Competition In its core competency, the Coca-Company has only one serious competitor, the PepsiCo Company, maker of Pepsi-Cola. Current market share of the two companies in the United States stands at 43.7% for Coca-Cola against 31.6% for PepsiCo. British firm Cadbury Schweppes comes in third in the American market with its 7UP and Dr. Pepper brands but does not have a head to head cola competitor for Coca-Cola. Supermarket “private label” cola brands are a substitute beverage for the big two but in terms of dollar sales, they do not cut greatly into their market share. According to the Beverage Digest 2001 survey, the top 4 brands continue to be Coke Classic, with a U.S. market share of 19.9%, Pepsi-Cola, with 13.2%, followed by Diet Coke with 8.8% and Mountain Dew (a PepsiCo product) with 6.9%.Beverage; Coke; Coca Cola; Soft Drink; Business

Hartogh, Matthew

English

Research Papers in Economics

It￿s Still The Real Thing 
 
A Profile of the Coca-Cola Company 
 
 
 
Matthew Hartogh 
GBUS 600 
May 1, 2002   1
Introduction 
 
  The Coca-Cola Company of Atlanta, Georgia is the world￿s largest provider of 
carbonated soft drinks with an over 50% market share worldwide. Atlanta pharmacist 
John Pemberton created the drink in 1886 as a fountain beverage which contained syrup 
and water, and the extract of kola nuts and coca leaves. By 1898, the beverage was 
available at drug store counters in all states as well as Canada and Mexico.
1 
Brand Recognition 
  Today the flagship Coca-Cola Classic (now without cocaine) is the world￿s most 
popular soft drink and along with other Coke products is available in over 200 countries. 
1.1 billion servings of Coca-Cola beverages are served every single day. More 
importantly, the beverage which defined the carbonated cola category continues to 
maintain strong brand recognition everywhere. The trademark coke bottle or red can with 
the Coca-Cola wave device, whether written in Hindi, Chinese, or Hebrew, is ubiquitous 
and is universally recognized by nearly everyone, whether literate or not, in places where 
the cross of the Christian church has not even been seen.
2  Truly, Coca-Cola is an 
American business success story. 
Competition 
  In its core competency, the Coca-Company has only one serious competitor, the 
PepsiCo Company, maker of Pepsi-Cola. Current market share of the two companies in 
the United States stands at 43.7% for Coca-Cola against 31.6% for PepsiCo.
3 British firm 
Cadbury Schweppes comes in third in the American market with its 7UP and Dr. Pepper 
brands but does not have a head to head cola competitor for Coca-Cola. Supermarket 
￿private label￿ cola brands are a substitute beverage for the big two but in terms of dollar   2
sales, they do not cut greatly into their market share. According to the Beverage Digest 
2001 survey, the top 4 brands continue to be Coke Classic, with a U.S. market share of 
19.9%, Pepsi-Cola, with 13.2%, followed by Diet Coke with 8.8% and Mountain Dew (a 
PepsiCo product) with 6.9%.
4   
  In recent years, the competition between the top two firms has been vigorous and 
has been played out for all of us to see on television, in supermarket shelf space, in 
school lunchrooms and at sports stadiums across the country. One factor driving the 
intensity of competition between the cola giants has been the flat or declining 
consumption of carbonated soft drinks (CSDs) in recent years. A changing public taste 
oriented toward ostensibly lighter and healthier sports drinks, teas, and single serve 
bottled waters has left the big two scrambling to chip out market share in the increasingly 
fragmented beverage field.
5  
  While overall company market share has remained relatively constant between the 
big two over the last decade, the Coca-Cola Company has had to struggle not to lose 
ground to its arch-rival. Last year was not a good one for Coke in which it lost market 
share to Pepsi.
6 In addition, the Wall Street Journal reported that this was the third 
straight year in a row that Coca-Cola has slipped in market share. A 0.1 or 0.2 % decline 
in share for Coke brands may not sound like much but it adds up to a large sum in a 
company with over $20 billion in annual revenues.
7 This trend has been noticed by the 
financial press and Wall Street insiders alike and has depressed the price of Coca-Cola 
stock to $53 a share from its high of $83 in the early 1990￿s. This is recorded in my 
SWOT analysis of the company in which a key weakness is listed as weak share price and 
a key external threat is listed as the perceived strength of PepsiCo￿s financial position.
8   3
Strategy into the Future 
  In a recent interview, I asked Diana Lopez, route manager at the Coca-Cola 
Bottling Company of Sylmar, California, several questions related to Coke￿s forward 
looking strategy and how it plans to position itself in the market. She was especially 
enthusiastic about new products from the company like Powerade, a sports drink which is 
gaining in popularity. She related that Powerade and Dasani Water, Coke￿s entry in that 
