Coca-Cola’s top investors include Warren Buffet’s company, Berkshire Hathaway, with 9.25% of shares, and other mutual funds like The Vanguard Group, holding 8.51% of shares, and BlackRock owning over 7.19% of shares of the company. Other individual investors like Herbert A. Allen, director of The Coca-Cola Company since 1982, and Barry Diller, Chairman of the Coca-Cola board since 2002. And former CEO Muhtar Kent.
| Aspect | Description | Analysis | Examples |
|---|---|---|---|
| Products and Services | The Coca-Cola Company offers a diverse portfolio of non-alcoholic beverages, including carbonated soft drinks (Coca-Cola, Diet Coke), fruit juices (Minute Maid), bottled water (Dasani), tea (Honest Tea), energy drinks (Monster), and sports drinks (Powerade). The company also produces and distributes syrups and concentrates to its network of bottling partners. | Coca-Cola’s product portfolio is extensive, catering to various consumer preferences and beverage categories. The company’s brand recognition and innovation drive its success in the competitive beverage industry. The broad range of beverages addresses different consumer needs and occasions. Coca-Cola’s business model involves manufacturing and distributing both finished products and concentrates to bottling partners. | Carbonated soft drinks, fruit juices, bottled water, tea, energy drinks, sports drinks, syrups, and concentrates, diverse product portfolio spanning various beverage categories, brand recognition, innovation, addressing diverse consumer needs and occasions, manufacturing, and distribution of finished products and concentrates. |
| Revenue Streams | The Coca-Cola Company generates revenue primarily from the sale of its beverages to consumers through various channels, including retail stores, vending machines, and restaurants. The company also earns income from the sale of syrups, concentrates, and beverage ingredients to its bottling partners. Licensing agreements and brand partnerships contribute to revenue as well. | The core revenue source for Coca-Cola is the sale of its beverages to consumers through a wide range of distribution channels. Income from syrups, concentrates, and ingredients sold to bottling partners diversifies revenue streams. Licensing agreements and brand partnerships extend income sources. Coca-Cola’s multiple revenue streams enhance financial stability. | Revenue from sales of beverages to consumers through various channels, income from syrups, concentrates, and ingredients sold to bottling partners, licensing agreements, and brand partnerships, diversified revenue streams ensuring financial stability. |
| Customer Segments | Coca-Cola serves a broad spectrum of customer segments, including individual consumers, households, restaurants, cafes, convenience stores, supermarkets, and vending machine operators. The company’s beverages cater to people of all ages and are consumed in various settings and occasions. Partnerships with retailers and foodservice establishments are crucial for reaching customers effectively. | Customer segments for Coca-Cola encompass individual consumers, households, restaurants, cafes, convenience stores, supermarkets, vending machine operators, and a wide range of foodservice establishments. The company’s beverages are designed to meet the preferences of consumers of all ages and are consumed in various settings. Collaborations with retailers and foodservice businesses are instrumental in expanding market reach. | Individual consumers, households, restaurants, cafes, convenience stores, supermarkets, vending machine operators, foodservice establishments, diverse customer segments spanning consumer and B2B markets. |
| Distribution Channels | Coca-Cola products are distributed through an extensive network of channels, including retail stores (grocery stores, convenience stores, etc.), vending machines, restaurants, cafes, theaters, stadiums, and online platforms. The company relies on its network of bottling partners to manufacture, package, and distribute its beverages. Coca-Cola also collaborates with various distributors and wholesalers to ensure efficient supply chain management. | Distribution channels for Coca-Cola products encompass a wide range of retail locations, dining establishments, entertainment venues, and e-commerce platforms. The company’s bottling partners play a crucial role in manufacturing and distributing its beverages. Collaborations with distributors and wholesalers enhance supply chain efficiency. Coca-Cola’s extensive distribution network ensures accessibility to consumers globally. | Retail stores, vending machines, restaurants, cafes, theaters, stadiums, online platforms, bottling partners for manufacturing and distribution, collaborations with distributors and wholesalers, extensive distribution network ensuring global accessibility. |
