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Coca-Cola's Market Strategies Explored

General Report October 30, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Recent Product Innovations and Collaborations
  3. Market Performance and Financial Insights
  4. Consumer Preferences and Product Discontinuations
  5. Sustainability and Corporate Responsibility
  6. Geopolitical Impact and Consumer Boycotts
  7. Conclusion

1. Summary

  • Exploring The Coca-Cola Company's brand evolution, this report reveals insights into how the company navigates market dynamics and consumer behavior. Coca-Cola's recent initiatives, such as launching BACARDÍ & Coca-Cola Ready-To-Drink Cocktails and innovative products like Coca-Cola Oreo Zero Sugar, signify its effort to capture emerging consumer trends. Competitive dynamics are addressed with analyses of Coca-Cola's stock performance in comparison to PepsiCo and Dr. Pepper, highlighting substantial market share against its rivals. Key financial indicators were disclosed, showing a slight lag in projected revenue despite robust trading activities. Coca-Cola’s strategic response to consumer preferences includes product discontinuations, such as Diet Coke with Splenda, reflecting adaptability to changing tastes. Sustainability efforts are underscored by investments in Africa’s water security and packaging innovations aligning with global sustainability goals. Additionally, the report sheds light on regional impacts of geopolitical tensions, with consumer boycotts in the Middle East leading to shifts towards local alternatives.

2. Recent Product Innovations and Collaborations

  • 2-1. Launch of BACARDÍ & Coca-Cola Ready-To-Drink Cocktail

  • On September 17, 2024, The Coca-Cola Company and Bacardi Limited announced plans to launch BACARDÍ Mixed with Coca-Cola as a ready-to-drink (RTD) cocktail. This cocktail will debut in select European markets and Mexico in 2025. James Quincey, Chairman and CEO of The Coca-Cola Company, stated that this collaboration supports their strategy as a total beverage company, tapping into the growing RTD market. The integration of these two iconic brands aims to provide consumers with a convenient, high-quality option to enjoy one of the world’s most popular cocktails, which historically combines BACARDÍ rum and Coca-Cola. The packaging will display responsibility symbols, emphasizing that the product is intended solely for consumers of legal drinking age. The alcohol by volume (ABV) for this cocktail is set to be approximately 5%, although it may vary based on market regulations.

  • 2-2. Coca-Cola and Oreo Collaboration

  • Coca-Cola and Oreo partnered to introduce Coca-Cola Oreo Zero Sugar and Oreo Coca-Cola Sandwich Cookies. The Coca-Cola Oreo Zero Sugar drink offers a flavor experience akin to Coke Zero with an additional hint of Oreo. The cookies feature a dual design: one side remains traditional Oreo black while the other side is red with Coca-Cola branding. The filling is infused with Coca-Cola flavor, and the cookies are enhanced with edible glitter and popping candy to mimic carbonation. These products are available temporarily, with cookies pre-ordering starting from September 9 in markets including the US and Brazil, and the drink is currently accessible online from Coca-Cola.

  • 2-3. Jack Daniel’s and Coca-Cola Cherry Canned Cocktails

  • Jack Daniel’s launched a new ready-to-drink canned cocktail, Jack Daniel’s and Cherry Coca-Cola. This drink, marketed as a refreshing variation on a classic, features a blend of Tennessee Whiskey and Coca-Cola cherry flavor. Available in four-packs at a suggested retail price of $12.99, each can contains 7% ABV and is priced at approximately $3.50 per can. The introduction of this limited edition cocktail comes amid a growing demand for RTD beverages, which experienced a 2% volume growth and a 6% value growth in 2023, particularly due to consumer convenience. The RTD category is expected to continue to grow annually at about 3% until 2028. To maintain consumer interest, brands are innovating with new flavors and premium beverages.

3. Market Performance and Financial Insights

  • 3-1. Coca-Cola Stock Performance Analysis

  • Coca-Cola (KO) closed the latest trading day at $72.10, indicating a +0.97% change from the previous session's end. This change outpaced the S&P 500's 0.13% gain on that day. Shares of Coca-Cola saw a gain of 3.22% over the previous month, trailing the Consumer Staples sector with its gain of 4.49%. Recent trading sessions have shown volatility, with the stock ending at $71.80, a -0.42% adjustment the following day. The beverage giant's stock has gained 4.52% over the past month, exceeding the sector's gain of 4.12% and the S&P 500's gain of 1.54% during that period.

