PESTLE and SWOT analysis of Coca Cola 2017
PESTLE & SWOT analysis of Coca Cola
- For PepsiCo Pestle and Swot analysis, see PepsiCo Pestle & Swot.
- For Unilever Pestle and Swot analysis, see Unilever Pestle & Swot.
The Coca-Cola Company is an American based multinational corporation that is engaged in the manufacture, retailing and marketing of more than 500 non-alcoholic beverage brands including the iconic Coca Cola. Founded in 1892, the company is headquartered in Atlanta, Georgia overseeing a franchised business model where it makes the famed Coca Cola syrup concentrate which it then sells to more than 300 bottling partners located around the world. Revenue for the year ended 31st December 2016 was US$41.863billion on operating income (before tax) of US$8.136billion. Of the more than 500 brands The Coca-Cola Company owns, 21 generate annual retail revenue in excess of US$1billion (Annual Review 2016). Interbrand, the global brand consultancy ranked the Coca Cola brand 3rd in the 2016 rankings for “Best Global Brands” after Apple and Google assigning it a brand value of US$73billion (Interband 2016).
2.0 Coca Cola PESTLE analysis 2016-2017(Opportunities and threats)
2016 was a challenging year for the carbonated soft drinks (CSD) market in the US which has declined for nine straight years, largely due to a decline in soda sales, part of a long-term trend that has seen total sales and volume of sugary sodas consumed decline for 11 consecutive years, as consumer worries over use of high calorie sugars and artificial sweeteners escalate (Kell 2017). Even sales for diet sodas, supposed to be the industry saviours, continue to dip primarily due to increased scepticism of artificial sweeteners such as aspartame, a controversial artificial sweetener often used in diet colas (Kell 2017). Diet sodas sold by both The Coca-Cola Company and rival Pepsico posted steep volume declines last year as consumers opted for healthier options. 2016 sales for Diet Coke fell by 4.3% from the previous year while Diet Pepsi was down by 9.2% (Kell 2017).
With carbonated drinks losing market share to non-carbonated drinks especially bottled mineral water, Coca-Cola is seeking to remake its portfolio under new CEO James Quincey, with strategic emphasis being placed on what American consumers are actually drinking such as bottled water or very small mini soda cans.
In the following section, we will thus identify the major drivers of change behind Coca Cola’s external environment looking at the general trends driving the soft drinks industry in general. This will help us understand how The Coca Cola Company can utilise its brand competencies so as to take advantage of macro environmental opportunities while at the same time neutralising emerging threats that are chipping away at its success.
2.1 Political environment
Coca Cola and other soft drinks companies like PepsiCo are currently embroiled in a battle over proposals across many US states to introduce a soda tax on artificially sweetened beverages such as diet soda. The soda tax which was first introduced in Berkeley in 2015 was also adopted by Philadelphia taking effect from January 2017. The tax, which raises soda prices by 3 cents per ounce in Philadelphia, has recently been successfully passed in four other state cities including San Francisco, Oakland, Seattle in Washington and Boulder Colorado (Esterl 2017). If more states successfully follow through with similar proposals designed to reduce soda consumption, it will hurt Coca Cola sales at a time when unit case volume sales are already in decline as carbonated drinks lose their popularity among health-conscious consumers. Soda taxes have already been shown to reduce soda consumption, with a UC Berkeley study in August 2016 showing a 26% drop in the consumption of soda among low-income Berkeley neighborhoods after the Californian city introduced the tax (Anwar 2016; Cohen 2016).
The early part of 2017 also the introduction of a Muslim travel ban by the Trump administration. Coca Cola Chairman Muhtar Kent joined a swath of more than 1000 CEOs in publicly condemning the ban which he said would impact the company’s long standing policy that values diversity and mobility of its global employees and customers (Kaplan 2017).
2.2 Economic environment
Staggering declines in soda consumption in the broader US market have unfortunately hurt Coca Cola sales with the company recording revenue of US$41billion in 2016, its lowest since 2010 (See figure 1 below). The declining sales are due to a combination of both economic and social trends that are changing the beverages people drink today across the US and Europe. Such trends are responsible for the US firms decision to cut 1,200 jobs later this year, a 22 per cent reduction of its 5,500 corporate staff (Rodionova 2017).
Figure 1: Coca-Cola's revenue and income 2009-2016 (in million U.S. dollars)
2.3 Social environment
The macro social environment can include changes in people’s lifestyles, fashion, labour composition, social mobility and other demographic trends that have the potential to either threaten Coca Cola or avail opportunities to them. One such lifestyle change with future potential to affect Coca Cola sales dramatically is consumer-focus on healthy beverages. With soda consumption in the United States falling to a 30 year low in 2016 (Sun 2017), bottled water consumption finally managed to overtake soda to become the largest beverage category by volume (see figure 2). Americans are now drinking more bottled water than sugary drinks amid increased concern over their impact on health, in particular Type 2 diabetes and obesity rates, which have risen to among the highest levels in the world (Purdy 2016).
Figure 2: US beverage market growth 2015-2016
2.4 Technological environment
When it comes to the technological macro environment affecting The Coca Cola Company, it is the digital revolution especially the emergency of online marketplaces, that is having a revolutionary impact on the way the company has always transacted with its consumers (Annual Review 2016). The pace of retail technological change especially the growing acceptance of digital bots, artificial intelligence, driverless delivery networks, 3-D printing and other technologies with a focus on speed, convenience and ubiquity are enabling shoppers to operate seamlessly across and between all retail channels. For companies like Coca Cola, this changing retail landscape provides incredible new opportunities to create stronger relationships with their retail customers and shoppers, many of whom are now just a click’s reach of desire from their beverage brands.
