Management Report: The Coca-Cola Company
Introduction
The Coca-Cola Company is the leading producer, marketer, and distributor of non-alcoholic beverages around the world. The Coca-Cola Company’s soft drinks are present in more than 200 countries and territories across the world. The name of the company “Coca-Cola” comes from the world’s best-known brand name; the Coca-Cola soft drinks. Nevertheless, Coca-Cola has an array of soft drink products under its name. Currently, the Coca-Cola Company has over 500 soft drink brands, which range from water, tea, coffee, juices, sports drinks and energy drinks. The most famous brands include Coca-Cola, Sprite, Fanta and its variants, Diet Coke, Dasani and Coke Zero among other brand names (The Coca-Coal Company, 2013). The Coca-Cola’s headquarters is situated in Midtown Atlanta, Georgia.
Procurement of the Coca-Cola Company
The procurement process in The Coca-Cola Company takes place on two levels: central and regional level. Each of the two distinct levels has a unique function that it plays in the overall production, marketing and distribution of The Coca-Cola products. Besides that, each level of Coca-Cola entity has unique products hence requires different procurement guidelines and frameworks.
The Centrally Based Procurement Process
The central procurement process for the Coca-Cola Company is a function of the Georgian headquarter and the top management. Generally, the Coca-Cola headquarters produces the soft drink concentrate, which it distributes to its various bottler companies around the world. The Coca-Cola Company procures items unique to its role as the main supplier of soft drink concentrate.
The Coca-Cola Company’s head office procures ingredients for the concentrate. The ingredients for Coca-Cola soft drink includes plant extracts such kola nuts, lime juice, citric acid, caramel colourings, essential oils(nutmeg, vanilla, coriander and nerolli among others)( Pendergrast, 2013, p. 491). In this case, Coca-Cola has to solicit for individuals and firms to deliver these ingredients for making the Coca-Cola concentrate. Some of this products have to come from oversees while other products come from within the United States. At the same time, the Coca-Cola head office also procures tanks, shipping services, advertising services, construction and other vital duties for its operations around the world.
The Coca-Cola Company’s operations follow the law of the country where the company operates. The head procurement of the ingredients and associated services follows the procurement laws of the United States. This is because the Coca-Cola Company is in the United States. Different states of the United States have got different contract laws, which apply in the procurement process for Coca-Cola Company’s ingredients. For instance, if the Coca-Cola Company has to secure transportation, advertising and other services from different forma within the United States, the Company has to follow the legal provisions of that state. Nevertheless, many scholars believe that the enactment of the Uniform Commercial Code has helped simplify the definition of contract laws regarding procurement processes in the United States (Tepper, 2012).
Similarly, the Coca-Cola Company has to follow the legal provisions of the Countries it operate in outside the United States. This is because the Coca-Cola Company has to obey all the territorial rights of the countries in which it operates. Strategically, failure to observe the laws of the countries where it operates in it means that the company would risk losing its license to operate in that particular territory or nations. For instance, in the United Kingdom the Coca-Cola Company has to adhere to the procurement law of the United Kingdom or the European Union. The company has to abide by the law as a strategy to enhance its marker leadership. Essentially, any legal challenge to Coca-Cola’s procurement practice can lead to financial losses. For instance, each country or region has its own unique definitions of duties and obligations of persons in the (procurement) contract.
Regional or National-Based Coca-Cola Procurement
Regional Coca-Cola procurements are a function of the regional Coca-Cola head offices, which are responsible for all procurements of their regions. The manner at which the regional head offices and their respective bottlers carry own with the procurement processes depends on the ownership of the bottler itself. The Coca-Cola Company has a stake in many bottler companies in the world. For instance, the Coca-Cola Company owns the Coca-Cola North American branch. As such, the Coca-Cola Company handles all the Coca-Cola procurements in North America). For instance, the Coca-Cola Company does not need to sell Sprite, Fanta or Coca-Cola concentrate or syrup to its North American branch because the company partially owns the Coca-Cola North America. According to the National Geographic (2013), the Coca-Cola North America has to procure other companies to supply aluminum cans, plastic bottles, water, corn sweetener, carbon dioxide, transport tracks and cars among other goods and services.
