Coco Cola Case

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The company we have chosen is Coco Cola India. Coca-Cola India Private Limited re-launched Coca-Cola in 1993 after the opening up of the Indian economy to foreign investments in 1991. Since then its operations have grown rapidly through a model that supports bottling operations, both company owned as well as locally owned and includes over 7,000 Indian distributors and more than 1.3 million retailers. Today, their products are the leading brands in most beverage segments. The Coca-Cola Company’s brands in India include Coca-Cola, Fanta Orange, Fanta Apple, Limca, Sprite, Thums Up, Burn, Kinley, Maaza, Maaza Milky Delite, Minute Maid Pulpy Orange, Minute Maid Nimbu Fresh and Nestea Iced tea, the Georgia Gold range of teas and coffees and Vitingo (a beverage fortified with micro-nutrients). The product for our study is COCO COLA (COKE).

The beverage industry is a major driver of economic growth. A National Council of Applied Economic Research (NCAER) study on the carbonated soft-drink industry indicates that this industry has an output multiplier effect of 2.1. This means that if one unit of output of beverage is increased, the direct and indirect effect on the economy will be twice of that. In terms of employment, the NCAER study notes that “an extra production of 1000 cases generates an extra employment of 410 man days.” 1) What are the determinants of demand of the product that the company is producing? Demand is the quantity of a good that customers are willing and able to purchase during a specified period under a set of economic conditions. The demand of a product depends on various factors. The law of demand states that when the price of a good falls the quantity demanded increases and vice versa, cetris paribus. The other factors other than price which affects the demand of a product are consumer incomes , price of related goods , time period , consumer taste and preferences , consumer expectations about future prices, advertisements etc . The determinants of demand for COCO COLA are as follows.

Price
One 2OO ML bottle of ‘COCO COLA’ is priced as Rs 12. Though fairly a very small fraction in consumer income, still it is a major determinant of its demand. Coco cola mainly today wants to target the rural India, where 700 million Indians reside. The income brackets in such parts are lower, hence the price would play a vital role in determining the demand. A drop in the price would increase the quantity demanded, especially in the rural areas. Also, children one the main consumers of coco cola, and they are restricted with limited pocket money. Therefore, they have a lower purchasing power. Thus their demand of the drink is also governed by its price to a large extent. Income of the consumers

Another important determinant of coco cola is the Income of Consumers, with respect to rural India , as the income of the consumers will rise , they will move to higher income brackets , leading to an increase in their purchasing powers , thus there would be a higher demand for coco cola. Also ,as consumers move to higher incomes , the money they give their children for their personal expenses also increases. Hence, children have more money in their hands which further drives up the consumption of Coco cola. Since Coco Cola is a normal good , an increase in the income will across different income brackets will lead to a higher demand of the product Consumer Tastes and Preferences

Consumer choices is one of the most indicator of the demand of a product. In case of Coco Cola , consumer tastes and preferences plays a vital in determining the demand. Certain consumers might have an inclination towards pepsi or thumbs up. With the growing fetish for fitness we have often noticed a shift in the demand from soft drinks towards energy drinks , while some consumers are prefer fruit based drinks like mazaa or slice. Thus, in such cases as most of these drinks are available for similar prices , the customer preferences plays a crucial in...
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