category, are doing very well in machine, convenience, and supermarket sales in southern 
California. When I asked about how Classic Coke was doing and whether Pepsi posed a 
challenge to its position, her answer was that ￿Coke has a very strong following, as it 
always has and [people tell her] that Coca-Cola￿s taste is what sells the product. And 
small store owners tell me, especially in Latino neighborhoods that the Coke brand means 
quality to them.￿
9 According to Ms. Lopez, Coca-Cola intends to build upon its success 
and popularity as the original cola drink which is ￿loved by consumers everywhere.￿ 
In the soft-beverage working group, we have indeed identified this feature, 
differentiation, as key to Coke￿s historical and continuing success. ￿If it ain￿t broke, don￿t 
fix it,￿ was the lesson of the company￿s ill-fated experiment with ￿New Coke￿ in the 
1980￿s.  
  Moving ahead, Coca-Cola￿s forward-looking strategy is to position itself in the 
non-carbonated sector of the soft drink market and take advantage of changing consumer 
tastes. Since taking over at the helm two years ago, CEO Douglas Daft has endeavored to 
accomplish this as well as to cut costs so that a leaner Coca-Cola can produce better 
numbers on the bottom line. In the last two years he has slashed nearly 30,000 from the 
workforce. In addition, he has placed renewed emphasis on ￿thinking locally, acting   4
locally.￿ This initiative has led to the transfer of quite a few executives from Atlanta to 
field offices around the country with the mission to feel the pulse of local consumers and 
serve them better.
10 Daft has not always found his reform efforts smooth sailing, 
however. Unlike the legendary Robert Goizueta who steered Coke through its most 
successful years in the late ￿80s and early ￿90s, Mr. Daft has not been given 
unconditional support by the board of directors. Specifically, Warren Buffet, whose 
Berkeshire Hathaway has a major share of Coca-Cola stock, demonstrated that he may 
keep Daft on a short leash by vetoing Daft￿s bid to acquire Quaker Oats last year.
11 
Legal and Regulatory Issues 
  As the multi-billion dollar market leader in the soft-drink world, the Coca-Cola 
Company is burdened with the strengths and weakness of empire. The company will 
continue to be held to close scrutiny, both legal and financial. Any attempt to use Coke￿s 
enormous market power to leverage strategic advantage in the marketplace will be met by 
resistance from competitors as well as regulatory authorities. Take, for example a case in 
which the company was sued for requiring exclusive advertising agreements with local 
supermarkets in Texas and was required to pay a hefty fine and divest itself of 
distribution rights for Dr. Pepper in that jurisdiction.
12 
Forecast 
  Wall Street analysts have been reporting for some time on the doldrums that 
Coca-Cola has found itself in the last few years. After the untimely passing of Mr. 
Goizueta, who led Coke through a period of unprecedented growth and financial success 
in the ￿80s and early ￿90s, the company has drifted for the last few years with   5
disappointing earnings and unimpressive efforts to distinguish itself in a market where 
cola has shown slow or no growth. 
  New CEO Douglas Daft has shown initiative in repositioning the company to take 
advantage of the changing consumer tastes we have discussed above. In addition, his 
cost-cutting moves promise to tighten up the bottom line at a company which has been 
described as an ￿enormous bureaucracy.￿
13  
  The news appears to be brightening up. The L.A. Times reports that Coke expects 
to show a 9% earnings gain in the quarterly report due out soon. Also, the stock price, 
which has been slipping over the last 5 years, is showing rebound over the last few 
months. This may be in large part due to the resurgent U.S. economy, but let us not forget 
that Coca-Cola made over $4 billion in profit last year.
14  Further, while Coke has had to 
skirmish with Pepsi in the American market, it is still dominant overseas. On the positive 
side of my SWOT analysis, I identify management as a key internal strength. Overseas 
markets, where Coca-Cola has impressive marketing expertise, is identified as a key 
external opportunity.  According to beverage digest, ￿Coke went through two challenging 
years, but it is now emerging as a focused, well managed company again.￿
15 
  I would give Coca-Cola a buy recommendation because the stock is well below 
its 5-year highs and appears to be trending up. Management looks good, and the 11,500 
customers in 200 countries who sip a Coke beverage every second give me confidence 
that the company will see better days ahead. 
 
  
   6
                                                                                                                                                
References 
 
Note: Data, references and graphs used by permission from Hartogh, et. al., ￿The Soft Beverage Industry￿, 
unpublished MBA study, California State University Northridge. 
 
