The Coca-Cola Company is the world's biggest drinks company, controlling more than half the global market in carbonated soft drinks as well as a substantial chunk of the somewhat larger non-carbonated segment. It owns four of the world's five best-selling soft drinks. Its principal brand is of course Coca-Cola itself, the world's best-known and most valuable brand. But the company also sells almost 500 other beverage brands ranging from variants like Diet Coke and sister products such as Fanta and Sprite to a vast range of carbonated and non-carbonated juice-based drinks, bottled waters, iced teas and coffees. Increasingly Coca-Cola has found that its sheer size works against it. Competition authorities now watch the company's every move, effectively ruling out the acquisition of anything other than marginal products; and market saturation and economic downturns in both emerging and mature markets caused sales growth to stall for more than a decade. Since 2006, though, the company's performance has begun to fizz once again, mainly through aggressive development of non-cola products, including bottled water.
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The Adbrands Company Profile of Coca-Cola summarises the brand's history and current market position.
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Adbrands Weekly Update 30th Jul 2015: Coca-Cola's 2Q results were boosted by solid growth in non-carbonates, especially tea, water and newly launched enhanced milk Fairlife. Those products reported combined volume growth of 5% in the quarter, compared to just 1% for carbonates. One-time star performer Diet Coke slumped 7% as a result of a continuing move away from aspartame-sweetened drinks by US customers. Group revenues slipped 3% as a result of currency - at constant rates they would have risen around 4% - but net income jumped 20%, mainly as a result of an accounting gain on the company's stake in Monster Beverages.
Adbrands Weekly Update 30th Apr 2015: Coca-Cola Company managed to offset the impact from currency with the strongest underlying growth it's seen for more than two years. Volumes of both still and sparkling beverages rose during the quarter, with especially strong performances from Coke Zero and Sprite, up 5% and 4% respectively. Reported group revenues rose 1% to $10.7bn. Ex currency devaluation, the growth would have been 8%. The main weak spot was Diet Coke, down 6% because of an apparent consumer backlash in North America against alleged (but entirely unproven) health risks associated with the artificial sweetener aspartame. PepsiCo also reported a solid quarter, but has taken more dramatic steps to counter the slide in sales of its own low-cal competitor Diet Pepsi. It announced plans to drop aspartame as the sweetener in that drink in favour of a blend of sucralose and acesulfame potassium. (Aspartame, long the sweetener of choice in low-cal drinks, is marketed separately to consumers as Equal, Nutrasweet or Canderel; sucralose is better-known as Splenda). Seth Kaufman, SVP of PepsiCo North America Beverages, said: "Diet cola drinkers in the US told us they wanted aspartame-free Diet Pepsi and we're delivering." The timing of PepsiCo's announcement couldn't be better. Coca-Cola must now press on with aspartame or be seen to be following in its rivals' footsteps. A change of ingredients would also have disturbing echoes for the company. By stunning coincidence (or more likely clever planning on Pepsi's part) this week marks the 30th anniversary of the company's disastrous 1985 decision to meddle with its formula and relaunch its top-selling drink as New Coke. The resulting consumer backlash almost destroyed the company.
Adbrands Weekly Update 23rd Apr 2015: Coca-Cola Company is the latest big marketer to call a review of media, joining the likes of Visa, SC Johnson, L'Oreal, Coty and Unilever, all currently taking pitches for partial or global duties. Coke's review is just for the US for now. It has asked incumbent Starcom Mediavest to compete against the three networks who handle its business in other parts of the globe: Carat, MediaCom and UM.
Adbrands Weekly Update 16th April 2015: PepsiCo and arch-rival Coca-Cola Company swapped sporting sponsorships in the US, with Pepsi winning the new deal with the NBA, but surrendering Major League Soccer. Under the new arrangement which starts in July, Coke-owned Sprite will be replaced for the first time since 1994 as official NBA soft drinks sponsor by PepsiCo's (higher-selling) Mountain Dew. The deal is also said to include snack brands including Ruffles and Doritos and Aquafina water. Group-owned Gatorade is already an NBA partner. However, Coca-Cola announced it had taken over Pepsi's partnership with Major League Soccer.
Adbrands Weekly Update 12th Feb 2015: Coca-Cola reported better than expected performance for 4Q and across the year as a whole, with overall volumes up 2%, including a 1% gain for the sparkling beverages portfolio. The flagship Coke brand delivered 1% growth over the full year, though 4Q was only slightly better than flat. Non-sparkling beverages did even better, up 4% for the year. Best growth performance is still from emerging markets, with North America sparkling beverages down 1% and Europe down 3% for the year. Currency also weighed heavily against the group, dragging down full year revenues for the second consecutive year to just under $46.0bn. At constant rates, growth would have been more like 3% for the year and 4% in the final quarter. But investors were encouraged by a 2% increase in North America revenues in 4Q, the biggest such increase for two years. Net income for the year dropped 17% to $7.12bn as a result of steep impairment and foreign exchange charges in the final quarter.
