Distribution strategy of Coca- Cola -
March 27th, 2011
The Coca-Cola Company is a beverage retailer, manufacturer and marketer of non-alcoholic beverage concentrates and syrups. The company is best known for its flagship product Coca-Cola, invented by pharmacist John Stith Pemberton in 1886. The Coca-Cola formula and brand was bought in 1889 by Asa Candler who incorporated The Coca-Cola Company in 1892. Besides its namesake Coca-Cola beverage, Coca-Cola currently offers more than 500 brands in over 200 countries or territories and serves 1.6 billion servings each day.
The company operates a franchised distribution system dating from 1889 where The Coca-Cola Company only produces syrup concentrate which is then sold to various bottlers throughout the world who hold an exclusive territory. The Coca-Cola Company owns its anchor bottler in North America, Coca-Cola Refreshments.
The Coca-Cola Company is headquartered in Atlanta, Georgia. Its stock is listed on the NYSE and is part of DJIA, S&P 500 Index, the Russell 1000 Index and the Russell 1000 Growth Stock Index. Its current chairman and CEO is Muhtar Kent.
Coca Cola Company makes two types of selling
1)Direct selling = In direct selling they supply their products in shops by using their own transports. They have almost 450 vehicles to supply their bottles. In this type of selling company have more profit margin.
2)Indirect selling = They have their whole sellers and agencies to cover all area. Because it is very difficult for them to cover all area of Pakistan by their own so they have so many whole sellers and agencies to assure their customers for availability of coca cola products.
Objectives: A firm’s distribution objectives will ultimately be highly related—some will enhance each other while others will compete. For example, as we have discussed, more exclusive and higher service distribution will generally entail less intensity and lesser reach. Cost has to be traded off against speed of delivery and intensity (it is much more expensive to have a product available in convenience stores than in supermarkets, for example).
Narrow vs. wide reach: The extent to which a firm should seek narrow (exclusive) vs. wide (intense) distribution depends on a number of factors. One issue is the consumer’s likelihood of switching and willingness to search. For example, most consumers will switch soft drink brands rather than walking from a vending machine to a convenience store several blocks away, so intensity of distribution is essential here. However, for sewing machines, consumers will expect to travel at least to a department or discount store, and premium brands may have more credibility if they are carried only in full service specialty stores.
Retailers involved in a more exclusive distribution arrangement are likely to be more “loyal”—i.e., they will tend to
• Recommend the product to the customer and thus sell large quantities;
• Carry larger inventories and selections;
• Provide more services
Thus, for example, Compaq in its early history instituted a policy that all computers must be purchased through a dealer. On the surface, Compaq passed up the opportunity to sell large numbers of computers directly to large firms without sharing the profits with dealers. On the other hand, dealers were more likely to recommend Compaq since they knew that consumers would be buying these from dealers. When customers came in asking for IBMs, the dealers were more likely to indicate that if they really wanted those, they could have them—“But first, let’s show you how you will get much better value with a Compaq.”
Distribution opportunities: Distribution provides a number of opportunities for the marketer that may normally be associated with other elements of the marketing mix. For example, for a cost, the firm can promote its objective by such activities as in-store demonstrations/samples and special placement (for which the retailer is often paid). Placement is also an opportunity for promotion—e.g., airlines know that they, as “prestige accounts,” can get verygood deals from soft drink makers who are eager to have their products offered on the airlines. Similarly, it may be useful to give away, or sell at low prices, certain premiums (e.g., T-shirts or cups with the corporate logo.) It may even be possible to have advertisements printed on the retailer’s bags (e.g., “Got milk?”)
Other opportunities involve “parallel” distribution (e.g., having products sold both through conventional channels and through the Internet or factory outlet stores). Partnerships and joint promotions may involve distribution (e.g., Burger King sells clearly branded Hershey pies).
Deciding on a strategy. In view of the need for markets to be balanced, the same distribution strategy is unlikely to be successful for each firm. The question, then, is exactly which strategy should one use? It may not be obvious whether higher margins in a selective distribution setting will compensate for smaller unit sales. Here, various research tools are useful. In focus groups, it is possible to assess what consumers are looking for an which attributes are more important. Scanner data, indicating how frequently various products are purchased and items whose sales correlate with each other may suggest the best placement strategies. It may also, to the extent ethically possible, be useful to observe consumers in the field using products and making purchase decisions.
Here, one can observe factors such as :
(1) how much time is devoted to selecting a product in a given category,
(2) how many products are compared,
(3) what different kinds of products are compared or are substitutes (e.g., frozen yogurt vs. cookies in a mall),
(4) what are “complementing” products that may cue the purchase of others if placed nearby. Channel members—both wholesalers and retailers—may have valuable information, but their comments should be viewed with suspicion as they have their own agendas and may distort information.
Outsourcing distribution and manufacturing:
Coca-Cola India minimised its capital needs by meeting new manufacturing capacity needs throughexternal co-packers, outsourcing its distribution and meeting its in-market-refrigeration and cooling needs by giving incentives to retailers to self-fund the same through its “Own Your Fridge Scheme.” Today, the company has an extensive rural and urban distribution network. Coca-Cola adopts a hub and spoke format distribution network ensuring that large loads travel longer distances and short loads travel short distances. The company has increased its village penetration from 9 per cent in 2000 to 28 per cent in 2004 and covers approximately 175,000 villages today. Rural India now accounts for 30 per cent of Coca-Cola’s sales volumes.
Expanding its distribution networks:
The company had also decided to expand its retail network by 18 per cent during the financial year
2004-05 taking the total number of retailers to 1.3 million across the country.
Other Distribution Strategies:
1) Coca-Cola Cricket
2) Coca-Cola Concerts
3) Coca-Cola Food Mela
4) Coca-Cola Basant Festival
5) Coca-Cola GO-RED
6) Coca-Cola Party in a Park
7) Coca-Cola Shopping Festival
8) Coca-Cola Ramzan Campaign
9) Coca Cola TV Mazza
10) Coca-Cola & Mc Donald's
11) Fanta & Sprite Launched
12) Diet Coke