The Diversification of Coca-Cola: Globalization & Strategic Fit

The Diversification of Coca-Cola: Globalization & Strategic Fit
Arzoie Sharma, Jimmy Larkin, Isabel Fernandez, and Gabriel Esteves
THE DIVERSIFICATION OF COCA-COLA
ARZOIE SHARMA, JIMMY LARKIN, ISABEL
FERNANDEZ, AND GABRIEL ESTEVES
THE GEORGE WASHINGTON UNIVERSITY
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The Diversification of Coca-Cola: Globalization & Strategic Fit
Arzoie Sharma, Jimmy Larkin, Isabel Fernandez, and Gabriel Esteves
Abstract
The purpose of this company research is to analyze the efficiency of the global strategy
employed by Coca-Cola. Some strategies that we incorporate in our evaluation include
elements of differentiation, marketing, and distribution that serve Coca-Cola’s purpose
in various markets. Our focus on Coca-Cola stems from the firm’s proven success in
international operations, as it continues to be one of the most recognized beverage
brands in the world. The case provides an in-depth review of how Coca-Cola utilizes
each of the strategies listed above, especially in its operations in Japan.

The Diversification of Coca-Cola: Globalization & Strategic Fit
Arzoie Sharma, Jimmy Larkin, Isabel Fernandez, and Gabriel Esteves
Introduction
In 1886, the innovation and curiosity of Dr. John S. Pemberton, an Atlanta-based
pharmacist, led to the birth of the world’s largest beverage company: Coca-Cola. Since
then, Coca-Cola has expanded to over 500 brands in more than 200 countries. In its
expansion, Coca-Cola developed four of the world’s top five non-alcoholic sparkling soft
drink brands: Coca-Cola, Diet Coke, Fanta and Sprite. In addition to these carbonated
beverages, the brand owns several other product lines with a portfolio of greater than
3,900 beverages. These range from diet and regular sparkling beverages to still
beverages, 100% fruit juices, sports and energy drinks, teas, coffees, milk and
soy-based beverages. The firm’s global strategy and sustainable growth gradually
became a key component of its mission statement and company values.
Coca-Cola’s mission statement is “to refresh the world, to inspire moments of
optimism and happiness, and to create value and make a difference” (The Coca-Cola
Company, 2018). The value of the firm is emphasized in its people, portfolio, partners,
planet, profit, and productivity. The company is currently led by President and CEO,
James Quincey. Quincey joined Coca-Cola in 1996 and rose the ranks, eventually
taking charge of operations in Europe and Mexico. Coca- Cola’s operating structure is
divided into 6 groups: Europe, Middle East and Africa, Latin America, North America,
Asia Pacific, Bottling Investments, and Corporate. As the world’s largest beverage
company, Coca-Cola has an enterprise value of $214,122 million and revenue of
$41,863 million (GuruFocus, 2017, Fortune 500, 2017).
In 2017, Coca-Cola held 22% share of the North-American non-alcoholic
beverage market and an increasing beverage sale reaching $2.75 billion, while
PepsiCo, Coca Cola’s competitor in North-America, only attained a 19% market share
(Reuters, 2017). However, the non-alcoholic beverage market has seen a gradual
decline in sales of soda drinks in the last ten years. By 2016, the sale of soda drinks
declined 1.2% in the United States (Reuters, 2017). The issue with soda drinks is
evident in Coca-Cola’s Diet Coke product, which had a 4.3% decrease in volume in the
United States and a consequent loss in market share (Fortune 500, 2017).
As sales of soda beverages remain in steady decline, Coca-Cola looks to new
opportunities in the alcoholic beverage segment. One expansion was finalized in
Coca-Cola’s Chu-Hi, a canned alcoholic drink, that the multinational firm was testing in
Japan. Subsequent analysis of Coca-Cola’s recent expansion into the alcoholic
beverage industry in Japan will provide an insight into the global potential of the new
product line.
The Global Beverage Industry
The Global Beverage Industry can be broken down by two primary segments:
non- alcoholic and alcoholic items. Historically, two large entities have dominated the
non-alcoholic beverage landscape: Coca-Cola and Pepsi. Approximately 60% of the
global non-alcoholic beverages is controlled by Coca-Cola and PepsiCo. Of this 60%,

The Diversification of Coca-Cola: Globalization & Strategic Fit
Arzoie Sharma, Jimmy Larkin, Isabel Fernandez, and Gabriel Esteves
the split between Coca-Cola and Pepsi is about 40% to 20% with Coca-Cola controlling
the majority of the market. Both companies face heightened competition from the
growing market of healthier alternatives to sugary soda drinks. Such changes in the
market have led for companies such as Coca-Cola to diversify their offerings in order to
stay relevant.
The Non-Alcoholic Segment
In 2016, estimates for the global non-alcoholic beverage market were valued at
$967.3 billion USD. The non-alcoholic beverage industry consists of four primary
categories: carbonated soft-drinks, ready-to-drink tea and coffee, bottled water, and
sports/energy drinks. In the U.S., the per-capita consumption of soda beverages has
been trending downward. As of 2014, Coca-Cola and PepsiCo soft drink volumes have
fallen consistently at an average of 1%, while Dr. Pepper Snapple Group’s volumes
remained flat. While Coca-Cola has attempted to promote “healthier” options through
skinny cans, Diet Coke, and Coke Zero, Diet Coke sales were down a staggering 6% in
the last three months of 2017. The decline of Diet Coke has been faster than that of any
other Coca-Cola beverage – in part because of the dramatically shifting perceptions of
what qualifies as healthy (Morris, 2018). Steady declines in carbonated soft drink
volumes are largely due to health concerns, as soda’s high sugar and caffeine contents
cause several health issues like obesity, diabetes, osteoporosis, and tooth decay.
Nonetheless, the decline in soda products does not entirely indicate the future of
Coca-Cola, as said company has diversified into growing categories like juices, energy
drinks, water and possibly alcohol.
The Alcoholic Segment
For thousands of years, cultures across the globe have consumed alcoholic
beverages. In 2015, estimates for the global alcoholic beverage market were valued at
1,344 billion USD, and are projected to reach $1,595 billion USD by 2022 (Dwivedi).
Data suggest that the global alcoholic beverages market is driven by an increase in the
global young-adult demographic, coupled with those who have high disposable incomes
and demand premium/super premium products. While the alcohol industry appears to
be a rather lucrative business venture, the industry is consolidated and faces intense
market competition. If Coca-Cola were to enter the alcohol industry, it would face stiff
competition from names such as Anheuser-Busch, Bacardi, and Heineken as these
firms have dominated the market for quite some time.
International Marketing
In terms of international marketing, it is important to point out the difference
between international and global marketing. Coca-Cola has been recognized to act