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Free for all users | see full profile for current activities: Coca-Cola was invented in 1886, but ownership of the brand passed through several hands over the next few years. [see Coca-Cola brand profile for more]. Former drugstore clerk Asa Candler became owner in 1891. He saw the drink's full potential and secured distribution throughout soda fountains in the United States, Canada and Mexico by the end of the century. Less sure that customers would buy the drink for home consumption, he offloaded the production problem by selling bottling rights to Benjamin Thomas and John Whitehead, also for $1. They promptly established a national chain of franchised plants and made their own fortune. In 1919, Candler's family sold the company (against his wishes) to Atlanta businessman Ernest Woodruff, for $25 million. Woodruff part-financed the deal by selling part of the shareholding to the public. Coca-Cola had gone public.
For the next sixty years, the key figure in the development of Coca-Cola was Woodruff's son, John, who became president of the company in 1923, aged 33. He was then the youngest executive of any major corporation, but he built it into a truly global business through a massive commitment to advertising, and international expansion in the wake of the US Army's involvement in World War II. The company had begun to establish overseas bottling plants in the 1920s, but quality and sales were both disappointing. Aware of the power of Coke as a symbol of home, Woodruff announced in 1941 that every US serviceman overseas would be able to get a bottle of Coke for 5 cents, wherever in the world he was. In 1943, General Eisenhower placed an order for ten bottling plants to be set up in Europe; by the end of the war, a total of 64 plants had been established around the globe to fulfill Woodruff's pledge. When the war ended the plants remained, having developed an infrastructure of their own, and they traded off the new enthusiasm for all things American.
As competition increased, Coca-Cola was forced to rethink its dependence on a single brand, and embarked on a policy of systematic diversification during the 1960s. Fanta, which had been invented in Germany during the war, was introduced into the US in 1960 and the company also spent $72.5m buying up juice manufacturer Minute Maid. This was followed by the launch of Sprite in 1961 (the company's reply to 7-Up), diet drink TAB in 1963, and several other low sugar or high protein brands including Fresca and Saci. But a heath scare over the artificial sweetener used in these and most other low sugar drinks caused an industry-wide panic. TAB and Fresca were both withdrawn in 1969.
For the rest of the 1970s, Coca-Cola was plagued by political problems relating to treatment of workers, difficult negotiations with bottling plants over terms, and the devastating impact of the Pepsi Challenge [see Pepsi profile]. In 1981, the ageing Woodruff handed over the company's reins to protege Roberto Goizueta in the hope that Coke's image could recover from the battering it had received. Overall, Goizueta's reign was enormously successful, marred by just one disastrous marketing error. In 1985, in an attempt to see off the Pepsi Challenge, he "improved" the formula for Coca-Cola, only to find that consumers preferred old Coke to new Coke. But otherwise the company prospered. Coca-Cola acquired film studio Columbia Pictures in 1982 for $750m, only to sell it to Sony seven years later at a profit of almost $1bn. The same year, the company returned to the low-sugar arena with Diet Coke, which quickly came to dominate this new sector. In 1986, the company grouped together the bottling interests it owned, mostly in the US, as Coca-Cola Enterprises and floated the majority shareholding of the business.
During the 1990s Goizueta encouraged a continuing process of rationalisation within the bottling businesses, who were at least part of the secret behind Coke's success. Coke's idea has always been to have supplies of the drink within, as John Woodruff famously put it, "arm's reach of desire". In practice that meant within five minutes traveling time of most consumers. As a result, the group built up an unparalleled international network of largely independent bottling businesses in every local territory, aggressively wading into one country after another. Coke took a minority stake in most and supported increased rationalisation among them to strengthen the local business. With these and other moves, Goizueta transformed the company. Between 1981 and 1997, when Goizueta died, the value of The Coca-Cola Company had risen from $4bn to $145bn.
In 1997, Coca-Cola and its sister brands achieved an average of more than 1 billion servings per day for the first time. As the company proudly announced, it had taken 22 years to sell the first billion servings of Coca-Cola. Now, they were selling a billion drinks a day. That resulted in record sales and profits, not just in core territories but on new frontiers as well. In China, the world's largest market, volume rose by 30% in just one year. But the good news was not to last. The next three years proved difficult for the company. A sudden economic downturn in emerging markets, combined with the massively successful launch of Procter & Gamble's rival drink Sunny Delight in Europe caused sales in all international markets to stall. Coke issued three profit warnings in six months during 1998 and 1999.