| Key Partnerships | Coca-Cola collaborates with a variety of partners to enhance its operations and market reach. Partnerships with bottling partners are central to its manufacturing and distribution processes. The company works with retail chains to ensure its products are available to consumers. Collaborations with restaurants, cafes, and foodservice establishments contribute to market access. Licensing agreements with brands like Monster Energy extend the product portfolio. Coca-Cola also forms partnerships for marketing and promotional campaigns. | Collaborations with bottling partners are critical for manufacturing and distribution. Partnerships with retail chains guarantee product availability. Collaborations with restaurants, cafes, and foodservice establishments enhance market access. Licensing agreements with brands like Monster Energy broaden the product portfolio. Marketing and promotional partnerships strengthen brand visibility and reach. Partnerships play a pivotal role in expanding Coca-Cola’s presence and offerings. | Collaborations with bottling partners, partnerships with retail chains, collaborations with restaurants, cafes, and foodservice establishments, licensing agreements with brands like Monster Energy, marketing and promotional partnerships, instrumental in expanding presence and offerings. |
| Key Resources | Key resources for Coca-Cola include its well-established brand portfolio, which includes Coca-Cola, Diet Coke, and other renowned brands. The company’s extensive research and development capabilities drive product innovation. A global manufacturing and supply chain infrastructure ensures product availability worldwide. Strong marketing and advertising efforts enhance brand recognition and customer loyalty. A dedicated workforce, including marketing and sales teams, supports market growth. | Resources for Coca-Cola encompass a strong brand portfolio, research and development capabilities, a global manufacturing and supply chain infrastructure, marketing and advertising efforts, a dedicated workforce, including marketing and sales teams. These resources collectively support Coca-Cola’s position as a global beverage leader. | Strong brand portfolio, research and development capabilities, global manufacturing and supply chain infrastructure, marketing and advertising efforts, dedicated workforce, resources supporting a global beverage leader. |
| Cost Structure | Coca-Cola incurs various costs associated with its operations, including expenses for raw materials (sugar, flavorings, etc.), manufacturing and bottling, marketing and advertising expenditures, distribution and logistics, employee salaries and benefits, research and development investments, and administrative overhead. Efficient cost management is vital to remain competitive in the beverage industry. | Costs associated with Coca-Cola’s operations include raw material procurement, manufacturing and bottling expenses, marketing and advertising expenditures, distribution and logistics costs, employee salaries and benefits, research and development investments, and administrative overhead. Effective cost management is crucial in the highly competitive beverage sector. | Raw material procurement, manufacturing and bottling expenses, marketing and advertising expenditures, distribution and logistics costs, employee salaries and benefits, research and development investments, administrative overhead, efficient cost management crucial in the competitive beverage industry. |
| Competitive Advantage | Coca-Cola’s competitive advantage stems from its extensive brand portfolio, which includes globally recognized names like Coca-Cola and Diet Coke. The company’s innovation in product development and flavor offerings keeps consumers engaged. A well-established global manufacturing and supply chain infrastructure ensures product availability. Marketing and advertising campaigns reinforce brand recognition and customer loyalty. Collaborations with bottling partners and various distribution channels enhance market reach. Coca-Cola’s position as a market leader is fortified by its brand strength, innovation, accessibility, and partnerships. | Coca-Cola’s competitive strength is founded on its diverse brand portfolio, featuring globally renowned names like Coca-Cola and Diet Coke. Continuous innovation in product development and flavor choices keeps consumers engaged. A robust global manufacturing and supply chain infrastructure guarantees product availability. Marketing and advertising campaigns bolster brand recognition and customer loyalty. Collaborations with bottling partners and extensive distribution channels extend market reach. Coca-Cola’s market leadership is strengthened by brand recognition, innovation, accessibility, and strategic partnerships. | Diverse brand portfolio, continuous innovation in product development, robust global manufacturing and supply chain infrastructure, marketing and advertising campaigns enhancing brand recognition, collaborations with bottling partners and distribution channels, competitive position built on brand strength, innovation, accessibility, and partnerships. |
Breaking down Coca-Cola ownership
Who is Herbert A. Allen?
Who is Barry Diller?
Director of The Coca-Cola Company since 2002, he is also Chairman of the Board and Senior Executive of Expedia Group, Inc. Barry Diller has served as Special Advisor to TripAdvisor, Inc.
marketing and operations leadership positions throughout his career.
What is the Coca-Cola incentive formula?
As of 2017, the Coca-Cola incentive formula comprises a base salary multiplied by a target percentage times the company performance factor. To which the individual performance amount is added.