Outside the United States, most of the bottlers operate as independent bottlers companies. Nevertheless, The Coca-Cola Company procures their exclusive role to bottle and distribute Coca-Cola products in their regions, territories or countries. This is because Coca-Cola sets quality standard for bottler companies to follow. The standards include the quality of water, the colour shade for its bottles, the shape of the bottles and the amount of sugar among other quality requirements. Bottlers that do not follow the set rules and regulations lose their licenses. However, bottler companies procure the services of other companies to enable them operate smoothly. For instance, bottlers in other parts of the world enter into a contract with other companies to supply packaging materials. Above all, the bottlers have to procure the concentrate from central Coca-Cola Company.
Overview of the Production
The production of the Coca-Cola beverages take happens in two stages. First, The Coca-Cola Company produces the concentrate at its concentrate factories. The concentrate manufacturing plants are located in various parts of the world such as Singapore, Swaziland, and in the United States among other places.
Peninsula Beverage Company is responsible concentrate manufacturing for Coca-Cola. The concentrate manufacturing of Coca-Cola soft drink is a rigorous chemistry operation. According to Peninsula Beverage Company (2014), manufacture of Coca-Cola concentrate demands knowledge of merchandize “7X,” a highly secretive formula. Secretive employees, privy to the secrete formula are the once who mix the various ingredients in known proportions to produce Coca-Cola. Peninsula Beverage Company also produces syrups for Fanta, Sprite and other Soft Drinks under its name, which it sends to its bottlers around the world.
In the bottling plant, the licensed bottlers mixes the syrup in water in the ration of 1:5; that is, 1 gallon of syrup produces 6 gallons of the finished product (National Geographic, 2013). The dilute mixture passes through a pressure mixer at a lower temperature in the presents of carbon dioxide to carbonate it. The machines then bring on clean glass or plastic bottles and aluminum cans with the product label for bottling. Later on, the bottler warehouses the finished product to await marketing. Coca-Cola bottlers rely on ground water, which they treat to remove taste and salts. Bottles, cans, crates and associated materials come from the procurement process. As such, the bottler’s duty is to dilute the syrup, carbonate, bottle and distribute the finished product.
The Distribution Strategy for Coca-Cola Products
The Coca-Cola has a unique distribution strategy that gives it an edge over its rivals. According to Shankar et al. (2008), The Coca-Cola Company market dominance depends entirely on its penetrative approach to distribution of its products. The Coca-Cola Company’s distribution model depends on the strategic location of bottling plants and middlemen, both large and small. Each country can have one or several bottling plants, strategic in the main market zone. Each major city may have its own bottling plant to produce and distribute products to the city and its hinterland. For instance, the Coca-Cola Hellenic (group) has more than 300 bottling plants, situated in different parts of Europe (Coca-Cola Hellenic, 2014). Each of the bottling plant serves a particular market niche enabling the company to reduce transport-related costs.
Large middlemen are the distributors performing the role of wholesalers and agents in the distribution channel. The larger distributors serve certain regions of the market, they supply to retailers and smaller distributors. The Coca-Cola Company also urges its bottlers/franchises to distribute finished products direct to smaller distributors. Smaller distributors are strategically found in remote areas of the country (Vrontis & Sharp, 2003). As such, The Coca-Cola Company entices its distributors with discounts to keep them into business. Nevertheless, micro distributors are common in the developing world, where infrastructure is underdeveloped.
At the same time, the Coca-Cola Company distributes its products directly to retail store and supermarkets. Retail stores have a large market base, which makes economic sense to them to buy Coca-Cola in large scale to enjoy economies of scale. Direct distribution of Coca-Cola products to retail stores also buys their loyalty to Coca-Cola Products. As such, The Coca-Cola Company is able to entice newer middlemen and retail stores.
