Coca-Cola SWOT Analysis Case Study
This Coca-Cola SWOT analysis case study demonstrates how effective managers, investors, and entrepreneurs analyze their businesses through the SWOT analysis. The SWOT analysis guides companies as they try to pinpoint their specific strengths, weaknesses, opportunities, and threats. This Coca-Cola SWOT analysis case study intends to first shed light on the company’s weaknesses and strengths. Then, it will discuss the opportunities Coca-Cola can maximize to improve its top line and bottom line. The purpose of this Coca-Cola case study is to show you how to analyze an entity through the SWOT analysis.
A Short History of Coca-Cola
The Coca-Cola Company journey started in 1886 in Atlanta, Georgia. The pharmacist John S. Pemberton created the first cola on May 8, 1886. Over that year, the daily sales averaged 9 drinks.
Accountants mostly crunch numbers. However, in moments of inspiration and genius, they too can do what creative people usually do. It was Frank Robinson, the company’s first accountant, who suggested that advertisement that featured the name Coca-Cola would look great. Robinson also thought up the company’s famous Spencerian script logo.
The year 1886 also saw Coca-Cola’s first ever newspaper ad. The ad read: “Delicious and Refreshing Beverage.” In 1988, Asa Candler started the process to acquire the company’s patent and formula. Candler finalized his purchase of the company in 1892, registering it as a corporation in Georgia.
Registering the Patent and Selling Bottling Rights
In 1893, the new owner registered the company’s logo with the U.S. patent office. In the same year, the business paid dividends to investors for the first time. By 1895, consumers in every state in the U.S. were buying and enjoying Coca-Cola. In 1899, Candler sold bottling rights to Benjamin F. Thomas and Jason B. Whitehead. The two businessmen were from Chattanooga, Tennessee, and $1 is the amount they paid for these rights. That is how Chattanooga became the first U.S. city to bottle Coca-Cola.
Coca-Cola is more than a Century Old
The company has expanded over the last 132 years, becoming one of the largest food and beverage companies worldwide. The business makes and sells sodas, water, coffee, tea, juice, and soy-based products among others.
From a Small Concern to the Most Valuable Soft Drinks Brand Worldwide
From a sole proprietorship in 1886, the business has grown into one of the most prominent brands on the planet. Brand Rankings places Coca-Cola at position 9 among the worlds’ top 100 companies by brand performance. Finally, Coca-Cola is the world’s most valuable soft drink brand (non-alcoholic) on the planet, according to Statista.
Coca-Cola SWOT Analysis Case Study: Be sure to Read the Short Section Below
The rest of the article focuses on why you’re here: Coca-Cola SWOT analysis case study. Note: in this SWOT analysis, we’ll use the term Coca-Cola to refer to the company that uses that name. We’ll also use the same term while referring to the specific brand that bears that name. The context in each case should easily clarify the intended meaning.
The Strengths that Drive Coca Cola’s Business
There are a few factors that give Coca-Cola serious advantages over its competitors. Some of these factors include:
Favourable Tax Laws in the United States
Unfavorable tax laws in the U.S. had forced many companies to redirect their cash to overseas markets. Fortunately, the Trump administration introduced tax reforms early in 2018 that have companies wanting to come back. The aim of the reforms was to encourage investing in the U.S. As a result, many companies including Coca-Cola are beginning to make big plans for the U.S. market.
According to the company’s president and CEO James Quincy, “tax reform will make investing in the U.S. more attractive.” Quincy further says that the latest development in the tax code should “spur economic growth.” The CEO recently revealed that the company is reviewing the new tax law. The company hopes to leverage the new tax reforms and “accelerate investments in the U.S.”
With a market share of nearly 43 percent in the U.S., Coca-Cola is among the most dominant players in the non-alcoholic beverages market. As a result, the company is likely to benefit enormously from the latest tax reforms. Admittedly, company’s competitors will also take advantage of the tax reforms. However, most of them are unlikely to see as big an impact as what Coca Cola might.
Coca Cola Continues to Build a New Image
The world seems to be moving away from carbonated soft drinks and products that contain a lot of artificial sugars. But these very products have been the backbone of the company’s product portfolio for decades. Fortunately, the company has decided to follow consumers and their evolving tastes and preferences.
