Local brand entering global market
Mergers amp acquisition in the local soft drink industryRapid proliferation of private brands
EFE Matrix
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
EFE Matrix
Key External Factors Weight Rating Weighted Score
Opportunities
Soft drink market on a continuous growth trend 010 3 030
Brazil among the Top ten economies of the world 005 3 015
Availability of Sophisticated technology enabling the company to serve large geographic markets
010 4 040
Still 60 of the market is untapped 010 3 030
Declining growth rate of Tubainas 010 2 020
Majority of the competitors have weak legals status or are into tax evasion practices implementation of good corporate governance can be a major threat to such competitors
010 4 040
Threats
Increasing awareness of health consciousness 010 2 020
Allegation on big brands for unfair competition practices 005 3 015
Entry barrier are low 010 3 030
Local brand entering global market 005 2 010
Mergers amp acquisition in the local soft drink industry 010 3 030
Rapid proliferation of private brands 005 2 010
Total (Analysis shows that company aware and is taking action )
100 290
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Strengths
Extremely recognizable brand is one of greatest strengths Worldwide network of bottlers and distributors of Company products Sophisticated marketing capabilitiesGlobal presenceWide distribution network amp largest commercial fleetProduct mix catering five market segmentsLeader in soft drink category Legal corporate establishment
WeaknessesLack of branding among class C Brazilian consumersNot focusing in beer manufacturingHighly priced amp lower margins as compared to competitorsIntroduced marketing strategies not earning targeted results Vending machines were not widely availableBottlers entering into manufacturing of their own brands
IFE Matrix
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
IFE Matrix
Key Internal Factors Weight RatingWeighte
dScore
Strengths
Extremely recognizable brand is one of greatest strengths 0100 4 0400
Worldwide network of bottlers and distributors of Company products
0100 4 0400
Sophisticated marketing capabilities 0075 3 0300
Global presence 0075 3 0225
Wide distribution network amp largest commercial fleet 0050 3 0150
Product mix catering five market segments 0010 3 0300
Leader in soft drink category 0100 4 0400
Legal corporate establishment 0100 3 0300
Weaknesses
Lack of branding among class C Brazilian consumers 0100 1 0100
Not focusing in beer manufacturing 0040 2 0150
Highly priced amp lower margins as compared to competitors 0075 1 0075
Introduced marketing strategies not earning targeted results 0075 1 0100
Vending machines were not widely available 0050 2 0100
Bottlers entering into manufacturing of their own brands 0050 2 0150
TOTAL ( Analysis shows company is strong ) 1000 315
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
TOWS Matrix
Strengths Weaknesses
Extremely recognizable brand is one of greatest
strengths
Worldwide network of bottlers and distributors of
Company products
Sophisticated marketing capabilities
Global presence
Wide distribution network amp largest commercial
fleet
Product mix catering five market segments
Leader in soft drink category
Legal corporate establishment
Lack of branding among class C Brazilian
Consumers
Not focusing in beer manufacturing
Highly priced amp lower margins as
compared to competitors
Introduced marketing strategies not earning
targeted results
Vending machines were not widely available
Bottlers entering into manufacturing of their own
brands
Opportunities S-O Strategies W-O Strategies
- Soft drink market on a continuous growth trend- Brazil among the Top ten economies of the
world
- Availability of Sophisticated technology
enabling the company to Serve large geographic
markets
- Still 60 of the market is untapped
- Declining growth rate of Tubainas
- Majority of the competitors have weak legal
status or are into tax evasion practices
implementation of good corporate
governance can be a major threat to such
competitors
- Make strategic alliance to capture untapped market
- Enhancement in product mix
- Allocate more funds for advertisement campaigns
-Uuse appropriate forum for the strict implementation of laws pertaining to corporate governance
- Create awareness through aggressive marketing campgin to highlight brad trade
-Start beer manufacturing
-Focus on maximum capacity utilization By reducing pricing and reaching economies of scale
-Make strategy according to consumer preferences
Threats S-T Strategies W-T Strategies
- Increasing awareness of health consciousness
- Allegation on big brands for unfair
- Competition practices
- Entry barrier are low
- Local brand entering global market- Mergers amp acquisition in the local soft drink
industry
- Rapid proliferation of private brands
-Introduced more products to cater the needs of health conscious consumers
- Be more transparent in marketing strategies adopted and create positive image of a fair market player
- Emphasis more on quality aspects of its products and run campaigns and bring awareness among consumers
-Introduce wide range of product line to cater more than one classes of society
-Restrict local brand by creating stiff competition within the industry
-Consider the option of further acquisition to minimize rivalry for itself
-Make conclusive contracts with bottler restricting them to launch their own product
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
SPACE Matrix (Y axis)
Financial Strength (FS)
Return on Investment = + 6
Leverage = + 5
Liquidity = + 5
Working capital = + 5
Cash Flow = + 4
Ease of exit = + 1
Risk Involved = + 2
Total Score = + 28
Average Score = 287 = 400
Environmental Stability ( ES)
Technological change = - 4
Rate of Inflation= - 3
Demand variability = - 3
Range of competitive products = - 2
Barriers to entry = - 6
Competitive pressure = - 2
Price elasticity of demand = - 2
Total score = - 22
Average Score = -227 = - 314
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
SPACE Matrix Calculation X axis
Industry Strength ( IS)
Growth Potential= + 5
Profit Potential = + 3
Technological Know how= + 3
Resource utilization = + 4
Capital Requirement = + 4
Ease of Entry = + 2
Productivity capacity
utilization = + 4
Total Score = +25
Average IS Score = 257 = + 357
Competitive Advantage (CA)
Market Share = - 2
Product Quality = - 2
Product life cycle = - 4
Customer Loyalty = - 3
Competitionrsquos capacity utilization = - 3
Technological Know how = - 2
Control over suppliers and
Distributors = - 2
Total Score = 18
Average CA Score = -187 = -257
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
SPACE Matrix
FSConservative Aggressive
CA IS
Defensive Competitive
ES
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Returnable Bottles - a wrong move
1- Coca Cola to confront Tubainas reintroduced in returnable glass bottles2- Sales of soft drinks went up by 103- Priced closer to Tubainas amp appealed to class C amp D consumers4- The distribution was extended to nearly 7000 points of sale5- This move elicited mixed reaction from consumer large retailors were not so sure as it posed a major problem6- Strategist shared their concerns that cost associated with transporting cleaning amp storing bottles could nul any apparent savings7- The real objective was to increase Coca Colarsquos profitability in Brazil8- By the end of 2003 returnable bottled accounted for less than 10 amp there were no signs of growth in market share
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Future outlook
1- Coca Cola showed encouraging signs2- Partnership with lsquoNORSArsquo resulted in regaining control of distribution in several north eastern states having 28 of the population3- Coca Cola market share reached 445 in 2003 (422002) which led the operational profit to grow by 404- Taubainarsquos share dropped from 428 to 3885- Coca Cola should offer all possible taste amp price levels6- The consumer benefited most in terms of price amp variety
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
Emerging Competition
1- Market became more competitive with the entry of RC Cola2- Bebidas signed franchise agreement to produce amp distribute RC cola for 20 years4- In blind test between RC PEPSI amp Coke consumers preferdn RC 5- One of the strategies to be adopted by RC was to oofer sampling in super markets6- Counting on RC tastes amp technical expertise RC Cola is expected to gain 5 of Brazilian market in next three years7- The product was being produced amp distributed in five north eastern cities amp in various type of containers8- The brand is also launched at 10-15 lower than Coke
THANK YOU
THANK YOU
