Coca-Cola is one of the world’s biggest and most well-known beverage brands. During its heydays when the company was led by CEO Goizueta, Coca-Cola’s stock was on a steady rise. As late as the 1990s, Coca-Cola Co. was one of the most respected companies in America, a master of brand-building and management in the dawning global era (Carvens & Piercy, 2009). Over the last couple of years, however, Coca-Cola’s stocks have been falling and profits have been decreasing from quarter to quarter. The new age brings a challenge to Coca-Cola to find a way to reinvent and rebrand itself. With Mary Minnick as the new head of marketing, Coca-Cola is creating a new and fresh image through marketing and product development efforts. In this paper, I will describe and evaluate Coca-Cola’s marketing and innovation strategy transformation designed to position the company on the cutting edge of consumer trends, and developing healthy beverages, examine the underlying logic of Minnick’s emphasis on understanding why people consume beverages, discuss the underlying local of the non-carb drinks strategy, and compare and contrast the performance of Coca-Cola and Pepsi. To Minnick, growth means more than simply boosting sales of Coca-Cola Classic. And innovation involves more than repackaging existing beverages in slightly different flavors (Carvens & Piercy, 2009).
As the head of marketing at Coca-Cola, Minnick is implementing a new marketing and innovation strategy that will help transform the company’s position. Although Coca-Cola is one of the world’s biggest brands, it wasn’t moving forward in a positive direction. In fact, the company’s sales and market share growth was slowly declining. Coca-Cola, as a company, was still stuck back in their glory days, the 80’s and 90’s, where carbonated drinks dominated the beverage market. Since then, however, the market has changed drastically. Minnick acknowledges the fact that Coco-Cola’s carbonated drinks generate the company majority of their sales; however, there is a huge opportunity the company is missing out on. As the beverage industry evolved, non-carbonated drinks, such as gourmet coffee, tea, and sports drinks, entered the market. In order for Coca-Cola to grow as a company, as well as in profits, Minnick believes that they must push out new products to claim a space in other market segments. In her eyes, Coca-Cola has dominated the carbonated drink category for a while, but there are other market segments Coca-Cola must invest in that are steadily growing. Minnick’s focus is on product development. Becoming a leader in its industry and product innovation is at the top of her list. According to the case study in the text, under Minnick’s leadership, Coca-Cola has pushed out 1,000 new drinks or new variations of existing brands worldwide in the past 12 months (Carvens & Piercy, 2009). For example, Coca-Cola Zero was created to target diet-oriented male consumers. Minnick even plans on creating products that could possibly enhance the way people feel and look. For example, products that improve skin care or even healthcare. “Coke has launched 18 clinical trials to test the health benefits of different new ingredients that it hopes to use in future drinks” (Carvens & Piercy, 2009). The new product strategy steers Coca-Cola away from being a soda-centric organization and pushes the company towards beverage diversity.
To become leaders in their class, Coca-Cola must lead with new customer trends. Minnick challenges her team “to start thinking broadly about why people consume beverages in the first place” (Carvens & Piercy, 2009). Coca-Cola’s strategy is to bring transformational innovation to the beverage market by crossing over traditional beverage categories. Offering new and innovative products will help Coca-Cola create a new market segment that they can dominate. According to the text, Minnick is even researching innovative companies, such as Apple Computer, British Petroleum, and Kraft, to study how these companies approach innovation (Carvens & Piercy, 2009). As the company transforms its beverages, it is also reinventing the company brand along the way. Once implemented, in my opinion, Minnick’s strategy should impact the company successfully. Coke has been a leader in the carbonated drink industry for years, but they are missing out on another opportunity that can put them a step ahead of everyone else.
