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7/30/2019 UK_End term

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Utkarsh Kichlu PGDM-IB, 53

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Topic: Sales and distribution strategies of Coca Cola in African Countries like South

Africa

Soft drinks experiences dip in volume growth in 2011

Despite slow economic recovery, South African soft drinks experienced a decline in volume

sales growth in comparison to the previous year. This is largely due to the drop in

carbonates sales volumes as the category experienced inflated growth in 2010 due to South

Africas hosting of the 2010 FIFA World Cup. Carbonates are also losing share of throat to

tap water as consumers look to save money as well as for growing health concerns.

Health and wellness and convenience continue to impact South African soft drinks in2011

Consumers continue to seek both convenience as well as health and wellness benefits when

purchasing soft drinks. Whilst the number of new product launches is limited due to the

recent economic downturn, there have been packaging innovations within existing brands in

order to appeal to the demand for convenience. The small number of new launches within

the category tended to meet the demand for health and wellness by being rich in

antioxidants, vitamins and minerals and containing reduced sugar.

Coca-Cola South Africa continues to dominate sales in 2011

Coca-Cola South Africa dominates South African soft drinks, making up more than half of

total off-trade volume sales in 2011. The company dominates carbonates, accounting for

more than three quarters of total off-trade volume sales. Bromor Foods, a division of Tiger

Brands, has a strong concentrates and sports and energy drinks profile. Pioneer Foods,

which manufactures Pepsi under licence, and is the holding company of both Continental

Beverages (in concentrates) and Ceres Fruit Juices, are also strong players.

Coca Cola is able to gauge per capita consumption of its 239 products by country and

region. Cokes marketers can tell the interested lay person, for instance, that the average

person in Phuket, Thailand, enjoys only 12 servings of Cokes products annually in

comparison to the average citizen of Rome, Georgia, who tosses back 941 eight-ounce

Coke products per year.


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Cokes strength has always been its ability to super-saturate first world markets and to

infiltrate foreign markets, providing rough competition to already established foreign brands

through a variety of tried and true means.

Cokes strategy for the last 115 years has been to get the familiar red and white logo the

1886 handwriting of Mr. Frank M. Robinson, bookkeeper to the products Atlanta, Georgia,

inventor Dr. John Stythe Pembertonfirmly imprinted in peoples minds in the furthest

reaches of the globe. According to Coca-Cola, An Illustrated History(Doubleday: 1978),

Cokes first proprietor, ASA Chandler, told his directors that We are firmly convinced that

wherever there are people and soda fountains, Coca-Cola will. win its way quickly into

the front rank of popularity.

By the turn of the century, Chandlers prediction was proving correct: Coke was alreadyavailable in Canada, Jamaica, Puerto Rico, the Philippines, France and England. The end

of World War II completed the companys global conquest, with the taste for Coke having

been exported to the liberated world by American soldiers. Today, Coke is sold in over 200

countries.

In this millennium, Coke is focusing a great deal of its attention on promoting itself in less-

developed markets and Asia. An article in the New York Times points out that if Coke

consumption in Chinawhich banned the product from Maos takeover in 1949 until 1978 could rise from 7 liters per person to 121 (the average per capita consumption in the

Philippines), Cokes market share would expand by a whopping 40% (January 28, 2001).

This would be good news for a company that came through 2000 a bit worse for wear,

having suffered an unfavorable settlement in a race discrimination suit, layoffs, a

contamination scare in Europe, the departure of its CEO and the failure to complete its

purchase of Quaker Oats and the Gatorade brands. As of this writing, Cokes share price

sits at a 52 week low. These setbacks have brought the companys value down almost

13% from 1999 to the end of 2000 to $72.5 billion, bringing it within the sights of Microsoft,

which, at $70.2 billion dollars, is the worlds second most valuable brand name.

Africa as a Model of Branding Success in the Third World

Cokes success on the African continent ought to stand as a model of how the company

will proceed to build its sales in its fledgling Asia-Pacific Group, which targets 3.2 billion

potential consumers compared to Africas 1.2 billion. The average African drinks two

servings of the companys products per month, twice as much as the average Asian.Despite Africas poverty, raging civil wars and incredible health problems, Coke is sold


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throughout the continent with the exception of Libya, Morocco and the Sudan. The

company has managed to find a presence in hotspots such as Rwanda, Burundi, Angola

(where it has just completed a new US$33M bottling plant) and Zimbabwe.

