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Executive Summary

The purpose of this report is to critically analyze the Coca-Cola company, particularly in light of the recent decline in the soft drink industry.

Coca-cola has long enjoyed success by being a leader in the global industry. The purpose of its products and the company’s marketing approaches have evolved significantly over the decades, keeping in line with demand. Specifically, the Coca-cola company has placed a strong emphasis on diversity, which has bolstered its international image. Unfortunately, that image has been impacted negatively by its environmentally irresponsible practices.

In a precarious time for the industry, it is crucial for the Coca-cola company to strive for excellence and continue to meet the evolving needs of their client base, which can be done by following these recommendations:

Shift their production focus from sugar-filled soft drinks to healthier alternatives.
Be aware of and responsive to the demands of consumers and suppliers, particularly in terms of promoting cultural sensitivity and green practices.
Embrace transparent approaches that are environmentally and socially responsible.

1 Introduction: Soft drinks

Soft drink companies are feeling the pressure to evolve and grow with market demands. According to McGregor (2017), the bubble has burst on Australian soft drink manufacturing. Since consumers are becoming more health conscious, demand has shifted away from carbonated soft drinks and toward bottled water. Supermarkets and grocery stores are major channels for soft drink manufacturers. When consumers become more health conscious, these outlets react to the lessened demand and decrease their stock (see Figure 1). They also start producing their own products to better meet their customers’ needs.

Figure 1: Demand and health consciousness (McGregor, 2017)

McGregor (2017) reports that growth has been and will continue to be slow in the industry, predicting 1.0% annual growth over the next five years, bolstered only by the growing popularity of energy and sport drinks. This may impact production and profitability of the two major players in Australian soft drink production, Asahi Holdings (25.5% market share) and Coca-Cola Amatil Limited (53.7% market share) (McGregor, 2017). This report examines the Coca-Cola company in depth.

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2 Coca-Cola

Coca-Cola is more than a company; it is a global success story. Coca-Cola commands over half of the world’s soft drinks market at 51% and is often referred to as the best known brand (Vernon, 2005, p. 273). According to Felony (2016, p.23), people in over 200 countries consume 1.9 billion servings of Coca-Cola beverages every day.

The Coca-Cola company, or officially Coca-Cola Amatil Limited in Australia, is the country’s biggest soft drink manufacturer. They produce mostly non-alcoholic beverages (see Figure 2), such as Coca-Cola, Fanta, Sprite, Mother, Deep Springs, Vitamin water and other beverages (McGregor, 2017). The Australian headquarters, run out of North Sydney, has distribution rights across Australia, New Zealand, Fiji, Papua New Guinea and Samoa (McGregor, 2017). Recently, the company has rolled out several initiatives to bolster profits, such as a major overall to production processes, called Project Zero, which cut $100 million over three years (McGregor, 2017). There are a number of factors that have affected the relative popularity of the company and three are examined below: how Coca-Cola became an international company; its successful approaches to cultural understanding and marketing; and its sometimes questionable environmental practices.

2.1 American values to international presence

The company came from an unlikely beginning. In 1886, founder Dr. John Styth Pemberton, invented and marketed it as a headache cure, touted on the bottle as “not only a delicious and invigorating beverage, but a valuable Brain Tonic and cure for all nervous afflictions” (Vernon, 2005, p. 273). With each change of hands, the company stabilized financially, improved its marketing techniques and solidified its values. Allen (2015, p. 35) notes that, by World War II, Coca-Cola had made its familiar red logo synonymous with American values, so its worldwide expansion excited or angered people in many countries. The company, its products and brand are now ubiquitous and hold an international presence.

2.2 Cultural understanding

The value that Coca-Cola has placed on diversity is one key indicator of its success. Felony (2016, p.23) reports that Coca-Cola’s cultural understanding is better developed than many multinational companies because diversity is an integral part of “who they are, how they operate and how they see the future”. Coca-Cola has been able to transcend its ‘American-ness’ because they have allotted specific localised values, preferences and associations in each of the 200 countries where their products are sold (De Mooij, 2014). The company also uses cross-cultural approaches to connect its separate client bases, such as the 2014 airing of an ad in which actors sung ‘America the beautiful’ in seven different languages (On Marketing, 2014). Also, their marketing practices are current and aggressive, evident in the inclusion of non-traditional family models in their advertising. A philosophy focused on diversity has served the company well and will continue to keep them current and in touch with their target consumers.

2.3 Corporate social responsibility

Corporate social responsibility (CSR) is important because it makes public interest, not just private gains, a priority for companies. CSR can be thought of as when companies “decide voluntarily to contribute to a better society and a cleaner environment” (European Commission, 2001), although this is sometimes profitable and other times unprofitable. It is worth noting regulations, practices and CSR often vary for international companies between the countries where they are located. Coca-Cola India’s (2017) website claims that they place high value supporting community programs, focusing on sustainability, health and water stewardship. That final focus is important because, according to the United Nations Environmental Program, the world is facing a water crisis where 15% of the world’s population does not have drinking water and 30% does not have access to safe sanitation. Karnani (2014) questions Coca-Cola’s CSR practices since they established a major water-intensive plant in the water-stressed area of Kaladera. In 2006, the company agreed to an independent assessment by The Energy and Resources Institute (TERI), who recommended they either transport water in or relocate the plant (TERI, 2008). Unfortunately, the company did not follow either recommendation. The company’s actions were not in line with their CSR claims. It is possible that the company’s emphasis on water stewardship could be ‘greenwashing’, making them appear more environmentally friendly than they actually are.

3 Conclusion & Recommendation

This report has examined the Coca-Cola company, an internationally successful company, and where it sits within the wider soft drink industry. Although it is a giant within the industry, sales growth is considerably slow. The expansion of the company, from American to international, was outlined. Several examples were given to illustrate how that expansion was reflected in intercultural marketing and a strong value allotted to diversity. Finally, CSR practices were called into question in one of those many locals that the company has expanded to.

In the current market, where industry growth is so slow, it is paramount that a company like Coca-Cola highlight its strong points and try to correct its weak points. It could do that by following these recommendations:

Shift their focus from soft drinks to sport drinks, energy drinks, and purified water, where there is a high demand.
Offer alternatives that are sweetened with natural sweeteners, such as honey, maple syrup or stevia, rather than sugar or aspartame.
Work more closely with super market chains to produce what customers are after in terms of product and packaging. This may include a greener bulk fill area for reusable containers.
Continue to be progressive in marketing campaigns, staying culturally sensitive whilst representing ‘non-traditional’ families and peoples.
Adopt internationally stringent practices around transparency and a genuine stewardship for the environment and communities in which Coca-Cola operates.