By expanding and diversifying their product line, Coke is maximizing its exposure in the industry. With the new age came new consumer trends and demands. In order to stay ahead, Coke must enter new market segments to keep up with the other competitors in the industry, such as PepsiCo. By entering new segments with innovative products, Coca-Cola can capture a new audience and expand in untapped market niches. The company would increase profitability by generating income from an additional segment outside of the already successful carbonated-drink category that didn’t previously exist. Coca-Cola is shifting its product strategy to develop healthy beverages. “Minnick’s ambitions, if they hold, would utterly redefine Coca-Cola’s image as a purveyor of sugar-laden junk that you should’ve give your kids” (Carvens & Piercy, 2009). Entering a healthy-beverage market segment can potentially improve as well as expand Coca-Cola image. The new market segment will reel in even more consumers for the company, only contributing to the already established foundation. Coca-Cola has already seen its peak days, and in order for a great company to get better, it must continue to bring innovation and creativity to the market. Companies that lead in innovation, such as Apple Computers for example, continue to create new products that are even more advanced and revolutionized than before. Coca-Cola needs to adapt the mindset of companies such as this. New, innovative beverages will help the company gain market share in the industry.
Gaining exposure in other market segments can benefit the company’s image and revenue. Ideas of crossing over beverages into new categories, such as skin care, beauty, weight watchers, and detoxification is in the works for Coca-Cola. With the new age, people are seeking a different satisfaction from beverages than they have in the past. For example, not only are consumers looking for good taste, but they also desire features, such as feeling and looking better. Coca-Cola has the ability to become the leader in a new market segment with new innovative health beverages. Coca-Cola can use Red Bull for example. Red Bull created the energy drink segment, becoming the leading brand in a fresh market segment. Similarly, Coca-Cola can mimic Red Bull’s strategy by seeking out a growing, niche market with opportunity of expansion. The healthy beverage market can be tricky, however. In order to make certain claims in the U.S., government approval and regulation is required. Therefore, Coca-Cola would have to
invest in heavy product research to uphold its claims. On a good note, the international market isn’t as strict as it is in the U.S. According to the case study, Coke is already selling some of these very products in Japan. Obviously, the healthy beverage transformation Coke implemented has an existing target audience and a consumer base. The company might have a tougher time promoting the product with bold health claims in the U.S., though. Along with law regulation, Coke is faced with the cost of independent bottlers.
The cost for producing a healthy beverage is higher than the cost of the producing a Coke. Overall, the healthy beverage strategy will bring something fresh to the Coca-Cola brand. Although there might be a couple of downfalls, such as the cost of bottling and health claims in the U.S., the product still has potential for improvement and advancement. For example, Coca-Cola will think more creatively about consumer needs. The opportunity to create relationships with bottlers by bringing them into the decision making process can help lower costs. By using feedback from the customers, Coca-Cola can determine what products were successful and what products need to be tweaked. When inventing a new drink, one must take it back to the basics to re-examine the product from scratch. Minnick wants to do the exact same. “Minnick loves to talk about what she considers the 1- primal “need states” that consumers have, including “hunger and digestion”, “mental renewal”, and “health and beauty”” (Carvens & Piercy, 2009). The first step towards creating a new and innovative product is to choose the category your product will satisfy. For example, will the drink be targeted towards detoxification or energy rejuvenation? Coca-Cola can create a new market segment once they’ve closed in on the “consumer wants” the product will satisfy.
Overall, there is a huge market opportunity in the heath beverage segment. The latest research out of Harvard School of Public Health finds disturbing evidence of a link between sugary drink consumption and heart disease. In addition to weight gain, the adverse effects of these beverages on blood sugar, blood cholesterol fractions, and inflammatory factors throughout the body are likely to contribute to the increase in heart disease. (Harvard School of Public Health). Heath issues related to beverage consumption are on the rise in the U.S. Due to these issues; a market in healthy beverages not only exists, but is in high demand. Through marketers in the beverage industry, this factor can be played to their product’s benefit. For example, according to the article from Harvard School of Public Health, “a good target: Beverages that have no more than 1 gram of sugar per ounce, and are free of non-caloric sweeteners” (Harvard School of Public Health).
