Coca-Cola in Brazil

1920s and 30s International expansion The Company began a major push to establish bottling operations outside the U. S. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and South Africa. On May 8, 1886, a pharmacist named Dr. John Pemberton carried a jug of Coca-Cola® syrup to Jacobs’ Pharmacy in downtown Atlanta, where it was mixed with carbonated water and sold for five cents a glass. In 1942 Coca-Cola entered the Brazilian market. ? Brazil is Coca Cola’s third largest operation and second largest international market. ? Low average consumption (144 bottles/p/y) USA (462 bottles/p/y) ? Mexico (402 bottles/p/y) ? low profitability market ? 20th position ? ? ? ? ? ? From 1986 to 2003 nonalcoholic drink consumption AVG yearly growth of 13. 92%. ? Per Capita Consumption of Soft Drink in Brazil has increased by average rate of 17. 37% per year. Highly competitive market : ? AmBev: main competitor with 17% market share. It partnered with Pepsi increasing sales profitability. ? Other competitors have an average market share of 33,5% (within these, there are illegal manufacturers operating without permissions and without paying taxes). More than 3500 brands of soft drink in Brazil.
More than 700 plants in 2004. Difficulty to reach rural communities. POS consumption. ? ? ? ? ? Cola was the Brazilian favorite flavor (41. 8%) followed by Guarana (23. 9%) and Orange (11. 4%). Soft drinks were sold in variety of containers made of glass, PET and aluminum, having capacities that varied from 200 ml to 2. 5 liters. The most favourite packaging is the disposable bottle from 2 to 2,5 litres with a total percentage average consumption of 72. 88*. Average sales growth rate in brazil between 1986-2003 in parcentage: 5,74 Consumers cares about price, flavor and quality, without being influeced by brand name.
Poor distribution channels. ? Only 25% of soda sales are through supermarkets. ? Scarcity of vending machines. A- B: C: D-E: ?Most sophisticated class. ?They have the highest levels of income and education ? Typical worker ?Lack purchasing power ? Low/middle class ?Struggle to afford basic ? Compromise 12,6 million goods & services households ? 28% of total national consumption ? ? ? ? ? ? Worldwide top known brand. Distribution network (9000 vehicles). High quality products. Wide product mix. Large market share. Large scale of operations. ? Poor distribution network in rural areas Investment reduction in media and advertising in 67% of product categories ?

The price of Coca-Cola is higher than that of competitors ? Price cutting strategy has effect only on market share and not on profitability ? Develop a more accurate distribution network in rural areas. ? Expanding product range (Guarana). ? Partnership/acquisition with local brands. ? Sponsoring more social events (Rio 2016) and contribute to social development. ? Coming up with more efficient promotion. ? Leveraging class C. ? Consumer behavior: strong price consciusness and low level of loyalty ? Intense competition. B brands competiting illegally (no legal existence thus not paying taxes) ? High threat of new entrants (ex. RC Cola) ? High elasticity of demand ’ ? Expanding the output of the company’s product (Guarana Kuat) planting 200ha of Guarana: Pros: they secured the 11% Guarana market in Brazil. Pros: they allowed to reach a cost benefit controlling the supply and quality of raw materials. ? Venture into Tubainas territory: Pros: acquisition and blocking of new competitors. Cons: acquiring a competitor does not signify securing from its future actions. ? Price cutting from $0,65 to 0,45 ? -30%:
Cons: negative effect on profitability. ? Buying back franchise operations: Pros: market share back from 48% to 50%. Cons: negative effect on profitability. ’ ? Partnership with Norsa: Pros: market share from 42% in 2002 to 44,5% in 2003 and increasing operational profits by 40%, thus implies Tobainas’s market share dropping by 4%. ? Sponsoring national events (mostly Rio de Janeiro Carnival): Pros: dissemination of brand awareness. ? Renovation of the company’s plants: Pros: more effective and efficient operations. ?
introducing returnable glass bottle: Pros: reducing cost of packaging. Strenghten its position in the south-east of Brazil widening its distribution network. ? Keep going on strategic partnerships with local competitors. ? Extend the existing product range and effectively advertise and market it. ? Use different types of packaging to arrive to customers thus increasing their demand ? introduce limited edition bottles maitaining the same price. ? Make the company organization and asset structure more flexible in order to better respond to an high competitive and fast changing environment. ? Increase promotional activities in order to fight price competition and improve the peirceived quality for the products.
Achieve operational efficiency through economies of scale. ? Exacerbate legal actions against B brands. ? Acquire or build Joint Ventures with Brazilian companies for exploiting their local knowledge. ? To be more involved in the local distribution, concentrating on the positioning of the products in the shelves. ? To better understand the customers needs and to adapt to local tastes. ? Make the customers understand that they are paying a premium price for a higher quality of products, and not because of the high promotion and advertising expenses.