Coca-Cola Business Model and SWOT Analysis 2022 – How Does Coca Cola Make Money?

 

Coca-Cola is a multinational company that deals in producing, distributing and selling nonalcoholic beverages mainly made up of carbonated drinks. It is one of the most well-known and widely recognized brands in the world, with a market capitalization of $163 billion.

Like many of its competitors, Coca-Cola uses its brand name to sell more than just a drink. It is also used to create value-added consumer packaged goods (CPG).

Background of Coca Cola

Coca-Cola was founded by John Pemberton in Atlanta, Georgia, in 1886. He was able to establish an efficient marketing channel thanks to the fact that he bought his syrup from the pharmaceutical company, which had been established only twelve years before. The syrup had a high sugar content (38%) and resembled beer with numerous medicinal properties.

By 1887 he had already patented the syrup and started distributing it as “Coca-Cola” at his soda fountain outlets. The so-called ‘water of the trade’, which was very limited in volume, was served in a tall glass and attracted customers with its medicinal taste.

Pemberton made considerable profits by selling other people’s syrup. He also started producing his own syrup whenever he failed to meet demand. As time went on, Pemberton managed to re-brand the drink under the name “Coca-Cola”.

Coca Cola Main Products

Coca-Cola produces and markets non-alcoholic beverages in major countries worldwide. The company’s products span from beverages to bottled water and soft drinks to sports drinks. Soft drinks are the most popular products, with a value of over 90% in 2020.

Coca-Cola is also a major bottler of branded water and other beverages, such as juices and fruit drinks.

Why is Coca-Cola Popular?

Coca-Cola is the world’s most valuable brand. It is also the most popular brand in markets of over 1000 people. Coca-Cola has been able to achieve this position due to its consistent quality, unique recipe, and unique delivery system.

1. Consistent Quality and Reliable Delivery of the Product

The drink has a strong and unique taste, which is why it is famous. The recipe itself has been kept secret since the very beginning, which ensures that no party other than the company itself can copy its distinct taste. The company has also managed to produce its well-known drinks in such a way that they are consistent in terms of quality throughout the world.

 

This is especially important given that the drink is not altered with anything else – coloring or preservatives for example. The consistency in terms of taste, packaging, and distribution makes the drink very popular. Despite the fact that the company has used different flavors over time, they have maintained their original recipe and therefore their unique taste.

2. The Delivery System

Coca-Cola uses a unique delivery system that has contributed to making it more popular than its competitors. The company’s distribution system is quite complicated as it involves several parties including Coca-Cola itself, its distributors, and retailers.

3. The Recipe

The drink is made using pure water, a special formula of sugar and the extract of coca leaves. The company keeps the recipe secret, which ensures that it is difficult to copy their drink. Coca-Cola has a range of different colors and sizes available. The main product is available in two variants – Coca-Cola Classic and Coca-Cola Zero Sugar. Other flavors include Diet Coke, Coke Zero, Coke Zero Sugar, Dasani, Fanta Lemon and Sprite Orange.

4. Global Recognition

The brand is easily recognizable even with its logo, which has remained the same over the years. The company has been able to achieve this recognition due to the consistent advertisement and marketing that it provides to its customers. Furthermore, Coca-Cola uses a variety of channels including television, radio, online and social media to reach out to its customers.

The company spends billions of dollars each year in advertisement and marketing alone. Coca-Cola also uses sponsorship of sports events such as the Olympics, football tournaments and Olympic Torch Relay.

5. Positive Brand Image

The brand has been able to build a good image for itself since its early years. The company has been known for its honesty and transparency. It also shows its willingness to give back to society. Coca-Cola sponsors numerous events which benefit the local community and raises money for regional charities. Furthermore, it supports initiatives that help in fighting diseases such as cancer, AIDS, malaria and water scarcity around the globe through their “1-for-1” scheme.

How Does Coca Cola Make Money?

1. Customers that purchase Coca-Cola products are able to serve more people since they require fewer servings per customer. The company sells its drinks in larger quantities, thereby increasing the revenue. Pricing and Cost Structure

2. Coca-Cola focuses on selling high-margin items to increase its profit margins. It sold 68% of its drinks in developed countries and 32% in emerging markets, which indicates that it is more likely to sell higher-margin products in developed countries as compared to emerging markets. Coca-Cola sells concentrate to its distributors, who are then responsible for producing, packaging, marketing and distributing the finished product.