  • 3-2. Earnings Forecast and Revenue Estimates

  • Coca-Cola is expected to report EPS of $0.75, reflecting a 1.35% increase from the corresponding quarter of the prior year. The current consensus estimates forecast revenue to be $11.65 billion, indicating a 2.56% decline compared to the same quarter last year. For the entire fiscal year, consensus estimates project earnings of $2.85 per share and revenue of $46.03 billion, which represents changes of +5.95% and +0.61%, respectively, from the previous year. Recent trends in analyst forecasts suggest a 0.03% rise in the Zacks Consensus EPS estimate, indicating positive revisions and analyst confidence in Coca-Cola's business performance.

  • 3-3. Comparison with PepsiCo and Dr. Pepper Stock Performance

  • Coca-Cola and PepsiCo collectively command a 71% share of the U.S. carbonated beverages market, where Coca-Cola has a substantial lead with a market share of 46.3% compared to Pepsi's 24.7%. Over the past decade, Coca-Cola's stock has risen by 70%, although this lags behind the S&P 500's 184% return. Pepsi's stock has performed slightly better with a 93% increase during the same period. Additionally, while Coca-Cola's dividend growth averaged 3.3% over the past five years, Pepsi's growth was 6.5%, suggesting that Pepsi has a slight edge in terms of dividend performance. However, Coca-Cola's slight outperformance of 22.1% in the last year shows its strength in a turbulent market.

4. Consumer Preferences and Product Discontinuations

  • 4-1. Discontinuation of Diet Coke with Splenda and Coca-Cola Cherry Vanilla

  • Coca-Cola announced the discontinuation of two popular beverages, Diet Coke with Splenda and Coca-Cola Cherry Vanilla, in September 2024. This decision came as a response to changing consumer taste preferences. Diet Coke with Splenda, an artificial sweetener variant intended as an alternative to aspartame, has been notably missed by consumers who claimed it was superior to regular Diet Coke. The brand confirmed these changes in a post on X (formerly Twitter) expressing regret over the disappointment caused.

  • 4-2. Impact of Changing Consumer Tastes

  • The discontinuation of Coca-Cola Cherry Vanilla was attributed to the constant evolution of consumer preferences and lifestyles. Coca-Cola explicitly stated that as a 'Total Beverage Company,' it is committed to adapting its product offerings to align with what consumers desire. This ongoing assessment of consumer preferences is critical to their strategy for maintaining relevance in the competitive beverage market.

  • 4-3. Public Reactions to Discontinued Products

  • Public reactions to the discontinuation of Diet Coke with Splenda and Coca-Cola Cherry Vanilla have been overwhelmingly negative, with many fans expressing their disappointment through social media platforms. Users on Reddit described Diet Coke with Splenda as 'the best soda on the planet' and shared feelings of loss upon its removal. In particular, one user lamented, 'Please tell me I’m not the only one who thought Diet Coke with Splenda was the best drink on the planet! It was so good!' Such sentiments highlight the strong connection consumers had with these products.

5. Sustainability and Corporate Responsibility

  • 5-1. Coca-Cola's Water Stewardship Initiative in Africa

  • The Coca-Cola Company in Africa, alongside its bottling partners—Coca-Cola Beverages Africa (CCBA), Equatorial Coca-Cola Bottling Company (ECCBC), and Coca-Cola HBC—has announced a significant investment of nearly USD 25 million. This initiative aims to address critical water-related challenges in 20 African countries from this year until 2030. Led by Global Water Challenge (GWC) and executed with environmental organizations such as The Nature Conservancy (TNC), International Union for Conservation of Nature (IUCN), and World Wildlife Fund (WWF), this initiative aims to improve water security for millions of Africans, supporting community health through increased access to clean water.

  • 5-2. Sustainability Goals and Packaging Innovations

  • Coca-Cola has established a 2030 Water Security Strategy that focuses on enhancing water security where the company operates and sources its ingredients. The beverage giant stresses that one in three Africans face water insecurity and has committed to initiatives that protect and enhance watershed health while improving sanitation services. This initiative aligns with the United Nations' Sustainable Development Goal 6, which aims to ensure availability and sustainable management of water and sanitation.

  • 5-3. Response to Health Concerns and Consumer Advocacy

  • Coca-Cola has acknowledged the increasing consumer advocacy regarding health concerns. The company is focusing on transforming its product portfolio by reducing sugar content and launching innovative new products that meet evolving consumer preferences. This responsiveness to consumer health trends is critical as the company navigates an increasingly competitive market.