Research has informed consumers that sugar is bad for their health. That’s perhaps the reason these products did not see growth in revenue in 2017. But the company is working hard to build a new image for itself.
The company has started promoting, advertising, and marketing brands that seem to encourage healthier living. Essentially, these brands are either sugarless or they may contain little sugar. For example, Coca Cola has completely overhauled the image of its Diet Coke with new packaging and flavors. The brand had experienced declining sales volume and the company had to act.
Perhaps the brand will see improved numbers in the future just as Coke Zero Sugar did in 2017. The company reformulated Coke Zero Sugar’s flavors. It also developed a new package design for it, growing sales ten percent. There is, therefore, reason to predict that Diet Coke may see better sales in the coming years. Quincy, the company’s CEO, thinks that 2018 is going to be a “better year” for Diet Coke. However, the top-ranking executive knows that the company needs to do more than just reformulating flavors and redesigning packages. That said, Quincy expects Diet Coke to least stop losing sales.
Coca-Cola Entering Investing Heavily in Water, Coffee, and Tea Categories
The company is going all out to promote and sell water, coffee, and tea as healthy alternatives to carbonated drinks. The company has launched two of its leading brands Honest and Smartwater in several international markets. That seems to be a sound decision judging from the numbers. While the sales of carbonated drinks stood still in the last quarter of 2017, revenue from water, tea, and coffee grew six percent. Coca Cola currently has more than 1,200 no-and-low-calorie products.
Coca-Cola: the World’s Most Valuable Soft Drinks Brand
It is also among the most well-known brands in the world. Most consumers are familiar with the company’s popular brands including Fanta, Coca-Cola, Sprite, and Diet Coke. According to Business Insider, a staggering 94 percent of the people in the world easily recognize Coca-Cola’s logo. Coca-Cola is the world’s most valuable soft drinks brand. What’s more, the company owns and controls about 500 brands, 21 of which are billion-dollar brands. Brand awareness is a huge non-tangible asset, which can dramatically increase a company’s competitive ability.
It is possible for Coca-Cola to expand into new markets, further growing its global market share. Additionally, being a huge food and beverage company allows Coca-Cola to benefit significantly from economies of scale. Economies of scale are a form of power, and the company can use that power to its advantage.
Coca-Cola Runs a Highly Efficient Distribution Network
Coca-Cola owns or controls one of the largest product distribution networks in the world. The company leverages over 250 bottling partners in over 190 countries. That allows the non-alcoholic beverage behemoth to have extensive global reach while maintaining local focus.
The company manufactures concentrates, syrups, and beverage bases and sells them to its network of efficient bottling operations. The bottlers use the raw materials to make the final branded products, distributing them to vending partners and customers. Vending partners and customers then deliver the products to consumers.
Intelligent Advertising that Gets the Attention of Consumers
Unlike most other companies, Coca-Cola promotes ideas, feelings, and values rather than products. Did you know that the name Coca-Cola means “delicious happiness” in Mandarin?
“The only thing like Coke is Coca-Cola itself.” Can you believe that’s a 1940s ad? In the 1970’s, Coke would runs ads such as “Coke adds life” or “Have a Coke and a smile.”
Coca-Cola’s Most Successful ads
One of the most successful ads was the jingle that became an instant hit in 1971. Here’s the ad:
“I’d like to teach the world to sing in perfect harmony. I’d like to buy the world a Coke and keep it company.” It’s a clear message of peace, harmony, and togetherness.
The 1974 “Look up America” ad is also among the most successful ads the Coca-Cola marketing team has ever designed. America needed to rise from the ashes of Vietnam and the shame of Watergate. The people needed to feel confident at a time of great political uncertainty. Coca-Cola stepped in, encouraging the nation and selling tons of products in the process.
Coca-Cola Helped “Invent” the Image of the Modern Santa Claus
Did you know that Coca-Cola contributed immensely toward the creation of the modern image of Santa Claus? Santa became an important part of the marketing campaigns in the early 1930s. Coca-Cola presented St. Nick as representing joy, generosity, and togetherness. It is, therefore, not surprising that Coca-Cola moves about 1.9 billion servings each day.
A few factors may weaken the company in one way or another. But quantifying Coca-Cola’s weaknesses may not be possible at this point. However, it’s reasonable to assume that the weaknesses described below may affect the business appreciably.
