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GROWTH OF COCA COLA THROUGH ACQUISITIONS - A CASE STUDY (By- Rishabh Agrawal)
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Article Details
Growth Of Coca Cola Through Acquisitions - A
Case Study
Authored By- Rishabh Agrawal
Table Of Contents
I.
Abstract
II.
Table
of contents
III.
Introduction:
“ the coca cola company”
IV.
A
global distribution network – the coca-cola system
V.
Growth
through mergers and acquisitions
VI.
Noteworthy
partnerships
VII.
Pros
and cons of mergers and acquisitions
VIII. Conclusion
Introduction: “The Coca Cola
Company”
The "Coca-Cola Company," an American
corporation founded in 1892, is primarily engaged in the production and
marketing of syrup and concentrate for "Coca-Cola," a carbonated soft
drink that is a cultural institution in the United States and a global symbol
of American preferences. Furthermore, the company manufactures and distributes
other soft drinks, such as citrusy drinks. "Coca-Cola" is the world's
largest soft drink manufacturer and supplier, as well as one of the largest
corporations in the United States, with over 2,800 products sold in over 200
countries. The headquarters are located in Atlanta, Georgia.
John S. Pemberton (1831–1888), an Atlanta pharmacist,
founded the Pemberton Chemical Company in 1886, where he invented “Coca-Cola”.
Frank Robinson, his secretary, chose the drink's name and hand-wrote it in the
flowing style that became the "Coca-Cola" trademark. In 1903, cocaine
was removed from the "Coca-Cola" recipe. Pemberton marketed his syrup
to regional soda fountains with the help of promotion, and the beverage became
a huge success. By 1891, another Atlanta chemist, "Asa Griggs
Candler" (1851-1929), had gained complete control of the company (for a
total monetary investment of $2,300 and the exchange of some property rights),
and the Coca-Cola Company was formed the following year. The trademark
"Coca-Cola" was registered by the United States Patent and Trademark
Office in 1893.
Under Candler's leadership, syrup sales increased from
approximately 9,000 gallons in 1890 to 370,877 gallons in 1900. During the
following era, syrup production facilities were established in Dallas, Los
Angeles, and Philadelphia, and the product's distribution expanded to include
every state, territory, and province in the United States, as well as Canada.
In 1899, the "Coca-Cola" Company signed its first agreement with an
independent bottling company to acquire syrup for the production, packaging,
and distribution of "Coca-Cola" drinks.
These licence agreements laid the groundwork for the distinct
distribution structure that now characterises the majority of the American
soft-drink industry. The Coca-Cola Company, founded in 1892 with a $100,000
capitalization, was purchased in 1919 for $25 million by a consortium of
shareholders led by Ernest Woodruff, an Atlanta entrepreneur. His son, Robert
Winship Woodruff, was president and chair of the company for over three decades
(1923-55).
"Coca-Cola" diversified its packaging and
developed or acquired new products in the years following World War II.
Coca-Cola first appeared in marketing in 1941 and became a brand name in 1945.
The company purchased the rights to the German-created soft drink Fanta in
1946. The curved "Coca-Cola" bottle, first introduced in 1916, was
granted trademark protection in 1960. Furthermore, the company invented the
"lemon-lime" beverage "Sprite" in 1961 and the first
sugar-free cola, Tab, in 1963. The company entered the citrus juice industry
after acquiring "Minute Maid Corporation" in 1960. It purchased the
Fresca brand in 1966.
“Coca-Cola” was the only business permitted to sell cold
bottled beverages in the People's Republic of China beginning in 1978. In 1982,
the corporation launched Diet Coke, a low-calorie, sugar-free soft drink
(originally named Diet “Coca-Cola”). The business adopted a new flavour of
“Coca-Cola” in April 1985, employing a recipe it devised based on taste
testing, in an effort to combat its declining market share. However, New Coke
was not warmly welcomed. “Coca-Cola” reinstated its original flavour in July,
which was subsequently marketed as “Coca-Cola Classic” in response to consumer
criticism. From 1982 through 1989, the corporation controlled Columbia Pictures
Industries, Inc., a film and entertainment firm.