6. Geopolitical Impact and Consumer Boycotts

  • 6-1. Boycotts Against Coca-Cola and Pepsi in the Middle East

  • In the context of the ongoing conflict in the Middle East, consumers have initiated boycotts against Coca-Cola and Pepsi. This movement arises from accusations that these companies partially fund the Israeli military, which both corporations deny. Additionally, there is a widespread perception that these American brands symbolize the United States, which is seen as an ally to Israel. This sentiment has led individuals, particularly in countries such as Qatar, to view participation in the boycott as a moral duty. A notable example is the experience shared by Malik Al Hassan from Doha, who stated, 'This is a duty for all of us... we must boycott because these companies support the Zionist entity in a big way.' The boycott has significantly influenced consumer behavior in the region, leading to a marked shift in product preferences.

  • 6-2. Consumer Sentiment and Brand Perception

  • The boycott against Coca-Cola and Pepsi has resulted in notable changes in consumer sentiment and brand perception in the Middle East. Individuals are increasingly choosing to support local beverage options as a response to the geopolitical situation. This trend reflects a broader inclination towards nationalism and local pride. For instance, in Egypt, Mohamed Nour, who founded a local brand, V-7 Cola, reported a 40% increase in local market sales during the boycott, showcasing the growing preference for home-grown alternatives. This situation is corroborated by the facts that Coca-Cola's sales in Egypt dropped by at least 10% in the first half of 2024 and that overall beverages from Western brands saw a decline of 7% in the region.

  • 6-3. Local Alternatives Gaining Market Share

  • As the boycott continues, local beverage brands in various Middle Eastern countries are experiencing significant growth. In Pakistan, consumer preference for local brands like Cola Next and Pakola has surged, increasing their market share from 2.5% prior to the boycott to about 12%. Similarly, in Qatar, the local brand Kinza has surpassed Coca-Cola to become a leading choice among consumers. According to Fawaz Idrissi from the Abu Issa company, Kinza 'has taken over from Coke,' which was previously the second brand in market share. The rise of these alternatives highlights the evolving landscape of consumer preferences driven by political sentiments, suggesting that more consumers are prioritizing local products over established international brands.

Conclusion

  • The Coca-Cola Company's ability to adapt and innovate positions it as a leader despite facing multifaceted challenges. Key findings reflect resilience through successful product collaborations and strong financial health, providing evidence of adaptability in evolving markets. The introduction of popular ready-to-drink options and strategic product discontinuations demonstrate responsiveness to shifting consumer desires. Nevertheless, growing demands for sustainable practices and geopolitical factors pose challenges that accompany new opportunities. The sustainability initiatives across Africa highlight Coca-Cola's commitment to social responsibility, aligning business practices with community benefits. Despite tensions affecting brand perception, particularly in the Middle East, Coca-Cola’s brand remains influential, though it underscores the necessity for nuanced regional strategies. Future prospects for Coca-Cola involve leveraging its innovative capacity to bolster market share against competitors like PepsiCo and Dr. Pepper while focusing more on sustainable and health-conscious products to engage new consumer bases. Practical applications of these findings suggest Coca-Cola should amplify efforts in sustainability and regional engagement to sustain growth.

Glossary

  • Coca-Cola Company [Company]: The Coca-Cola Company is a multinational beverage corporation known for its flagship product, Coca-Cola. Established in 1892, it has grown to become one of the most recognized brands globally, offering a diverse range of beverages including soft drinks, juices, teas, and waters. The company's commitment to sustainability and community engagement is evident in its various initiatives, such as water stewardship projects and sustainable packaging goals.
  • PepsiCo [Company]: PepsiCo is a leading global food and beverage company, known for its flagship product, Pepsi. Competing directly with Coca-Cola, it has a diverse portfolio that includes snacks, beverages, and other food products. PepsiCo has focused on expanding its healthy product offerings and addressing consumer trends towards wellness and sustainability.
  • Dr. Pepper [Company]: Dr. Pepper is a unique soft drink brand known for its distinct blend of 23 flavors. It has gained a significant foothold in the beverage market, often positioned as a competitor to Coca-Cola and Pepsi. The brand has been notable for its strategic marketing and product diversification, appealing to a loyal consumer base.

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