Declining Sales for Carbonated Beverages Including the Coca-Cola Brand
People in different places around the world seem to have suddenly realized that sugar is their enemy. Consumer preferences are shifting away from carbonated drinks toward seemingly healthier choices. Health-conscious consumers across Europe and North America are increasingly avoiding beverages with high sugar content, according to Independent.
Soda sales are falling. They have followed a downward trajectory over the last 10 years. In fact, Coca-Cola sold more water in 2016 than it did soft drinks. In the same year, each consumer in North America drank 38.5 gallons of soft drinks while drinking 39.3 gallons of water. Shockingly, the value for soft drinks consumption in 2016 was much lower than it was about 15 years ago. According to Reuters, each consumer in the U.S. drank 50 gallons of carbonated soft drinks in the early 2000s.
Sodas form around 73 percent of Coca Cola’s net volume and 60 percent of the company’s value. It gets more interesting: the Coca-Cola brand generates about 25 percent of the company’s revenues according to one estimate. That shows just how important revenue from carbonated drinks has been and continues to be for the company.
But Diet Coke was among the fastest declining brands in 2016, with sales plummeting 4.3 percent. If Coke sales continue falling, the company’s top line may suffer significantly. Luckily, sales for coffee, tea, and water seem to be growing. However, it is not certain they will rise faster than the rate at which soda sales are falling.
Structural Impacts and Negative Currency Translations
Currency fluctuations can significantly affect a business’ profit and balance sheet numbers. According to the company’s website, Coca-Cola operates in more than 200 countries spread out across the globe. But the UN recognizes only 197 countries including the Vatican, Taiwan, and Kosovo. That said, it is hard to find a country where people can’t find and drink Coca-Cola’s products.
Coca-Cola earns nearly 60 percent of its revenue from outside the U.S. Most of those geographies don’t use the U.S. dollar. While preparing their financial accounts, overseas operations outside the U.S. must translate their currency into the dollar. That situation keeps Coca-Cola exposed to unexpected currency movements. In the first quarter of 2017, for example, the company contended with a currency impact of 5 percent in Eurasia and Africa.
Fortunately, the company has taken a few hedged positions. However, doing that may not fully shield it from currency fluctuations. In 2018, for example, Coca-Cola net revenues (Non-GAAP) face currency headwinds of up to 1 percent.
Additionally, the ongoing restructuring at Coca-Cola continues eating away at its profits. The company launched massive restructuring and refranchising efforts in 2017. These changes have affected and will continue affecting the company’s performance numbers for a while. For example, Coca-Cola’s net value dropped 11 percent as result of these developments in the first quarter of 2017. The refranchising changes have mostly affected North America and China. The structural changes rolled out have mostly impacted Coca-Cola’s business in Africa and Europe.
Coca-Cola’s Dependence on a Limited Resource: Water
In 2017 alone, Coca-Cola used a whopping 289 billion liters of water. That is a lot of it in a world where communities in many places can’t get enough water.
One town in southern Mexico is a case in point. According to one publication, one Coca-Cola factory is “sucking wells dry” in an indigenous town called San Felipe Ecatepec. Reports indicate that the bottling plant in that location consumed over 1 million liters of water each day in 2016.
Interestingly, the state (Chiapas) where the factory sits has the highest renewable water resources per capita. In that state, over 30 percent of the people living in the rural areas do not have access to safe drinking water. Additionally, climate change continues to worsen the problem. The issue is so bad that people have to walk for a whole two hours to fetch water. Frequent Salmonella outbreaks in the area further compound the problem.
Coca-Cola Pressing on to Achieve Aggressive Water Efficiency Goal by 2020
Coca-Cola is working hard to increase its water efficiency. In 2016, the company reported that it consumed 15 percent less water than it did in 2010. Additionally, Coca has set an aggressive water efficiency goal which it hopes to achieve by 2020. Currently, the company needs 1.92 liters to make a liter of product. By 2020, the company hopes to have reduced that to 1.7 liters for every liter of product. The company says it is on track to meet that goal.