1 Dow Jones Interactive online database. Company Profiles>Coca Cola. Retrieved from 
www.library.csun.edu >databases. Apr 1, 2002. 
2 ￿Coca Cola To Open 50,000 Outlets In Rural Push In India￿, Asia Pulse, Mumbai, Mar 22,2002. 
Retrieved From www.library.csun.edu > databases > ASAP business > Keyword: Coca-Cola, India. 
3 See Appendix A, Company Market Share 1997, 2001. (These are the latest figures we have retrieved.) 
4 See Appendix B, Company and Brand market share 2001. Beverage Digest. 
5 See the discussion on market fragmentation and beverage trends in Hartogh, et.al., ￿The Soft Beverage 
Industry￿ Unpublished MBA study, California State University Northridge. 
See also, ￿Schools cash in as cola wars heat up￿, Chicago Sun ￿ Times, Apr 21, 2002. 
6 “PepsiCo Inc. Gains in Soda Market As Coca-Cola’s Share and Sales Slip￿, Wall Street Journal, New 
York, Mar 1, 2002. 
7 www.sec.edgar.org > Company filings > Coca-Cola Form 10 K. 
8 See ￿Placing our bets. (Beverage Beat: overview of PepsiCo Inc.)￿, Beverage Industry, Jan 2002.  
PepsiCo named ￿Company of the Year￿. 
 
9 Interview with Diana Lopez, Route manager, The Coca-Cola Bottling Company of Southern California 
(A controlling interest subsidiary of the Coca-Cola Company), Sylmar, California. Tel: (818) 362-4307 ext. 
6307. Email: diana_lopez@na.cokecce.com  Interviewed on Apr 24, 2002. 
 
10 ￿Repairing the Coke Machine￿, Business Week, Mar 19, 2001. Retrieved from 
http://www.businessweek.com on 4/15/02. 
11 ￿Behind the Coke Board’s Refusal to Let CEO Daft Buy Quaker Oats￿, Wall Street Journal, Nov 30, 
2000. 
12 ￿How Coke Pushed Rivals Off the Shelf￿, New York Times, Aug 6, 2000. 
13 ￿Repairing the Coke Machine￿, Business Week, Mar 19, 2001. Retrieved from 
http://www.businessweek.com on 4/15/02. 
14  ￿Coke Adds Life to Sales, Profit After Losing Fizz in Late ’90s; Outlook for drink company brightens 
with restructuring and U.S. economic recovery￿, The Los Angeles Times, Apr 10, 2002. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   7
                                                                                                                                                
Appendix A Company Market Share, U.S. 
 
Company Market Share 1997
Pepsi-Cola
31%
Dr 
Pepper/7UP
14%
All Other
11%
Coca-Cola
44%
Company Market Share 2001
All Other
9.1%
Cadbury 
Schweppes 
15.6%
PepsiCo 
31.6%
Coca-Cola 
43.7%
 
  Source: Beverage Marketing Corporation, New York.  Retrieved from 
http://www.beverageworld.com  >  ￿data and statistics￿ on 4/10/02. 
 
 
 
   8
                                                                                                                                                
Appendix B Company and Brand market Share 
 
2001 2001  Share 
2001 
Cases  Volume 
Ranking Companies 
Market 
Share Change (millions) 
% 
Change 
        
1.   Coca-Cola Co.  43.7 -0.4 4,376.7 -0.2 
2.   Pepsi-Cola Co.  31.6 +0.2 3,164.7 1.3 
3.   Dr Pepper/Seven Up 
(Cadbury) 15.6 +0.9 1,559.9 6.4 
4.   Cott Corp.  3.8 +0.5 376.0 14.6 
5.   National Beverage  2.2 +0.1 224.5 5.1 
6.   Big Red  0.4 flat 41.7 3.0 
7.   Seagram  0.3 flat 30.4 6.7 
8.   Red Bull  0.1 +0.1 10.5 118.8 
9.   Monarch Co.  0.1 flat 8.6 8.9 
10. Private Label/Other  2.2 -+01.4 216.9 -38.6 
          
Total Industry  100.0 0.0 10,010.0 0.6 
        
SOURCE Beverage Digest/Maxwell       
        
 
 2001  Share 
2001 
Cases Volume 
Brands 
Market 
Share Change (millions) 
% 
Change 
        
1.   Coke Classic  19.9 -0.5 1,987.5 -2.0 
2.   Pepsi-Cola  13.2 -0.4 1,320.1 -2.8 
3.   Diet Coke  8.8 0.1 878.8 1.7 
4.   Mt. Dew  6.9 -0.3 687.7 -3.9 
5.   Sprite  6.5 -0.1 646.2 -1.8 
6.   Dr Pepper  6.2 -0.1 617.0 -1.7 
7.   Diet Pepsi  5.3 flat 533.6 2 
8.   7UP  1.9 -0.1 189.2 -7 
9.   CF Diet Coke  1.7 flat 171.7 -1 
10. Barq’s root beer  1.1 flat 114.2 1.5 
          
        
        
SOURCE Beverage Digest/Maxwell 
 
 
      
        
   9
                                                                                                                                                
Appendix C Coca-Cola 5year Stock Price 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   10
                                                                                                                                                
Appendix D Coca-Cola 3 month Stock Price 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   11
                                                                                                                                                
 
 
 
 
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The real thing: a profile of the coca cola company

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