2.5 Legal environment
Coca Cola is currently the subject of a lawsuit filed in a California district court by non-profit group Praxis Project. The lawsuit alleges that Coca Cola deliberately deceives consumers, misleading them about the health risks of drinking sugary drinks and sodas. The lawsuit, which also includes the American Beverage Association (a trade group funded by US beverage firms) as defendants, aims to prove that Coca Cola has been violating the Fair Advertising Law in its marketing and wants the defendants to face marketing restrictions similar to those faced by Tobacco companies. If successful, the lawsuit could shake the entire soft drinks industry. It may force Coca Cola to advertise public health warnings— e.g. "consumption of sugar-sweetened beverages can lead to type 2 diabetes, cardiovascular disease and obesity"—on their sodas, similar to health warnings tobacco makers have been forced to add to their packaging for decades (Kell 2017b).
2.6 Environmental factors
The transition to a low carbon and resource-efficient future is underway, affecting almost every sector of the global economy. However, for the world’s biggest drinks brand, the biggest environmental issues it continues to grapple with are local environmental considerations especially the impact of its waste from all its plastic bottles and aluminium cans. According to Elmore (2017), The Coca Cola Company produces more than 100bn plastic bottles annually, much of it ending up in the world’s oceans rather than plastic recycling systems.
The Coca Cola Company recognizes the current trends in consumers and governments demanding businesses to increase waste recycling. In its 2016 Annual Review, it committed to raising the amount of recycled plastic it uses in bottles from 40% to 50% by 2020. But environmental groups such as Greenpeace and Friends of the Earth have criticized Coca Cola’s proposal calling it merely ‘PR spin’. They are instead calling for all plastic drinking bottles to be made of 100% recycled plastic in addition to the introduction of an industry-wide deposit return scheme so that fewer plastic bottles end up outside plastic recycling systems (Taylor and Laville 2017).
Figure 3: The Coca Cola Company pestle analysis 2016-2017
3.0 The Coca Cola Company BCG Matrix
Coca Cola BCG Matrix available upon request.
4.0 The Coca Cola Company SWOT analysis 2017
- Strong brand reputation. The Coca Cola brand was ranked 3rd in the 2016 “Best Global Brands” Interbrand rankings after Apple and Google.
- Boasts 21 brands that earn annual retail revenue in excess of US$1billion
- Strong and creative brand marketing.
- Growing product portfolio with more than 500 new product lines in 2016 alone.
- Coca Cola has a less diversified portfolio that is too focussed on beverages compared to rival PepsiCo which has a much broader product diversification that includes snack brands in addition to beverages (Walsh 2016).
- Consumption of carbonated sodas has been in decline steadily over the years in the US reaching a 30 year low in 2016 (Walsh 2016; Kell 2017). This is reflected in Coca Cola’s revenues which have been in decline too since 2012.
- The final divesture of its Chinese bottling operations in November 2016 will help the company focus better on the more profitable syrup manufacturing business which offers more opportunity for future profitability. This also explains why the company has refranchised many of its bottling operations in the US (Annual Review 2016).
- The creation of Coca-Cola Beverages Africa will and launch of Coca-Cola European Partners are key strategic moves in important and valuable markets.
- Growth in lower-calorie beverages such as value-added bottled water (e.g. sparkling, flavored, and "vitamin" waters), coffee, teas and other high growth healthy beverages.
- Coca Cola recently lost a lucrative NBA sports sponsorship deal to PepsiCo at a time when soda consumption is not only declining but when Coca Cola is aalso losing US market share of non-carbonated drinks to its biggest rival (Walsh 2016).
- Lots of US cities and states are reviewing proposals to implement a soda tax, a tax that already has been shown to reduce soda consumption wherever it’s introduced.
- Coca Cola is currently the subject of a lawsuit filed for misleading consumers about the health risks of drinking sodas. If successful, the lawsuit could force beverage firms to display public health warnings on their sodas, similar to those tobacco makers add to their packaging for decades.
Figure 4: Coca Cola SWOT analysis 2016-2017
5.0 Coca Cola Five Forces Analysis
The Coca Cola Company Five Forces analysis available upon request.
2016 was a challenging year for the carbonated soft drinks (CSD) market in the United States. Total sales and volume of sugary sodas consumed have declined for 11 consecutive years, driven by consumer worries over use of high calorie sugars and artificial sweeteners. Even sales for diet sodas, supposed to be the industry saviours, continue to dip primarily as consumers turn to non-carbonated drinks especially bottled mineral water, which has overtaken soda to become the largest beverage category by volume. The Coca-Cola Company is now seeking to remake its portfolio under new CEO James Quincey with strategic emphasis being placed on lower-calorie beverages such as value-added bottled water, teas and other high growth healthy beverages. As healthy-consciousness continues to become the major driver of change in the soft drinks industry, The Coca Cola Company will need to diversify its portfolio in a similar way rival PepsiCo has done, and utilize its brand strength to help it take advantage of emerging opportunities in low calorie beverages. This is the best way the company can neutralize emerging threats such as new sugary drinks legislation that could chip away at its long term success.
Available upon request.
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