Here are the Opportunities Coca-Cola May Take Advantage of
Coca-Cola faces a few threats and weaknesses, and those factors may slow down the company’s growth, hurting its performance. Luckily, the company can leverage its strengths to maximize the opportunities that exist in the beverages markets. Here are some of those business opportunities:
Coca-Cola May Expand into Emerging Markets and Shore up Declining U.S. Sales
Emerging markets have expanding populations with improving incomes. Sales for fizzy drinks have been declining in the U.S. and the trend will likely continue. For that reason, Coca-Cola needs to grow its share in emerging markets to shore up slumping U.S. revenues.
Sales for Coke and Other Carbonated Drinks Falling in India
India is a key emerging market. That’s why Coca-Cola must aggressively push up its marketing efforts in this vast country. Sadly, though, Coca-Cola doesn’t seem to be doing well in India. Indian consumers, like their counterparts in developed nations, are increasingly going for healthier beverages. Some 2016 data shows that consumers in India are gravitating toward juice and juice drinks.
Latin America, the Middle East, China, and South Africa: Emerging Markets Coca-Cola Should Take Advantage of
Evidently, Coke shouldn’t expect to grow its carbonated drinks sales in India. One may also reasonably conclude that consumers in other emerging markets are making similar choices. The company would likely see improved revenues if it introduced different healthy beverages to consumers in emerging markets. Latin America, China, and the Middle East are some of the more important emerging markets Coca-Cola may consider. The company already has a presence in these markets, but it can and should do more there.
Coca-Cola Should Design New Products that Meet the Needs of Health-conscious Consumers
It is clear consumers in most markets now seek quality products that enhance their health. That’s why Coke needs to shift some of its focus from fizzy drinks to healthy products.
Coca-Cola seems to be moving in the right direction. For example, the company recently reformulated the flavors of some of its brands such as Diet Coke and Coke Zero Sugar. As earlier mentioned, the company now sells more water than it does carbonated drinks. As more consumers hop into the health-consciousness train, Coca-Cola must meet them with the refreshments they seek.
Coca-Cola and its Bottling Partners Recently Bought AdeS and a few Other Brands
Recently, Coca-Cola and its Latin America bottling partners acquired AdeS in 2017. AdeS is the largest soy-based beverage brand in Latin America. Coca-Cola saw the acquisition as an opportunity to boost its portfolio of functional drinks in those emerging markets. The deal enables the company to sell nutritious and delicious drinks in Paraguay, Chile, Colombia, and Bolivia.
AdeS isn’t the only acquisition by Coca-Cola in Latin America. The company has acquired other brands as well including Tonicorp, Verde Campo, Estrella Azul, Santa Clara, and Jugos Del Valle.
A Fast-growing Demand for Ready-to-Drink Coffee
Coca-Cola is fully aware of the need to make forays into ready-to-drink coffee markets. The business recently announced that it would acquire Costa. Costa is a strong brand that operates in more than 30 countries. Ready-to-drink coffee is among fast-growing categories that can help the company improve its top line. Coca-Cola says that the acquisition offers Costa opportunities for expansion “in multiple channels and formats.”
Threats Facing Coca-Cola
Global Warming May Lead to Never-seen-before Water Shortages Globally
There are predictions that global warming may lead to a serious water scarcity around the world in the near future. Coca-Cola likely faces water-related conflicts with communities in many places around the world. If that happens, governments in different countries may design laws and regulations that further complicate things for Coca-Cola. Such possibilities may dramatically affect the company’s revenues and profits significantly. Luckily, the company has committed to find ways to manufacture sustainably.
Stiff Competition from PepsiCo and Other Players in the Soft Drinks Industry
Coca-Cola faces a growing number of competitors. PepsiCo is among Coca-Cola’s worthiest competitors. The soft drink wars between the two companies mainly revolve around colas. And as the number of soda-loving consumers grows smaller, the battle for attention from shoppers will likely intensify.
As mentioned earlier, Coca-Cola has started reformulating flavors and redesigning packaging. These efforts have not gone unnoticed by consumers. One of its brands, Coke Zero Sugar, saw a 10 percent growth in sales in 2017. This happened after the company reformulated the brand’s flavors and redesigned its packaging. PepsiCo and Coca-Cola’s competitors must have noted that.
Now, the company (PepsiCo) has vowed to do whatever it takes to grow its soft drinks market share. PepsiCo’s CEO Indra Nooyi recently said that his company is “going to fix this.” According to Nooyi, PepsiCo doesn’t want to be “a net share donor…..especially on colas.” He further said that his company would increase its “spending on media.” Evidently, Coca-Cola needs to brace itself for a bruising colas battle with its main rival, PepsiCo.