For instance, Mr. Kent, with a 200% target, got an annual target incentive of $2 million, two times his base salary.
Before we move forward, I’d like to show you why I think Coca-Cola has been so successful over the years, and it has nothing to do with its secret formula.
Coca-Cola in the desert
Although a few people wonder about the Coca-Cola business model (they might give it for granted, just like I did not long ago), my curiosity was sparked in the middle of nowhere.
While traveling toward the Arizona Grand Canyon, I passed through a Dolan Springs town.
Situated in the middle of nowhere, at 3,400 feet of elevation, with less than four thousand people living there (according to Wikipedia estimate in 2010), I saw one thing that got my attention.
In front of a local shop, there was a Coca-Cola automatic distributor. I couldn’t see anyone around but I could get a fresh Coke!
I understand that Coca-Cola is a company born at the end of the 1800s.
Thus it had quite some time to get people accustomed to its brand and taste, as to become a habit (or a vice) for millions, if not billions of people (unfortunately, I’m one of them).
Yet, it doesn’t matter in which country you are in; Coca-Cola will be there.
What’s the secret of this company besides its formula? I bet that is about its business model and its distribution strategy. That’s why I looked into its financials to dissect its operations.
Coca-Cola operating segments
Coca-Cola can be divided into a few operating segments across Europe, the Middle East, and Africa:
• Latin America
• North America
• Asia Pacific
• Bottling Investments
• Corporate
Coca-Cola products line
- Beverage concentrates, referred to as “beverage bases,” and syrups, including fountain syrups.
- Finished sparkling soft drinks and other nonalcoholic beverages are referred to as “finished product business” or “finished product operations.”
Finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.
How does the Coca-Cola manufacturing process work? unfinished vs. finished products
As explained in the annual report:
In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling operations (to which we usually refer to as our “bottlers” or our “bottling partners”). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.
In our finished product operations, we typically generate net operating revenues by selling sparkling soft drinks and a variety of other nonalcoholic beverages, including water, enhanced water, and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. These finished product operations consist primarily of our Company-owned or -controlled bottling, sales and distribution operations which are included in our Bottling Investments operating segment. Also, in the United States, we manufacture fountain syrups and sell them to fountain retailers, such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. We authorize these wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States. Our finished product business also includes juice and other still beverage production operations in North America. Our fountain syrup sales in the United States and the juice and other still beverage production operations in North America are included in our North America operating segment.
How does the Coca-Cola distribution system work?
Coca-Cola drinks are available to consumers in more than 200 countries through a network of Company-owned or -controlled bottling and distribution operations, independent bottling partners, distributors, wholesalers, and retailers.
This is a massive beverage distribution system able to serve 1.9 billion beverages each day.
What brands does Coca-Cola own?
The Coca-Cola Company owns a portfolio of brands beyond the Coca-Cola drink, which comprises:
- Georgia is a coffee brand sold mainly in Japan.
- Dasani
- Ice Dew is a water brand sold in China
- Diet Coke/Coca-Cola Light
- Powerade
- Simply a juice and juice drink brand sold in North America
- I LOHAS, a water brand sold primarily in Japan
- Coca-Cola Zero Sugar
- Del Valle is a juice and juice drink brand sold in Latin America
- Glacéau Vitaminwater
- Ayaka a green tea brand sold primarily in Japan
- Fanta
- Schweppes is owned by the Company in certain countries other than the United States
- Gold Peak is a juice and juice drink brand sold in North America
- Sprite
- Aquarius
- FUZE TEA
- Minute Maid is a juice drink brand sold primarily in the Asia Pacific
- Minute Maid Pulpy
- Glacéau Smartwater is vapor-distilled water with added electrolytes that is sold mainly in North America and Great Britain
The secret isn’t in the secret formula but in the bottling partners
The Coca-Cola Company has five large independent bottling partners based on unit case volume that in 2017 were:
- Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola FEMSA”), which has bottling and distribution operations in Mexico, Guatemala, Panama, Colombia, Venezuela, Brazil), Argentina, and the Philippines;
- Coca-Cola European Partners plc (“CCEP”) Andorra, Belgium, France, Germany, Great Britain, Iceland, Luxembourg, Monaco, the Netherlands, Norway, Portugal, Spain, and Sweden
- Coca-Cola HBC AG (“Coca-Cola Hellenic”) Armenia, Austria, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, the Russian Federation, Serbia, Slovakia, Slovenia, Switzerland and Ukraine;
- Arca Continental, S.A.B. de C.V. northern and western Mexico, northern Argentina, Ecuador, Peru, and the state of Texas and parts of the states of New Mexico, Oklahoma, and Arkansas in the United States
- Swire Beverages Swire Beverages Hong Kong, Taiwan, 11 provinces and the Shanghai Municipality in the eastern and southern areas of mainland China, and territories in 13 states in the western United States.