In the early 1990s, Coca-Cola gained access to new
markets, beginning sales in Eastern Germany in 1990 and India in 1993. In 1992,
the company released its initial bottle produced in part from recycled plastic,
which was an important breakthrough for the industry at the time. Throughout
the 1990s, “Coca-Cola” introduced several new beverages, including the Qoo
children's beverage, Powerade sports drink, and Dasani bottled water, all of
which were promoted across Asia. Additionally, Coca-Cola bought Barq's root
beer in the United States; Inca Kola in Peru; Maaza, Thums Up, and Limca in
India; and Cadbury Schweppes drinks, which were distributed in over 120
countries worldwide.[1]
At the beginning of the twenty-first century, “Coca-Cola”
was accused of illegally polluting the soil and water, as well as committing
serious human rights breaches. In 2001, the “United Steelworkers of America and
the International Labor Rights Fund (ILRF)” filed a lawsuit against “Coca-Cola”
and “Bebidas y Alimentos and Panamerican Beverages, Inc.” Several American
institutions banned the sale of Coca-Cola products on campus as a result of the
dispute, which attracted international attention. The action was dismissed in
the end.
“Coca-Cola Zero”, a zero-calorie soft drink with the same
flavour as ordinary “Coca-Cola”, was debuted in 2005. In 2007, the business
purchased Energy Brands, Inc. and its assortment of flavoured drinks. In the
same year, Coca-Cola stated that it will join the “Business Leaders Initiative
on Human Rights (BLIHR)”, a collection of firms collaborating to create and
execute corporate responses to business-related human rights challenges.
A Global Distribution Network- The
Coca-Cola System
Coca-fast Cola's global development may be credited to
their unique “franchise distribution structure” (called "the Coca-Cola System"), which they
have been using since 1889. Several bottlers all throughout the world buy the
syrup concentrate that Coca-Cola makes and sells. This allows the corporation
to keep control over its top-secret formula without the hassle of operating
many of the separate plants.
There are around 900 bottling operations in the Coca-Cola
System and they manufacture 2 billion drinks every day. Each of the bottlers
has a contract that restricts their operations to a specific area. Reduces
competition from several firms selling the same product.
In addition to combining the syrup with carbonated water
and sweeteners, these distributors also package and distribute “Coca-Cola” in
cans or bottles to grocery stores, vending machines, restaurants, and cinemas.
Whereas the main syrup is manufactured by “Coca-Cola”, franchisees are
responsible for the management of carbonated drinks in their own territories.
The North American market is an exception to this
strategy, as “Coca-Cola” Company itself
keeps the majority of bottling and supply operations. “Coca-Cola” has
constantly supported the amalgamation of
different bottling firms outside of the United States. Coke has accumulated
stock in many of the firms in the “Coca-Cola System” over time.[2]
Growth Through Mergers &
Acquisitions
The Coca-Cola Company has a strategic plan in place to
ensure that the company continues to expand. Their long-term ambitions are to
increase the commercial beverage business in underdeveloped nations, with a
particular emphasis on Africa. As well as streamlining internal procedures and
generating new inventive items, they intend to reduce the number of master
brands in their product line, create fewer but better-quality master brands,
and improve their use of data.
As a result, Coca-Cola became one of the most prominent
and recognisable brands. They've become a cultural icon in the United States
thanks to their work in music, television, and movies. Advertisement is a large
component of the company's annual revenue. This includes advertising on
television and in social media.
But was this enough for the company’s growth? I doubt.
The company had something else in its mind. It was thinking of expanding the
scale via mergers, acquisitions and partnerships.
The Coca-Cola Company owns, develops, and distributes
more than 500 different brands across the world, including Coca-Cola and Diet
Coke. New goods that they developed have led to certain brands. More than a few
of these came via purchases, mergers, and other strategic alliances.
Some of the key mergers and acquisitions by the company
are listed below:
·
1960- A juice, soft
drink, and other beverage maker like “Hi-C”, “Minute Maid”, was purchased by
Coca-Cola.
