The Coca-Cola Company


Selected Coca-Cola Company drinks advertising

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.

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 21st Aug 2014: Coca-Cola made a long-expected move on Monster Energy, acquiring a 17% stake in the smaller company for $2.15bn. It already handles distribution in selected markets in Europe and the US. Under the arrangement, Coke will transfer management control of its own existing stable of energy brands, such as Burn, Relentless and Full Throttle, to Monster while in return taking over the smaller company's non-energy drinks including Hansen Natural and Peace Tea. It will also gradually assume global distribution duties for the Monster brand, currently divided between several other local partners. The enhanced partnership is widely expected to lead to a full buy-out of the business in due course, a staged acquisition strategy similar to that employed with UK-based smoothie and orange juice producer Innocent, which Coke now wholly owns. More recently Coke acquired what is now a 16% holding in Keurig Green Mountain, the developer of the enormously popular US home drinks system. For now, Monster's board has capped Coke's holding at no more than 25% before 2018, but it can withdrawn that restriction at its own discretion to allow a full buyout. That could be expensive for Coke. Monster's share price rocketed in the wake of this week's deal, pushing its market cap to around $15.5bn. 

Adbrands Weekly Update 15th May 2014: There's a revolution taking place in the North American coffee market, and Coca-Cola appears to be positioning itself in the driving seat. The soft drinks giant has increased its stake in Keurig Green Mountain, makers of America's increasingly ubiquitous coffee makers, to 16% (from an initial 10% earlier this year). As a result Coke becomes Keurig's single biggest shareholder, protecting its role as beverage partner for Keurig's soon-to-launch cold drinks dispenser. Yet the move coincides with publication of figures from Euromonitor which show that Keurig is now the clear leader in the US retail coffee market. The vast range of capsules it produces for Keurig machines, either under its own Green Mountain banner, or for branded partners including Folgers, Starbucks, Dunkin Donuts and others, give it a combined 18.4% share of the North American retail coffee sector. That's almost as much as Folgers (12.5% share) and Maxwell House (7.7%) combined. Yet five years ago it had less than 1%. In its accounts for 2013 it declared revenues of over $3.3bn from sales of capsules, on top of almost $1bn from the machines themselves. It's worth bearing in mind that Coca-Cola already has considerable exposure to coffee through its various canned java brands around the globe, so this is clearly an area it's interested in developing further. Also the slowly slowly sharebuilding strategy is one it has already used successfully in the past, notably to take control of UK-based juice and smoothie marketer Innocent. We're prepared to bet it won't stop at 16% of Keurig. 

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Adbrands Company Profiles provide a detailed analysis of the history and current operations of leading advertisers, agencies and brands worldwide, and include a critical summary which identifies key strengths and weaknesses. Adbrands Account Assignments tracks account management for the world's leading brands and companies, including details of which advertising agency handles which accounts in which countries for major markets. See also:

Coca-Cola Sprite Nestea
Fanta Innocent Coca-Cola GB

The Adbrands Company Profile of Coca-Cola summarises the brand's history and current market position.

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Adbrands Weekly Update 8th May 2014: Coca-Cola announced a job swap for two of its most senior marketers, Katie Bayne and Wendy Clark. Clark moves to the role of president, sparkling brands & strategic marketing North America, inheriting some of the duties that have been managed by Bayne in recent years. Bayne for her part took over Clark's role as SVP, global brand communications, sparkling beverages. At the same time Jonathan Mildenhall is leaving his role as Coke's SVP, marketing communications and creative excellence to become chief marketing officer of online travel service Airbnb

Adbrands Weekly Update 17th Apr 2014: Coca-Cola had a tough 1Q, with revenues and profits both down. Carbonated volumes slipped by 1% year-on-year, their first global decline since 1999. However that fall was countered by an 8% jump in non-carbonates, resulting in overall volume growth of 2%. The group is hoping to offset the difficult first quarter with a big marketing push across the rest of the year, anchored by the World Cup.

Adbrands Weekly Update 3rd Apr 2014: Industry watcher Beverage Digest published a gloomy analysis of the US liquid refreshment (LRB) market, saying that "challenging recent trends... continued and worsened in 2013". Total liquid refreshment volumes, including both still and sparkling beverages, fell for the first time in several years (by 1.6%), and the rate of decline among carbonates increased sharply to 3.0%, almost three times last year's fall. Sales of carbonated soft drinks (CSDs) peaked in 2003 and have been declining steadily ever since. The latest slide returns the sector to volume levels not seen since the mid 1990s. The big three of Coca-Cola, PepsiCo and Dr Pepper Snapple all suffered volume declines in both total carbonated drinks and the wider LRB market, and virtually all the top brands, including Coke, Pepsi, Mtn Dew and Dr Pepper suffered a fall. Of the top ten CSDs, only Sprite enjoyed an increase in volumes, and that by a measly 0.1%. Coke Zero crept into the top ten for the first time, displacing faster-declining Diet Dr Pepper. Coca-Cola's Dasani water was a rare exception in the wider LRB market with an impressive 5% hike in volumes. Rivals such as Nestle Pure Life and Poland Spring managed less than 1% apiece. Energy drinks currently sit just outside the top ten brands in both the CSD and LRB categories, but are likely to force their way in this year or next. Currently Monster Beverage Corp and Red Bull have share of 1.6% and 1.3% respectively, having both grown by 0.2% during 2013. At current rates Monster could take the #10 spot by volumes among CSDs from Coke Zero for 2014.


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Background

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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