3. Local Production and Localized Packaging

The company has been able to achieve higher margins by manufacturing products in local markets through its local bottling partners. The bottlers are independent licensees of the Coca-Cola Company. They provide access to their product expertise and local market knowledge to Coca-Cola in return for the right to use their branding, advertising and distribution channels.

According to the company, local production allows them to convert more revenue per unit. The international beverage business also has lower distribution costs, which again leads to better margins.

4. Bottling Rights

The company sells its concentrate and branded packaging to local bottlers through its global network. This has enabled the company to expand into new markets without incurring any initial start-up costs. The bottling rights are a long-term revenue source for the company and they have helped in increasing the company’s global reach by leveraging existing bottling partners.

The ownership of production and distribution also ensures that the Coca Cola Company maintains control over its brand even when it is being produced in different parts of the world.

5. Revenue from Brand Merchandising and Licensing

The company generates revenue from brand merchandising and licensing, which is through the sale of Coca-Cola branded products such as clothing, toys, games and other items. The company’s brand has a huge brand awareness worldwide and therefore customers are willing to spend money on these products.

6. Related Party Transactions

The company has entered into several related party transactions with its bottling partners. The company has given up to 20% of its equity to its bottler owners in exchange for the right and opportunity to produce, package and market Coca-Cola beverages.

The sum includes certain financial adjustments and other arrangements that enable the company’s bottlers to access certain marketing support and other resources, including international recognition of their brands.

7. The Company uses its power as a buyer to negotiate good deals with its suppliers. Coca-Cola uses its brand name for negotiating lower prices with suppliers and purchasing large quantities of raw materials, thereby reducing the cost of manufacturing and transportation.

8. The Company also sells output from its concentrated business to third parties and other companies in the food industry. Coca-Cola’s concentrate business sells concentrates on independent beverage companies in several countries such as China, Mexico, Brazil and India.

Coca Cola Swot Analysis 2022

Strengths

1. The company has the power and dominance to negotiate better deals with its suppliers.

2. The brand is internationally recognized and therefore consumers are willing to pay more for its products.

4. It produces a variety of drinks and therefore can generate high margins on every unit sold.

5. It also has a wide array of pricing opportunities that allow it to set prices according to supply and demand in different markets. The company has been able to achieve this through its power as a buyer and large brand awareness around the world.

6. The company has also made a name for itself through its charitable activities. For example, Coca-Cola has helped build well-run schools, clinics and hospitals in the developing world.

7. The company is able to reduce costs by selling its products in bulk.

Weaknesses

1. The Company still relies on partnerships with other companies for manufacturing and distribution of the products, which can lead to brand dilution and losing control over its brand identity.

2. The Company is focused on only one product, which leads to greater exposure to price fluctuations and other risk factors.

3. The Company also has high production costs due to the large scale of operations required to produce these products. This increases the cost of manufacturing to an extent that the company is unable to pass on the extra costs to consumers and relies on low labor costs around the world for its low price advantage.

4. The Company’s product portfolio is not very diversified and therefore, the company should attempt to diversify product categories in order to reduce risk factors.

Opportunities

1. The demand for the company’s products is on the rise globally due to increasing health consciousness among people and due to changing lifestyles. This increases the potential of growth in the future as people will be increasingly inclined towards healthy products as compared to sugary sodas.

2. The Company is also focusing on emerging markets such as China and India, which have huge populations and a growing middle class.

3. The Company is also focusing on other product categories such as energy drinks and ready-to-drink teas, which can increase its revenue base in the future.

Threats

1. The company’s products are addictive and therefore there might be legal issues in a few countries to curb the rising addiction to these products among people.

2. The Company is also facing increasing competition in its markets as a result of increasing health consciousness and changing lifestyles.

3. The growing popularity of energy drinks and other areas where the company has little or no presence could also pose a threat to the company’s success.

Conclusion

The company has had a very high performance over a long period of time, which has enabled it to achieve significant price increases over the years. The company’s strategy of focusing on only one product and vertical integration is also helping it achieve great economies of scale in production compared to other companies. However, Coca-Cola also faces increasing competition from energy drinks and other areas where the company has little or no presence.

Therefore, the company must attempt to diversify its product portfolio in order to survive in this competitive world.