·
1993- Coke bought renowned Indian brand “Thums Up”
because they couldn't break into the Indian market on its own. They currently
account for more than 40% of India's cola market share.
·
1995- “Barq's”, a maker of root beers and cream
sodas, has been acquired.
·
1999- With the
purchase of a 50% stake in the company, Coke was able to take over the
company's marketing and bottling activities.
·
2001- The fruit
drink, smoothie, and bar maker “Odwalla” was purchased. In 2020, this firm was
shut down.
·
2007- Coca-Cola
purchased vitamin and mineral-infused teas and fruit beverages manufacturer
“Fuze” Beverage.
·
2008- A well-known
iced tea manufacturer, “Honest Tea”, was bought for $40 million by the
corporation. In 2011, Coca-Cola completed the purchase of all remaining shares,
making it the sole owner.
·
2013- “ZICO”, a
manufacturer of coconut water, was recently acquired by Coca-Cola.
·
2014- Coca-Cola
bought 16.7% of “Monster Beverage”, the company that makes energy drinks, in
return for a long-term strategic collaboration.
·
2016- As a result,
Coca-Cola acquired a significant stake in “Chi Limited”, Nigeria's largest
distributor of snacks, food, and beverage items. In 2019, the remaining shares
were purchased.
·
2017- Coca-Cola
purchased the Mexican sparkling water brand Topo Chico.
·
2018- After
Starbucks, Coca-Cola now owns the world's second largest coffeehouse business,
“Costa Coffee”.
·
2018- One of the
world's leading kombucha producers, “Organic and Raw Trading Co.” of Australia,
has been purchased.
Noteworthy Partnerships
The Coca-Cola Company has had numerous successful
strategic alliances that have helped the company to develop rapidly in addition
to controlling various brands.
The cooperation with “McDonald's” is one of the most
well-known. Beverage suppliers were needed when “McDonald's” was first starting
out in 1955. By signing a joint agreement, “McDonald's” will solely offer
“Coca-Cola” drinks. McDonald's, the largest restaurant chain in the world,
supplies "Coca-Cola" products in nearly 40,000 of its locations
worldwide (based on revenue). “Burger King, Chili's, Chipotle, and Domino's
Pizza” are just a few of the restaurants that offer Coca-Cola products.
There are various stadiums, theatres, and music halls
where only Coca-Cola products may be purchased, thanks to partnerships with
Coca-Cola. This time, Olympics is sponsored in majority by the “Coca-Cola”
Company. After signing an agreement with Major League Baseball in 2017, Coke
committed to remove Pepsi and solely market Coke products.[3]
Pros And Cons Of Mergers And
Acquisitions
In this section, advantages and disadvantages of mergers
and acquisitions by a company (Coca-Cola in this case) will be discussed. As
the name suggests, mergers and acquisitions are transactions when two or more
businesses merge together, or where one firm acquires another.
ADVANTAGES
When two or more businesses merge or acquire each other,
there are several advantages for everyone involved. Benefits range from
enhancing customer service to boosting productivity for the company's
workforce. Mergers and acquisitions can have a number of benefits, including:
·
Improved Economic
Scale: Material and supply requirements are often greater for larger businesses
or those who have partnered with another firm. If companies purchase bigger
amount of raw resources and/or consumables, they may reduce their expenses and
pass on the benefits to consumer.
·
Lower Labor Costs: As
a result of a merger or acquisition, workers from both organisations may find
up performing identical activities. By merging their resources and eliminating
unneeded employees, companies may conserve money while maintaining a strong and
productive staff. Professionals in mergers and acquisitions are able to
evaluate the performance of others in comparable roles and select the most
qualified individuals for every role in their new company.[4]
·
Increased Market
Share: When two businesses merge and work in the same industry or offer
comparable products or services, the newly formed company can gain from the
resources that both businesses bring to a business arrangement.
·
More Financial
Resources: The newly formed company's overall financial efficiency is increased
by the combined financial resources of all the parties involved in a
"merger or acquisition." Increased inventory space or a bigger
marketing budget could open up new investment opportunities or expand the
organization's audience.
·
Enhanced Distribution
Capacities: Mergers and acquisitions can broaden a company's geographic reach
and hence its capacity to provide its products and services to a larger
audience.
