Coca-Cola (KO, Financial) is witnessing continued decline in consumer spending in the U.S. and especially in Europe and Japan coupled with declining global economic environments. The ongoing decline is poorly affecting the company’s short term performance. These factors when combined have led to a significant reduction in expenditures for personal consumption and consequently the non-alcoholic beverage industry is expanding one to two points lower than its earlier forecast at the year start.
Coca Cola is seeing continued decline in Europe with significant competitive pricing and ongoing tough macroeconomic environment. It gained a 3% price mix in Europe which was partially balanced by a 5% volume decline.
Making good progress
Coca Cola is experiencing significant progress in North America through the excellent execution of its strategies and disciplined approach towards pricing enabled by continued media investments, superior quality marketing programs like disciplined price pack and Share a Coke strategies coupled with enhanced execution in paying significant dividends with higher focus on teams and revenue growth in its Sparkling portfolio.
Coca Cola’s considerable added media investments propelled recruitment with significant volume and net revenue growth in major budding markets that include the Middle East, Sub-Sahara Africa and India.
The company is keen on changing the scope and pace of its actions for improving its ability to capture the growth for non-alcoholic beverage industry.
Coca Cola has already expanded its business with planned investments in Keurig Green Mountain and targets to continue the success with its awaited investment in master beverages which illustrates the company’s capability to adapt to the rapidly changing consumer trends and further driving continued innovation. In addition to these key partnerships Coca Cola is implementing a range of actions required for delivering long-term shareholder value.
First, Coca Cola is simplifying and streamlining its operating model for speeding the decision making process and improving its focus on the local markets to accelerate growth.
Second, Coca Cola plans on increasing efficiency by insistently expanding its productivity program. It targets on expanding the program from savings worth 1 billion by 2016 to 2 billion of annual savings by 2017 and 3 billion by 2019.
Coca Cola is restructuring its worldwide supply chain that includes optimizing its manufacturing process coverage in North America and significantly investing in technology to further modernize its operations. Coca Cola is executing zero based budgeting throughout the organization and is significantly redesigning and prioritizing its normal activities for further reducing the costs.
Third, Coca Cola targets to refocus on its core business model of developing into the world’s largest beverage brands and holding the top position among several significant local bottling partners. In North America, Coca Cola has an apparent and perfect plan to refranchise a majority of the company owned bottling territories by 2017 ending and thus retaining nearly one third of the entire bottling distributed volume in North America. And, rest of the territories are expected to be refranchised mostly by 2020.
Fourth, Coca Cola is estimated to accelerate calculated growth and brand investments, targeting both Still and Sparkling categories in a long run.
In Sparkling, Coca Cola expects to work continuously for improving its marketing quality and expanding its worldwide investments by implementing a network marketing model for improving the topline growth through the entire range of trademarks Sprite, Fanta and Coca Cola.
In Still beverages category, Coca Cola expects to continuously invest in its main growth opportunities where it is already a leader, particularly juice and juice drinks and increase the hydration.
Conclusion
Moving ahead, Coca Cola plans on expanding its investments in prioritized profitable categories where it is expected to seize value like value-added dairy. Further, Coca Cola targets on leveraging its partnership model with key companies like FairLife, Monster and Keurig Green Mountain coupled with accelerated M&A activities to improve its growth in core categories. These significant efforts are believed to support Coca Cola in building on its leadership worldwide for Still beverages and enhance growth eventually.