Coke is South Africas most admired brand name, availablefreely in Johannesburgs posh

malls as well as in the hinterlands where people must walk for miles down dirt roads to buy

a Coke from the spazza shops that sell rural Africans their basic goods. Here, it is the

undisputed leader in overall brand awareness (42%). Its nearest competitor in brand

awareness is the state run phone company, Telkom, which follows Big Red at a mere 28%.

In an October 2000, survey of South Africans, 91% of respondents in urban areas

mentioned Coke as the number one top-of-mind soft drink brand. Coke also owns its

nearest brand competitors, Fanta and Sprite.

Cokes success in Africa has been due to its savvy advertising as well as its ubiquitous

involvement in local community life. City dwellers in South Africa cannot fail to notice the

Coke signs installed in every shop and roadside stand, but Coke has taken the initiative to

reach poorer South Africans in rural areas as well. To this end it has initiated sports

sponsorships, sports development, entrepreneurial development, scholarships and

education projects. It has also relentlessly found ways to get its products trucked into even

the most remote corners of Africa and has cultivated a reputation for corporate honesty and

openness that has won the respect of African businesspeople from Cape Town to

Madagascar. If Coke can succeed here, Asia ought to be a snap.

Africanizing the Quintessential American Brand

Coke, the ultimate American product, manages to assimilate itself into utterly foreign


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cultures by utilizing local advertising campaigns that brilliantly link its products to peoples

aspirations and passions.

Throughout the late nineties the South African advertising agency of Sonnenberg Murphy

Leo Burnett (SMLB) helped promote the drink to the townships and villages of Coke

through emotively linking Coke with Africas great obsession: soccer. It also introduced a

locally famous commercial, shot in Morocco (ironically one of the few countries in the world

yet to enjoy Coke) that likens drinking your first Coke to your first kiss. Lately, SMLB has

linked Coke to the African concept ofseriti(community respect) by airing commercials that

show an African boy become a man of stature in his township by selling Coke.

These initiatives have helped make Coke an enduring symbol of Africa and its number one

brand. They also prevented Cokes main US rival, Pepsi, from gaining any market share inSouth Africa at all. A few years ago Pepsi appeared on the scene with an aggressive

marketing campaign aimed at the African consumer. Now it is once again unavailable, a

victim of Cokes utter control over this segment of the marketplace.

There is still much room for Coke to expand in Africa, which accounted for only 2 percent of

the companys US$3.7 billion operating profit last year. Last quarter Africans consumed

10% more Coke than a year earlier, while their counterparts in the US leveled off theirCoke purchases. Nonetheless, Africans still lag behind their First World counterparts in

consumption. The New York Timesquoted Cokes current chairman, Douglas M. Daft, as

especially interested in overseas expansion. According to Daft, consumers outside the US

drink less than one serving of carbonated soft drinks per week, compared to the one to

three sodas American consumers quaffeach day.

On April 22 of this year, Coke launched a worldwide ad campaign designed to oust its two-

year-old slogan Enjoy and replace it with Life Tastes Good. Its television advertising isembracing a positive, story-telling approach that shows Coke playing a vital part in lifes

meaningful moments, whether they are relaxing with friends or getting married. The

company has mandated thirteen global creative hubs to create these ads, one of which is

in Johannesburg, South Africa. These hubs have been given creative license to tailor their

share of the 30, 30-second TV advertisements to fit the profile of their local consumers so

long as the resultant ads remain within the companys overall conceptual framework.

According to Penny McIntyre, Divisional Marketing Director of Coca-Cola Southern and

East Africa, the new advertising approach ought to be extremely effective here in Africa


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where we are telling stories that are natural and honest not contrived or over the top in

their theatricality because the power of Coca-Cola is in the authentic way it can connect

people to themselves, to others, and to a culture that it is part of.

South Africa has already contributed to the campaign through a commercial illustrating the

meeting of the minds between a grandfather and his grandson in Pimville, Soweto. The

upbeat tone of these advertisements ought to further entrench Coke as the number one

brand here and provide the company with a new means to continue its further penetration

into Africa and indeed the world.

Throughout the world, Coca-Cola's success is achieved through an alliance of companies

engaged in advanced production and highly efficient distribution. The alliances are in

constant flux, and provide opportunities for aggressive entrepreneurs to develop and expandin a number of businesses. Occasionally, a micro enterprise in one segment of the alliance

will develop into a much larger enterprise through its association with the Coca-Cola system.

If there is a singular role model for South African entrepreneurs involved in the Coca-Cola

network, it would no doubt be the Kunene brothers. The Kunenes started as entrepreneurs

in the downstream network, selling Coca-Cola in Boksburg. They now have moved into the

manufacturing system, retaining ownership in a multimillion dollar Coca-Cola bottling

enterprise

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