This distribution system represented 2017 41% of the total unit case volume. This is a key ingredient to Coca-Cola’s overall business strategy.
Coca-Cola distribution plants
With distribution plants all over the world, Coca-Cola is able to make its products available everywhere:
As of 2017, the concentrated operations represented 51% of the production compared to 49% of the finished product operations.
Source: The Coca-Cola Company Annual Report
Net operating revenues were over $35 billion in 2017, compared to over $41 billion in 2016. Coca-Cola’s distribution channels are another key element of its overall business strategy.
A glance at the Coca-Cola ecosystem
With a massive portfolio of soft drinks with more than four thousand products worldwide, 250 bottling partners, 900 plants, and 27 million retail customers, The Coca-Cola system is probably the most extensive distribution ecosystem on earth.
Do you want to know who owns Google and who owns Apple?
Birth in Atlanta
The cola beverage which gave rise to The Coca-Cola Company was invented in 1886, so it is perhaps no surprise that the drink and the company itself has a long and storied history.
In this article, we’ll explore some of the twists and turns of this iconic brand and how it grew into the global force it is today.
Addicted to morphine after being wounded in the American Civil war, Atlanta pharmacist John Pemberton developed a substitute for the drug in the form of flavored syrup.
The syrup, which contained coca leaf extract and caffeine, was marketed as a patent medicine that could cure anything from nerve disorders to addiction, headaches, upset stomach, and impotence.
When some states passed prohibition legislation in the late 1800s, Pemberton also capitalized on support for the temperance movement by claiming that the drink was a healthy alternative to alcohol.
He took his concoction down the street to Jacobs’ Pharmacy where it was first sold from a soda fountain for the princely sum of 5 cents a glass.
Origins of the Coca-Cola name
The person credited for naming the soda is Frank M. Robinson, Pemberton’s partner and bookkeeper who believed that “the two Cs would look well in advertising.”
The first ever advertisement for Coca-Cola then appeared in The Atlanta Journal with oilcloth banners also draped over shop awnings. Coupons advertising free drinks were also advertised, which was considered an innovative marketing tactic at the time.
During the first year, sales of the drink averaged 9 servings per day.
Pemberton’s death and sale of the company
By 1888, three different versions of Coca-Cola sold by three different companies were on the market.
Soon thereafter, Pemberton became ill and was nearly bankrupt since the drink cost more to make than he was earning in revenue.
He then entered into a partnership with four Atlanta businessmen to sell parts of the business.
Codified by a verbal agreement, Pemberton stated that the Coca-Cola trademark would belong to his son Charley, but the other manufacturers could use his formula.
The Coca-Cola Company was incorporated in March 1888 with Charley Pemberton a major shareholder due to his ownership of the “Coca-Cola” name.
Pemberton then succumbed to stomach cancer five months later, but before his death, he acted as a consignor for Charley who sold a 33% interest in the recipe for Coca-Cola to pharmacist Asa Griggs Candler.
Securing control
After Pemberton died, Candler started selling a similar drink to Coca-Cola. But since Charley Pemberton owned the rights to the name, Candler was forced to use brand names such as “Koke” and “Yum Yum” which were not popular with consumers.
While stories differ on what happened next, most believe that Candler moved swiftly to obtain greater control over the company.
One story states that Candler arrived at Pemberton’s funeral to buy the trademark from Charley’s mother for $300 cash, while another is that he tried to force two of the businessmen in Pemberton’s original partnership out of the business.
However, when Charley Pemberton died of a suspected drug overdose in 1894, Candler attained sole control over the company more or less by default.
Expansion
By 1895, Coca-Cola was enjoyed across the United States with expansion into Cuba in 1899 and Europe in 1901.
Around this time, Candler sold the bottling rights to three businessmen from Tennessee who had some of the earliest technology that could bottle drinks at scale.