A product such as this has the potential of being marketed as health beneficial to its consumers, while still offering a bit of the sweetness in the beverage. Harvard School of Public Health conducted a systematic search of beverage offerings from the leading beverage manufacturers in the U.S., and there are only a few beverage options currently on the market that meet or come close to this 1 g/oz threshold and are free of non-caloric sweeteners (Harvard School of Public Health). Healthy beverages can be offered as an alternative to other sugar-packed options. Coca-Cola can market health products as a better alternative for consumers such as diabetic and heath disease patients. The market and audience for healthy beverages exists and Coca-Cola has the potential of becoming the largest health beverage provider in the market segment. “Consumers are demanding healthy beverages in the marketplace and retail sales of these drinks — whether nutritional, functional or enhanced — are climbing,” said Kim Jage, director of marketing and sales for the Healthy Beverage Expo, (Healthy Beverage Expo ).The health beverage market is steadily increasing; therefore, it is a good market to explore in. Along with every day customers, healthy beverages can be offered at cafeterias in places like hospitals and school systems, where healthy lifestyles are promoted.
Compared to Pepsi, Coca-Cola is far behind in the industry. Pepsi has established partnerships with many retails that provide plenty of shelf space to the diversified range of beverages and snacks it provides. The mindset that Coca-Cola is trying to shift to has been Pepsi’s motto for years now, “If we were only playing in carbonated soft drinks, competitively we would be disadvantaged in many ways”, says Reinemund, PepsiCo CEO. Although Coca-Cola generates more earnings than Pepsi per year, Pepsi owns more of the market share in different categories, allowing room for expansion in the future. While Pepsi has been acquiring companies, such as Gatorade and Aquafina, Coca-Cola has solely been concentrating on their carbonated-soda beverages. “Coke’s sodas constitute 82% of its worldwide beverage sales, far more than at Pepsi, which is gaining on Coke’s lead in the U.S. beverage market and numbers Tropicana juice Gatorade sports drinks, and Aquafina water among its billion-dollar beverage brands. Coke’s resistance to diversification has held the company back from gaining marketing share and profits in new market segments. Combined with its beverage diversity, Pepsi also offers snacks; therefore, it diversifies the company as a whole, marketing itself as a snack-and-beverage company. According to an article, “while Coca-Cola completely operates in beverages e.g. Coke, Sprite, Minute Maid, Dasani, PepsiCo is more diversified in its products on sale.
PepsiCo has not restricted its brands from being beverage-only as is suggested by Doritos, Frito-Lays and Quaker. Undoubtedly, the company’s strongest and most identifiable brand is indeed Pepsi but it has a certain advantage over Coca-Cola since it has a diversified product risk.” (Buy, Timing Best) Although Coca-Cola might generate more annual earnings, Pepsi has an advantage in its diversified products. According to Exhibit 2 Coke vs. Pepsi in our textbook, Pepsi has a diversified portfolio strategy that will make them the long-time winner (Cravens ; Piercy, 2009). Pepsi has generated a 12% earnings growth compared to Coca-Cola’s 4%. Pepsi’s stocks are at a rise, while Coca-Cola is looking at a decline in stock. Pepsi has even out performed Coca-Cola in the sales and sales growth category. Overall, Pepsi has a better potential of continuing to expand and grown in the future, whereas Coca-Cola seems to be on the decline.
After evaluating and analyzing Coca-Cola’s strategy and performance, I believe that the brand is in need of a new, innovative image. The company has been “frozen in time” of its heydays, while the culture around them as been changing. In order to catch up with its evolving society, Coca-Cola must step up and reinvent itself as one of the greatest beverage companies in the world. With a new marketing plan put in place by Minnick, I believe Coca-Cola has an potential to revise its image and remain at the top of the beverage industry. References
Cravens, D. W., ; Piercy, N. F. (2009). Strategic marketing (9th ed.). Boston: McGraw-Hill
“Harvard School of Public Health » The Nutrition Source » Time to Focus on Healthier Drinks.” Harvard School of Public Health. N.p., n.d. Web. 24 Sept. 2013.
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