Environmental and Supply Chain Analyses of Coca-Cola’s Naturally Sweet Division
1.0 Naturally Sweet Division’s SWOT analysis
1.1 Internal environment: One important strength behind Naturally Sweet’s business activities is Coca-Cola’s strong revenue structure, which was US$ 44.29 billion in 2015 (TCCC, 2016a) and 246 times that of the average revenue of firms (US$ 179.76 million) in the food and beverage industry (GE Capital, 2015). In the beverage sector, this revenue is 1.49 that of the No. 2 beverage company globally, which is PepsiCo (2016), making Coke’s revenue stream as the strongest in the beverage sector (Table 1.1).
However, despite this revenue strength, the same revenues have experienced erosions every year. For instance, Coca-Cola’s net operating revenue in 2013 was US$46.85 billion, while its 2015 figures declined to US$44.29 billion (TCCC, 2016a), a decline of 5.78 percent in just two years. The company tried to manage the situation by cutting down on its cost of goods sold (COGS) and its selling, general, and administrative expenses (SGAE).
1.2 External environment: Linshi (2015) reported that the backdrop of the declining net operating revenues of Coca-Cola Company (and PepsiCo) was the declining trend of soda sales growth in the last 11 years, which was attributed to the growing change of consumer preferences away from sugar-sweetened beverages. Although, Coke appeared to have managed the permanent-looking threat more effectively than its rivals, the threat came from the singling out of the Company as contributor of the obesity epidemic in America as cause-oriented groups (Table 1.1), such as health experts and the Center for Science in the Public Interest, elevated the discourse into public health policy issues, which can lead to regulatory constraints later on (AWP Society, 2014). This threatening trend among health-conscious consumers provided the Naturally Sweet Division a definitive edge in taking back this segment of the soda market into Coca-Cola’s fold, thus, counteracting the declining trend of soda sales as far as Coca-Cola’s market is concerned.
2.0 Coca-Cola’s adaptive performance to change
The creation of the Naturally Sweet Division represents Coca-Cola’s ultimate adaptive strategy against the strongest market threats it so far encountered in its history. The division will enable the Company to forward an argument that consumers have the full freedom to choose from sugar-based of the traditional brands (e.g. Coke, Royal, Sprite, etc.) and sugar-free Naturally Sweet brands in their right to advocate for their personal health. The division can also potentially win back health-conscious consumers to the Coca-Cola fold with indisputable health products with very low to zero sugar content.
Moreover, the Company’s cost-cutting control in its COGS and SGAE (see subsection 1.1) also constitutes an effective and realistic adaptive measure to manage its declining sales and consequent net operating revenues.
This adaptability to change reflects Coca-Cola’s Winning Culture, which includes working smart, acting like owners, and being the brand TCCC, 2016b). Working smart means remaining highly responsive to changing business conditions and courageously changing its course when adaptive necessity demands it. Acting like owners encouraged corporate leaders to be more mindful of their team’s expenditures with an objective of keeping it down as low as possible to bring down the Company’s annual expenditure performance. Being the brand consists of being creative always, seeking innovative ways to better serve the consumers.
3.0 Naturally Sweet Division: The supply chain
3.1 Existing supply chain: The Division’s supply chain is largely embedded in the Coca-Cola’s global supply chain system, which embodies sustainability control standards from the upstream links in the supply chain to the downstream endpoints. The objective is to ensure that the products reach the consumer refrigerators (Lean, 2015). Its upstream links comprise its suppliers of agricultural ingredients (e.g. sugar, juice, coffee, and tea), packaging materials, and cold-drink equipment (Jordan, 2013). From various ingredients, Coca-Cola manufactures its soft drink concentrates, which are distributed to its regional bottling partners. The bottling partners combine the concentrates with other ingredients (e.g. water) into bottled products, which are distributed into their respective downstream network of outlets of distributors and retailers (Sapardanis, 2016).
In Europe, for instance, Coca-Cola Enterprises (CCE), which is responsible for manufacturing and distributing the Coca-Cola portfolio in Europe (e.g. Western Europe) (Lean, 2015), buys product concentrates from The Coca-Cola Company through an established and reliable delivery system, which it combines with local ingredients to create the bottled brands under the Coca-Cola portfolio (Sapardanis, 2016). CCE has a minimum of one bottling factory in each country in Europe, such as Belgium, the United Kingdom, France, the Netherlands, Sweden, and the rest. Around 95 percent of drinks are produced in the country where they will be sold (Lean, 2015). The point is to ensure that the local supply chain is short and, therefore, fast in supplying consumer needs when they need it.
These bottling companies, organized either as a wholly owned subsidiary or a joint venture with a local company, have their own established distributors, which handle the sales and delivery functions to various outlets around the country. These distributors are obliged for maximizing the market potential of all Coca-Cola products in their respective territories. All partner bottles with exclusive jurisdictions in various global regions follow a largely uniform sourcing and distribution system with the global Coca-Cola system.
3.2 Adapting the supply chain to positively impact its business model: Naturally Sweet products will largely follow the Coca-Cola system model with only a few modifications, which primarily pertains to adding a new type of retailer outlets in the current distribution system. This outlets include organic shops and grocery stores as well as health food and supply shops, which are not traditional outlets and retailers for the traditional sugar-based Coca-Cola product portfolio.
References
AWP Society. (2014, January 16). Are all calories created equal? An analysis of the Coca-
Cola Company’s communication in the fight against obesity. New York: Arthur W. Page Society.
GE Capital. (2015). Food & Beverage Industry Economic Outlook Survey, Second Quarter
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Jordan, B. (2013, October 16). From farm to table: Sustainability in our supply chain.
Unbottled. Retrieved from: http://www.coca-colacompany.com/coca-cola-unbottled/from-farm-to-table-sustainability-in-our-supply-chain.
Lean. (2015, February 6). From factory to fridge: Inside Coca-Cola’s supply chain. Global
Manufacturing.com. Retrieved from: http://www.manufacturingglobal.com/lean/358/From-factory-to-fridge:-Inside-Coca-Cola's-supply-chain <22 June 2016>
PepsiCo. (2016). 2015 Annual report: Performance with purpose. Purchase, NY: PepsiCo,
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Sapardanis, C. (2016). Coca-Cola supply chain management success story. Computer Science Corp. Retrieved from: http://www.csc.com/application_services/success_stories/78846-coca_cola_supply_chain_management_success_story <2016 June 22>
TCCC. (2016a). Form 10-K: Annual Report 2015. Atlanta, GA: The Coca-Cola Company.
TCCC. (2016b). Mission, vision, & values. Coca-Colacompany.com. Retrieved from:
http://www.coca-colacompany.com/our-company/mission-vision-values <16 June 2016>
