Comment - Can Coca-Cola Dominate Another Century?
Coca-Cola CEO Muhtar Kent has a challenge on his hands if he wants to keep Coke's profits fizzing
Coca-Cola is one of the great commercial success stories of the last century and has come to embody the rise of America on the world economic stage. But, with demand stagnating in mature markets and US economic power under fire, can brand Coca-Cola continue to dominate?
The Coca-Cola Co celebrated its 125th anniversary at the weekend, with a fanfare of festivals, global celebrations and no less than a 29-storey thank you card. And indeed, there is no reason why the world's biggest beverage company cannot afford a small smile of satisfaction.
Coca-Cola is a brand to be reckoned with, and one that its closest rival Pepsi-Cola has been playing catch-up with since its inception. Even beyond soft drinks, Coca-Cola safely trumps all other drinks brands - be it beer, wine or spirits. In 2010, the brand made the number 16 spot in Brand Finance Global's 500 most valuable brands - worth $25.81bn. PepsiCo reached 24, but trailing far behind was Heineken at number 75 and Carlsberg at number 285.
However, while North America was once seen as a powerhouse for carbonated soft drinks growth, the market has since matured - not to mention broadened - and more health-conscious consumers are looking for alternatives.
There is no doubt that the decline of the CSD market in the US means that CEO Muhtar Kent has a challenge on his hands if he wants to keep brand Coke's profits fizzing.
In recent years, The Coca-Cola Co has had to turn to alternative beverages such as energy drinks, juices, RTD teas and bottled waters to keep the consumer interested. Saturation in established markets has also meant turning to emerging markets for sales growth.
In 2010, North America accounted for around 22% of Coca-Cola Co's net sales, while the Pacific region, which includes China, generated around 18%. Europe and Africa accounted for 16% each and Latin America 28%.
In February, the company said it had grown its business in China by more than 100m incremental unit cases last year, the seventh consecutive year of achieving this level of volume growth. Its Minute Maid Pulpy, a brand created for the Chinese market, also achieved billion-dollar brand status in February after only five years.
Yet, while some of the world's fastest growing markets have provided a platform for massive growth, in countries such as China, Coca-Cola must increasingly compete against a plethora of local brands that are strong in the market.
Sanford Bernstein analyst, Ali Dibadj, questioned how much more successful Coca-Cola can be. "Long-term, the question is: 'What will the next 125 years bring? Where else can they go in the emerging markets? How much more Coke can people drink?'", he told The Telegraph this week.
Coca-Cola and its rival, PepsiCo, are keen to pledge huge investments into these emerging economies. But, there is a risk that local brands might mount a tougher challenge, particularly in China, which is set to overtake the US as the world's largest economy in perhaps as little as 20 years.
As American economic might wanes, does the message of the American dream, which brands such as Coke have come to embody, also fade? Could this make Coke less aspirational? In other words, there is a danger that brand Coca-Cola could lose its relevance in some key emerging markets.
It will be more important than ever for Kent to ensure that the consumers coming into the global economy in the next 100 years recognise brand Coca-Cola as a household name, but also as a brand that stands for something that they want to be part of.
Having done this pretty well for 125 years, you'd have to say that if anyone can do it, then Coca-Cola can. However, it will need to be even more vigilant in the next 125 years in order to stay relevant.
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