Case Study

The Cola-Cola company (Abridged)

21 pages
February 2011
Reference: IMD-5-0767

(This is an abridged version of the case IMD-5-0741.) The Coca-Cola Company (TCCC) had developed a franchise model in the late 1980s consisting of TCCC and its 300 bottling partners worldwide. In 2009, TCCC retained its market leadership of the global sparkling soft drinks market in 2009, but continued to battle a host of fragmented competitors across the other beverage categories, including bottled water and energy drinks. Bottling partners made their own business decisions and some manufactured and distributed their own products or those of beverage companies other than TCCC. In 2007 alone, TCCC added more than 450 new still beverage products to its portfolio (including those gained through acquisitions) and it had no plans to slow its growth and product diversification. In introducing new products, TCCC relied on bottlers to carry and distribute these. But what was the incentive for a bottler to agree to distribute these – in particular, if it already had a competing brand? TCCC’s response was a multi-pronged growth and innovation strategy: it partnered with Nestlé to develop products such as ready-to-drink (RTD) teas in a joint venture named “Beverage Partners Worldwide”. It also lent stronger marketing support for still beverages like Dasani water (launched in 1999). Acquisitions were important, particularly in the still beverage category. Some of these acquisitions were done jointly with the bottler, while others were acquired fully by TCCC. But how many new products could it introduce via its bottlers? How could TCCC ensure profit maximization for itself as well as its bottlers? In February 2010, TCCC announced that it would acquire the North American operation of its largest bottler, Coca Cola Enterprises (CCE) in a transaction worth $12.2 billion, by assuming $8.8 billion of its debt and giving up its 34% equity stake in CCE, valued at $3.4 billion. In this way it would be able to better control new product introductions. Was this a sign that it was abandoning its franchise model?

Learning Objective

The objective of the case is to: 1) illustrate the asset-light franchise model of “The Coca-Cola System”, i.e. the relationship The Coca-Cola Company has with its network of bottlers; 2) outline The Coca-Cola Company’s historical success in sparkling beverages and its recent major moves into non-sparkling categories; 3) explore how The Coca-Cola company can grow and maximize profits, through product innovation and distribution, given its existing distribution system.

Keywords
Franchise, Retail, Brand Strategy
Settings
Global
1986-2009
Type
Published Sources
Copyright
© 2011
Available Languages
English
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