The company strengthened its global hand considerably late in 1998 with the acquisition of Cadbury Schweppes' soft drink brands in various non-US territories. Cadbury's original plan had been to sell all its non-US drinks to Coke for $1.85bn, but the deal was hampered by competition authorities in several of the countries affected on grounds that it would further increase Coke's sizeable market share. The EC, where Coke was already the focus of several anti-competitive investigations, proved a major obstacle. There followed months and months of negotiations with regulators in each of the objecting territories. In order not to delay the entire process, the two companies agreed the transfer of the first chunk of the drinks business in July 1999, with Coca-Cola taking control of more than 20 brands in 155 countries. This deal, recast with a price tag of $700m, excluded the United States, Norway, Switzerland and the European Union member nations, with the exception of the United Kingdom, Ireland and Greece. A few months later, South African and New Zealand regulators also approved the purchase. After a year of further wrangling, plans to sell the brands in Canada, Australia and Mexico were abandoned in July 2000.
In addition to the wrangling over the Cadbury Schweppes brands, Coke was plagued by a series of other problems in Europe. In 1998, the company agreed the purchase of Orangina from French group Pernod-Ricard. However the deal was quickly blocked by the French government, supported by some heavy lobbying from Pepsi (bottled in France by Orangina). Coke and Pernod-Ricard spent a year attempting to appease regulators before finally abandoning the deal in late 1999. (Orangina was later bought by Cadbury instead). Worse followed, as the group had to deal with contamination problems and further lawsuits relating to anti-competitive practices. Regulators also held up the merger of Coca-Cola Beverages, the bottler serving several European territories, with its Greek counterpart Hellenic Bottling Company. Reflecting the company's troubled year, CEO Douglas Ivester stepped down in January 2000, to be replaced by Douglas Daft. His first action was to announce a sweeping job-cutting programme, disposing of 6,000 jobs, or around 21% of the workforce.
In 2000, Coke tussled with PepsiCo to acquire Quaker Oats, the food and drink group whose brands included Gatorade, the best-selling US sports drink. PepsiCo's initial offer was turned down, leaving Coke the apparent favourite. But Quaker's shareholders balked at the idea of selling to topdog Coke, despite a higher offer. Pepsi walked off with the prize after all. The group also had to resolve a discrimination lawsuit brought by African-American employees who alleged the company treated black employees unfairly and consistently paid them less than their white counterparts. Coke paid out $192.5m, the largest sum ever paid by a US company in a discrimination case.
The beginning of 2001 was marked by two major announcements. The company established a joint venture with Nestle to market Nestea as an independent business, Beverage Partners Worldwide, with a brief to expand its operations globally. More significant still was a plan to spin off Minute Maid juice into a new $4bn joint venture with Procter & Gamble. Both developments were in no small part designed to head off increased competition from arch-rival PepsiCo. Yet the P&G deal later went flat in face of opposition from investors who felt they were getting poor value. After attempts to recut terms, the partnership was eventually abandoned in 2001.
The company was embarrassed in 2003 after it was revealed that some employees within the group's US fountain sales division had tried to manipulate the results of tests three years earlier to sell a new product, Frozen Coke, through Burger King outlets. This led to a full restructuring of the fountain division and Coke paid a handsome $21m to Burger King in compensation. Overall performance was also disappointing, especially in the US market. After a growth in volume during 2002 as a result of new launches, volumes for Coke slipped again in 2003, as the novelty effect of Vanilla Coke and Diet Coke with Lemon wore off. Early in 2004, chairman & CEO Douglas Daft announced he too would step down. He was replaced by Neville Isdell, a veteran of Coca-Cola's international operations, who came out of retirement to take the job. Steven Heyer, formerly president & COO, had been the sole internal candidate for Daft's job, but was effectively sidelined during the recruitment process. He announced his departure from Coke shortly after Isdell's appointment.
The group's various European antitrust disputes were finally settled in summer 2005 after six years of litigation. No fines were levied provided Coca-Cola execute a number of anti-competitive measures. For example, it was barred from offering volume-linked rebates or agreeing exclusivity deals with retailers, and was forced to allow rival products to take up to 20% of space in its coolers and vending machines. The company is also prohibited from offering discounts on top-selling brands such as Coca-Cola or Fanta in order to encourage retailers to sell its less popular products. If Coke breaks any of these conditions it will face steep penalties of up to 10% of worldwide annual revenues. However the group's problems spread to India and Latin America, otherwise regarded as a key potential growth markets. For many years, Coca-Cola and Pepsi had both faced criticism from consumer groups over their over-use of precious local water resources in developing countries, and Coke in particular is the subject of a boycott by many student associations in First World countries for its alleged abuse of human rights, especially in Latin America. In 2006, sales of both brands were temporarily suspended in India after an independent research company claimed to have found high levels of pesticides in 11 different soft drinks brands made by the two groups.
There was a further shake-up in the senior management team in early 2007 when Muhtar Kent, previously head of the international division, was named as group president, and likely successor to Neville Isdell. Shortly afterwards, Mary Minnick, president of global marketing, innovation and strategy, and widely tipped until then as a future CEO of the company, announced her resignation. Isdell handed over the role of CEO to Kent in July 2008, and stepped down as chairman in April 2009. See full profile for current activities
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