Mr. Muhtar Kent, CEO
Erica Wei, Corporate Analyst
May 1st, 2013
Increasing Marketing Focuses in Asian Markets
As society becomes more health conscious, domestic consumers are looking for healthier products. Increasing public concern of health issues, such as obesity, poses new challenges for the carbonated soft drink (CSD) industry, which has experienced declining growth in demand for recent years (Exhibit 1). As the United States has been Coca-Cola’s largest source of revenues by country and the company relies heavily on its domestic CSD market, this trend threatens the company’s future profitability. Coca Cola must dedicate more resources to the emerging markets of Asia in order to capture larger market shares and revenue. U.S. CSD Industry Revenue Growth
| Revenue $ million
| Growth %
Exhibit 1- United States CSD Industry Growth (IBISWorld)
The Coca-Cola Company
An American multinational beverage manufacturer and retailer, the Coca-Cola Company is a leader in non-alcoholic beverage concentrates with over 3,500 beverage products sold in over 200 countries. The company’s products can be broadly categorized into two segments: CSDs such as Coke, Sprite, and Fanta that bring in an estimated 78 per cent of the company’s beverage revenues, and non-carbonated beverages of water, fruit juice, and energy drinks that make up the remaining 22 per cent (wikinvest). Coca-Cola maintains a long-standing industry leader in CSD, hauling in large revenues from its domestic market, with market share reaching 32.7 per cent as in 2012 (IBISWorld). Competitive Advantages & Emerging Opportunities
Brand Equity – the CSD industry has long been a highly concentrated market with little differentiation in products. Brand recognition and equity create high barriers for new competitors to enter the market, and are key to determining sales. As 94 percent of the world’s population recognizes the Coca-Cola brand, it is already well positioned for mass expansion into emerging markets (Smith). Rising Purchasing Power – for the past decade, GDP has grown rapidly for many Asian countries, exceeding that of the North American and European nations (Exhibit 2). More importantly, major Asian countries such as China (over 9 per cent GDP growth for the past decade) and India (GDP growth over 6 per cent for the past decade) are still on a fast track of growth and show promising futures (the World Bank). Along with the growth in GDP comes the increase in disposable income. As a luxury product, CSD and the industry’s performance is tightly linked to the dynamics of population growth and disposable income levels.
Exhibit 2 – Global GDP Growth by Region (the Motely Fool)
Under-explored Markets – Unlike the relatively saturated North American market, the Asian market still has much room for growth. For example, the average American drinks a staggering 170 liters of CSD products annually, compared to China, India, and Malaysia’s 9, 3, and 17 liters a year (Check, Dodson, and Kirk). Furthermore, Asian markets such as China have sustained double digit growth, which is significantly higher than European and North American markets (Mintel). CSD market growth in China has been steadily climbing and is estimated to grow to 20.6bn liters by 2016 (Mintel). Combining the two factors of high growth and low saturation, Coca-Cola is presented with an excellent opportunity to increase revenues and maintain profitability. Increasing Focuses on Asian Markets
Historically, the Asian markets have held a relatively small share of Coca-Cola’s revenue. As of 2011, the Eurasia and Africa markets only consisted of 6 percent of Coca-Cola’ total revenues (gurufocus). Combining...
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