Candler sold the rights for just $1 and would later regret not asking for more. But with the first botting facility established in Chattanooga in 1899, he nevertheless set the company on a path to world domination in the beverage industry.
Key takeaways
- The cola beverage which gave rise to The Coca-Cola Company was invented in 1886, so it is perhaps no surprise that the drink and company itself has a long and storied history.
- Addicted to morphine after being wounded in the American Civil war, Atlanta pharmacist John Pemberton developed a substitute for the drug in the form of a flavored syrup that contained caffeine and coca leaf extract.
- After a series of protracted and complex deals over the rights to the Coca-Cola trademark and recipe, Asa Griggs Candler gained control over the company after Charley Pemberton’s death in 1894. His decision to sell the bottling rights to a concern in Tennessee enabled the company to distribute bottled drinks at scale.
Key Highlights
- Ownership Structure: Coca-Cola’s top investors include Berkshire Hathaway, led by Warren Buffet, with 9.25% of shares, and other institutional investors like The Vanguard Group (8.51%) and BlackRock (7.19%). Individual investors, including Herbert A. Allen, Barry Diller, and former CEO Muhtar Kent, also hold shares.
- Herbert A. Allen: Herbert A. Allen is the President, CEO, and Director of Allen & Company Incorporated, a privately held investment firm. He has been a Director of The Coca-Cola Company since 1982.
- Barry Diller: Barry Diller is the Chairman of the Board and Senior Executive of Expedia Group, Inc., and has been a Director of The Coca-Cola Company since 2002. He also serves as a Special Advisor to TripAdvisor, Inc.
- Muhtar Kent: Muhtar Kent is the Chairman of the Board of Directors of The Coca-Cola Company. He served as CEO of the company from 2009 to 2017 and joined Coca-Cola in 1978, holding various leadership positions.
- Coca-Cola Incentive Formula: The company’s incentive formula includes a base salary multiplied by a target percentage and the company performance factor. Individual performance is also considered in determining the annual target incentive.
- Distribution Strategy: Coca-Cola’s success can be attributed to its extensive distribution strategy, making its products available in over 200 countries through a vast network of bottling and distribution operations, independent bottling partners, distributors, wholesalers, and retailers.
- Operating Segments: Coca-Cola operates across various regions, including Latin America, North America, Asia Pacific, Bottling Investments, and Corporate.
- Product Line: The Coca-Cola Company owns a wide portfolio of brands, including Coca-Cola, Diet Coke, Fanta, Sprite, Powerade, Minute Maid, and many others.
- Concentrate and Finished Product Operations: Coca-Cola generates net operating revenues through concentrate operations by selling concentrates and syrups to authorized bottling operations. Finished product operations involve selling sparkling soft drinks and other nonalcoholic beverages to retailers or distributors.
- Massive Beverage Distribution System: Coca-Cola’s distribution system serves over 1.9 billion beverages daily through bottling and distribution operations, bottling partners, distributors, wholesalers, and retailers.
- Key Bottling Partners: Coca-Cola has five major independent bottling partners based on unit case volume, covering a significant portion of its distribution system.
- Historical Background: Coca-Cola was invented in 1886 by pharmacist John Pemberton, and the Coca-Cola Company was incorporated in 1888. Asa Griggs Candler gained control of the company through complex deals after Pemberton’s death in 1894.
- Global Reach: Coca-Cola expanded rapidly across the United States and later ventured into Cuba and Europe, becoming a global force in the beverage industry.
- Worldwide Ecosystem: With over 4,000 products, 250 bottling partners, 900 plants, and 27 million retail customers, The Coca-Cola system is one of the most extensive distribution ecosystems globally.
The Coca-Cola Expansion System Broken Down
Coca-Cola follows a business strategy (implemented since 2006) where it invests initially in bottling partners’ operations through its operating arm – the Bottling Investment Group.
As they take off, Coca-Cola divests its equity stakes and establishes a franchising model as a long-term growth and distribution strategy.
Breaking down Coca-Cola Mission and Vision
Coca-Cola’s Purpose is to “refresh the world. make a difference.” Its vision and mission are to “craft the brands and choice of drinks people love, to refresh them in body & spirit.
And done in ways that create a more sustainable business and better-shared future that makes a difference in people’s lives, communities, and our planet.”
Coca-Cola SWOT Analysis
Coca-Cola is the market leader in the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo.
However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.
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