Every coin has two sides. If there are advantages,
disadvantages follow.
DISADVANTAGES
In spite of the positive aspects of M&As, there are a
number of negatives that must be carefully examined by all parties. Some of the
possible drawbacks of mergers and acquisitions are as follows:
·
Increased Legal
Costs: A legitimate commercial transaction, the combination of two firms
sometimes necessitates the participation of numerous essential specialists. To handle the assets and related
financial concerns, the parties will typically need the
assistance of
transaction-specific attorneys and financial experts. It is not uncommon for
mergers and acquisitions to be accompanied by significant legal expenses.[5]
·
Expenses Associated
with the Deal: The firm acquiring the other would be required to pay a sum of
money for that company and its assets, as well as the fees for the consultants
engaged to assist with the merger or acquisition's logistics. A firm may regard
such expense as a disadvantage.
·
Potentially Lost
Opportunities: Mergers and acquisitions may entail the loss of other chances
because of the capital and time invested in the process.
Conclusion
The “Coca-Cola Company” has manufacturing facilities
in approximately two-hundred plus
countries, making it the largest non-alcoholic beverage supplier in the world.
From sodas to energy drinks to soy-based drinks, it has more than 3500 beverage
options (5000 brands). “Coca-Cola” in North America has taken attempts to
re-establish its beverage strategy and business model in recent years. Category
and brand emphasis is a priority for the American beverage manufacturer.
Innovative goods like “ViO BiO” lemonades are constantly being introduced in
Germany by the company. Sugar content will be reduced by 10% by 2020, according
to their plan. As a result of these changes in recipes, lower container sizes,
and clear product information for customers, this approach is adopted. An
acquisition of New England-based soda firm Moxie was completed in August of
this year. Because of the steady reduction in consumption of sugary drinks in
the United States, this acquisition was necessary. In the first quarter of
2018, the firm exceeded revenue and profit targets. A solid 4% volume growth in
the worldwide market, 3% growth in “Coca Cola”, and increased growth in “Coca Cola
zero sugar” are the company's foundations.
Coca-Cola understands the importance of a positive
customer experience to its company. According to “Smith + Co”, a five percent
shoot in “client loyalty” may raise profitability by as much as 85 percent
based on one study. As a result, it has decided to merge the function of the
Chief Marketing Officer with that of the customer. Earlier this year, Coca-Cola
announced the acquisition of Costa Coffee, a British coffee chain, for $5.1
billion.
More than 3,800 Costa
Coffee outlets exist across the world. Coffee will take precedence over retail
competition at this point in time. The company's Chief Executive Officer, James Quincey has vowed not to
effectively use CBD, a cannabinoid present in cannabis, until it is accepted by
law, safe, and palatable. The firm will be able to produce and provide its
customers both cold and hot beverages as
a result of this transaction.
In recent months, Diet Coke has released four new
flavours: Ginger Lime, Fiesta Cherry, Twisted Mango and Zesty Blood Orange. The
Coca-Cola Company's volume growth engine will be fueled by this new notion.
Fuze tea, Ayataka, and Gold Peak have all been added to the company's tea
portfolio throughout the years. Fuze tea was available in 50 countries by the
end of 2017.
According to Mr. Quincey, mergers and acquisitions will
play an important role in driving development. When it comes to creating new
platforms, he pointed to Coca Cola’s-acquisition of Jugos del Valle as an example. On the other hand, the organization's
future dividend growth is justified by its debt and cashflow, which Quincey
estimates will remain at six transactions in 2019, as compared to six
agreements in 2018. As part of Coca-SWOT Cola's analysis, the company points to
its acquisition and merger prospects as one of its most important strengths.
Additionally, the purchase of smaller firms and newer brands has played an
important part in the company's extraordinary expansion.
Article Information
GROWTH OF COCA COLA THROUGH ACQUISITIONS - A CASE STUDY (By- Rishabh Agrawal)
Authors: Rishabh Agrawal
- Journal IJLRA
- ISSN 2582-6433
- Published 2022/07/19
- Volume 2
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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