Competition between Coca-Cola and PepsiCo Shifting Away from Sodas
However, competition between PepsiCo and Coca-Cola has been shifting away from colas and other sodas for some time now. The year 2016 saw sales for soft drinks fall to a 31-year low in North America. That’s why both companies seem to be slowly moving away from the soda market. The rivals have decided to follow consumers, seeking to satisfy their fast-evolving tastes and preferences. But PepsiCo is not Coca-Cola’s only competitor. Nestlé and Keurig Dr Pepper are also important competitors to Coca-Cola.
Nestle vs. Coca-Cola
Nestlé markets bottled water, baby food, chocolate, pet food, ice cream, and instant coffee. The company controls over 2,000 brands, among them Nescafé, the most successful coffee brand globally. In comparison, Coca-Cola owns just 500 brands. That does give Nescafé a bit of competitive advantage over Coca-Cola.
Nestlé is the leading food and drinks company in the world. Coca-Cola has made forays into this category, but it should be ready to face stiff resistance from Nestlé. In 2017, Nescafé raked in revenues worth $92.31 billion. That number was nearly three times bigger than Coca-Cola’s annual revenue of $35.41 billion. Competing against Nescafé isn’t going to be a walk in the park.
Keurig Dr Pepper vs. Coca-Cola
Keurig Dr Pepper mainly markets coffee. This company owns over 125 brands against Coca-Cola’s 500 brands. The company owns Keurig, the most successful single-serve coffee system in the United States. Aside from that, the company owns Dr Pepper, one of the leading soft drinks in North America. Additionally, Keurig Dr Pepper owns Green Mountain Coffee, Mott’s fruit juice, Snapple tea and juice, A&W root beer, and Canada Dry Ginger Ale.
Before Keurig Green Mountain acquired this company this year (2018), its name was Dr Pepper Snapple Group. In 2017, Dr Pepper Snapple Group’s revenue amounted to $6.69 billion. Coca-Cola, therefore, outsold Dr Pepper Snapple Group five times. Coca-Cola must draw winning marketing campaigns and execute its strategies ruthlessly if it wants to erode its competitors’ market share.
Sugary Beverages Tax May Hurt Coca-Cola’s Profits
Some countries are beginning to pass laws that may end up depressing Coca-Cola’s overall profits. The U.K. is one of the countries that have introduced a sugar tax. In the U.K., the sugar tax is a levy that seeks to raise funds for sports in primary schools. The higher the sugar content in a particular product, the higher the tax payable.
The UK Government Intends to Raise £520 Million from the New Sugar Tax
The U.K. government hopes to raise a staggering £520 million from companies such as Coca-Cola. The new tax has seen the price of regular Coke rise by about 8 pennies in the U.K. The good news is that the U.K. government will not tax sugar-free drinks. Coca-Cola’s Diet Coke and Coke Zero Sugar are not subject to the new tax since they’re sugar-free beverages.
But it is not Just the UK
Mexico introduced a similar tax in 2014, which had companies pay 10 percent on sugary drinks. The decision resulted in a 12 percent drop in the sugar content of sugary products. Hungary saw an even bigger improvement of 40 percent. France, Finland, the U.S., and South Africa have also introduced the sugar tax.
Over the short-term period, Coca-Cola’s profits may get affected. Over the long term, however, such laws may work in Coca-Cola’s favor since less sugar means less spending.
Coca-Cola SWOT Analysis Case Study: Final Thoughts
The Coca-Cola Company is a stable business that has existed for over 130 years. The company does business in nearly every country in the world. With 500 brands, the company is among the world’s most well-known brands. It has an efficient distribution network that enables it to sell almost 2.0 servings every day. The company is trying to move away from the shrinking fizzy drinks market. Coca-Cola has recently completed a few acquisitions that immensely add to its competitive ability.
Global warming remains one of the most important threats the company faces. Fortunately, Coca-Cola has been working hard to improve its water efficiency. There are indications the company will achieve its 2020 water efficiency goal. Consider the path and steps we’ve followed while creating this Coca-Cola SWOT analysis case study. It is the straightforward path you should follow while analyzing any other kind of business.