Always CocaCola?

Photo by Kapungo

Coca Cola (henceforth CC) is the most recognisable brand name in the world; with further accolades for the company including owning 4 of the world’s top 5 brands, and currently operating in just over 200 countries. CC has faced market stagnation and in some countries, and even a decline in market share in the North American market. The consumer needs in these developed nations have been changing; further, these markets have become very saturated  and possess low growth prospects; thus leaving the existing incumbent companies and any others that enter the market to fight for small scraps of market share. Statically, ‘40,000 new consumer package goods are introduced into the United States each year.’This is further emphasised by Vanilla Coke having been launched in 30 countries only 1 year after initially launching in the US. Therefore, indicating exactly how crowded the markets in developed countries are.

The constraints of a crowded marketplace have necessitated the need for CC to quickly expand its products and brand by targeting developing countries to achieve increased profitability. The CC strategy can be seen to incorporate some level of Cross-Country subsidisation; that is to say, Coca Cola operates effectively on a global scale by co-ordinating its operations in the developing world with its established position in the developed world. It leverages its brand recognition, infrastructure, production and manufacturing network, and its financial strength to advance its strategy in the developing world. Therefore, demonstrating how its global strategy is enhanced by its operations on two fronts.

There are, however, significant issues and difficulties that arise from operating in foreign markets, particularly when the culture is quite dissimilar to the home countries’. A thorough grasp of the social, political and legal systems of certain developing markets is imperative. For example, in India, many rural villages and smaller towns will follow the orders of its chief religiously; thus, making direct advertising to consumers difficult if the chief is not appeased first.

Ajegroup (henceforth Aje) is one of the largest producers and distributors of cola in South America and Mexico, but contrasts well to Coca Cola through its conscious desire to operate solely in the developing nations; yielding sales of $1.5bn in 2010.

Aje targets the developing regions of the world, particularly Latin and Central America; and has more recently moved into South East Asia. Direct competition from Coca Cola and Pepsi necessitates a different global business model and marketing strategy; this can been seen as the essence of its competitive advantage.
Standardising marketing mix aspects, such as packaging, promotion and product, minimises costs and maximises consistent brand exposure to the market. Production is controlled exclusively by Ajegroup in contrast to CC, allowing them to keep production costs low and quality high. Further, the group invests significantly in technology to support the production process and to minimise production costs. They have grown 70% annually in the last five years, whilst internationalising the product has allows them to expand into profitable and growing markets whilst undercutting competitors’ prices directly at 40-45%.

The global marketing strategy derives much of its success from its fierce focus on the socially and economically developing Mexico, where Aje conducts 45% of its business. Promotion of ‘Big Cola’ is integral to the success of the company in the Mexican market. The Economist suggests Coca Cola have up to 70% market share in Mexico. However, Big Cola has targeted this segment specifically through its business model, proven to work in the Spanish cultures of the Americas, and its market knowledge of the area. Distribution through small family owned stores accounts for 75% of all cola sales. Yet, Coke is unable to utilise its size effectively over the retailer, as small stores don’t bulk buy in the same way as in other countries; leaving Aje able to capitalise on this with its sales force. Ultimately, in Mexico Big Cola was able to take 7% of the market share from Coke, with a future target share of 10%, due to a resilient focus on production process costs and the bottom line.

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2 thoughts on “Always CocaCola?

  1. Mr. Sam Warren (author of this article) may find it interesting to know the name of the person that sold the first bottled Coca Cola from Coca Cola of Los Angeles,Ca.
    On page 31 of the March, 1951 edition of the Red Barrel (Vol XXX, No. 2, issued by the Coca Cola Company) can be found a photograph with the following caption:

    “Sam A. Warren, 76, was the first salesman to deliver bottled Coca Cola in Los Angeles. That was 1901 and his truck was a buggy. In those early days Warren was obliged to create dealer acceptance by influencing his friends to concentrate on one dealer at a time until that dealer was convinced of consumer demand. Once the product was available, sales continued.”

    Sam Warren married my great grandmother, Martha, in 1917. I once had a letter of recommendation to him from Coca Cola of Los Angeles, dated 1902, wherin his employer laments the seasonal layoffs: “…our only reason to let him go is due to business necessarily lacking in the winter months.”

    I still have his holder for the early fluted soda fountain glass (as seen in the early ads) that he used while field testing to ensure that the soda jerks mixed the stuff correctly.

    Brian Rothhammer

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