The Coca-Cola Company also distributes Coca-Cola-branded refrigerators to retailers. Refrigerators enable consumers to enjoy cold soft drinks, especially during the hot weather. In this case, Coca-Cola is able to penetrate remote areas because customers associate thirst with Coca-Cola products.
Coca-cola Company also distributes beverage concentrate or syrup to larger restaurants such as McDonalds. This is because larger retail stores have the ability to dilute Coca-Cola, Sprite or Fanta syrup and refrigerate it for servings in plastic cans and bottles (United States Securities and Exchange Commission, 2012). The distribution of soft drink syrup to restaurants enhances brand loyalty; restaurants benefits from economies of scale. Besides that, restaurants and retailers are able to blend the concentrate further to achieve unique tastes for their customers.
Conclusion
In conclusion, Coca-Cola is a global leader in production, marketing, and distribution of soft drinks and none-alcoholic drinks globally because of its unique business model. Coca-Cola uses a franchise approach to production and distribution of its products. The Coca-Cola Company produces mainly concentrate which it distributes to its franchise/bottlers for dilution, carbonation and distribution. From the factory, the bottler channels the products to both distributors and retailers where the products are eventually sold directly to consumers. Coca-Cola has also adopted the use of mini distributors for its products. Mini distributors enable the company reach out to isolated segment of the society; slums and remote areas to enable them enjoy cold Coca-Cola product.
References
Coca-Cola Hellenic, 2014. Coca-Cola HBC Ireland and Northern Ireland. [Online] Available at: http://www.coca-colahellenicireland.com/aboutus/whatwedo/> (Accessed 8 January 2014).
National Geographic, 2013. Coca-Cola National Geographic Ultimate Factories / Mega Factories HD Documentary. [Video Online] Available at: <http://www.youtube.com/watch?v=FWsyM0hZvpc>(Accessed: 8 January 2014).
Peninsula Beverage Co., 2014. How Coca-Cola Is Made.[Onlline] Available at: <http://www.peninsulabeverage.co.za/cocacola/how-coca-cola-is-made/> (Accessed 8 January 2014).
Pendergrast, M., 2013. For God, country and Coca-Cola: the definitive history of the great American soft drink and the company that makes it. New York: Basic Books
Shankar, S., Ormiston, C., Bloch, N., Schaus, R., Vishwanath, V., & Global, E. M., 2012. How to win in emerging markets. Image. [Online] Available at: <http://sloanreview.mit.edu/article/how-to-win-in-emerging-markets/> Accessed: 8 January 2014).
Tepper, P. R., 2012. The law of contracts and the Uniform commercial code. London: Cengage Learning.
The Coca-Cola Company, 2013. The Coca-Cola Company Reports First Quarter 2013 Results. [Onlne] Available at: <http://www.coca-colacompany.com/press-center/press-releases/the-coca-cola-company-reports-first-quarter-2013-results> (Accessed 8 January 2013).
The Coca-Cola Company, 2014. The Coca-Cola North America. [Online] Available at: http://www.coca-colacompany.com/our-company/north-america-group> (Accessed 8 January 2014).
United States Securities and Exchange Commission, 2012. The Coca-Cola Company. Available at: <http://www.coca-colacompany.com/annual-review/2012/pdf/form_10K_2012.pdf> (Accessed 8 January 2013).
Vrontis, D. & Sharp, I., 2003. The strategic positioning of Coca-Cola in their global marketing operation. The Marketing Review, vol. 3, pp. 289-309.
Appendices
Appendix 1: Coca-Cola Company’s Distribution Models for Concentrate/Syrup
The Coca-Cola Company
Major Restaurants/Retail Stores Bottlers
Appendix 2: Coca-Cola Company’s Distribution Models for Finished Products
The Coca-Cola Company Distributors Retailers Consumers
Distributors Mini Distributors Consumers
Appendix 3: Coca-Cola Company’s Sales (Units in Billions) for 2010, 2011, 2012
| Year | Units Sold |
| 2010 | 25.5 |
| 2011 | 26.7 |
| 2012 | 27.5 |
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