Source: the finishing touch of Zhongjin
Coca-Cola Company is the leader of the global soft drink market, and its brand is also a typical representative of mass consumer culture. Through an in-depth review of the growth process of Coca-Cola Company Company over the past 130 years, this paper excavates the core competitiveness of the company's continuously expanding share and brand influence from the three aspects of brand marketing, globalization and diversified development. to provide reference for the leading development of domestic beverage enterprises.
Bid H shares: Tingyi, China Foods
China's soft drink market is still fragmented, with only 21% of CR3 in 2019. Leading companies such as Coca-Cola Company China and Master Kang have wider channel coverage, better brand awareness and stronger financial strength, and plan to integrate China's soft drinks market and continue to consolidate their leading advantages through high-end, category expansion, mergers and acquisitions.
Spanning 134 years, establish a global beverage empire
Coca-Cola Company Company was founded in Atlanta in 1886 and has a history of 134 years. At present, Coca-Cola Company produces and sells more than 4300 brands and 4300 kinds of soft drinks in more than 200 countries and regions. In 2019, Coca-Cola Company had a total income of US $37.3 billion and a net profit of US $8.9 billion. As of 2019, Coca-Cola Company's share of the global soft drinks market reached 21%, more than twice that of PepsiCo Inc, the second place in the carbonated beverage market segment. Coca-Cola Company's global market share is as high as 47%, also significantly surpassing the second place PepsiCo Inc 18.3%.
Chart: global soft drinks market pattern in 2019 (by retail sales)
Source: Euromonitor, China International Capital Corporation Research Department; Note: statistics include solid drinks
Chart: global market pattern of carbonated drinks in 2019 (by retail sales)
Source: Euromonitor, China International Capital Corporation Research Department
Full category development, market segmentation also occupies a leading position. Carbonated drinks are the company's core business, contributing about 66% to revenue in 2018. In addition to carbonic acid, the company also covers bottled water, fruit juices, instant tea, coffee and other soft beverage categories, all lines of business have strong brands. Fruit juices, bottled water and energy drinks are the most representative, with revenue contributions of about 9%, 9% and 6% respectively in 2018. Globally, Coca-Cola Company is not only a leader in the carbonic acid market, but also a leader in market segments. According to Euromonitor, the company ranked first in fruit juices, bottled water, instant tea and coffee in 2019 and second in energy and sports drinks. The proportion of the company's non-carbonic acid sales has gradually increased from 11% in 2000 to 30% in 2018, and management has increasingly emphasized the vision of building Coca-Cola Company into a full-category beverage company.
Chart: Coca-Cola Company's share of income from different beverage businesses in 2018
Source: performance materials on the company's official website, China International Capital Corporation Research Department; Note: Costa coffee is not included.
Chart: the company is also a leader in the global market segment (2019)
Source: Euromonitor, China International Capital Corporation Research Department; Note: by retail volume
Chart: introduction of the company's major billion-dollar brands
Source: China International Capital Corporation Research Department, the company's official website
For a century of multinational enterprises, globalization helps to expand. Coca-Cola Company, who has officially expanded globally since 1920, is one of the first FMCG companies in the United States to start globalization. In 2019, the company's sales volume in the international market accounts for about 80%, which is more than four times that of the local market, and the overseas market contributes the company's main revenue and profits. Compared with PepsiCo and other major FMCG companies, Coca-Cola Company is more international, with PepsiCo Inc accounting for 38 per cent of international market revenue and 31 per cent of operating profit in 2018. In addition, in 2019, Coca-Cola Company ranked first in 32 of the top 40 soft drink markets in the world, taking a leading position in all major markets.
Chart: share of revenue from North American and international operations of major FMCG companies in the United States
Source: annual reports of companies, China International Capital Corporation Research Department; Note: Coca-Cola Company and Procter & Gamble Co are 2019 data, the rest are 2018 data
Chart: Coca-Cola Company's historical development stage
Source: "Transformation and continuity the carbonated soft drink bottling industry and antitrust policy since 1980", Euromonitor, China International Capital Corporation Research Department; Note: sales unit is "Unit Case", each unit is 5.68L beverage.
Marketing is the king, hundred years of development carries heavy brand culture.
As a global leader in soft drinks, Coca-Cola Company's success is not only promoted by the background of the times, but also the company's efforts in product design, business model selection, brand building, globalization and diversification. We believe that the most basic and core element is the company's unremitting marketing efforts, which not only prolong the life cycle of carbonated drinks to more than 100 years, but also successfully shape the unique "Coca-Cola Company" brand culture. According to Euromonitor's "Global 100 most successful Fast Consumer Brands" in 2017, Coca-Cola Company ranks first in the range of $350 to $45 billion, far higher than companies such as PepsiCo Inc and Nestl é Coffee.
Century-old brand marketing is rooted in society and culture. In more than 130 years of marketing process, Coca-Cola Company has created numerous classic marketing cases through continuous marketing innovation, including binding Santa Claus to the polar bear IP image, launching famous hilltop advertisements and so on. Coca-Cola Company's marketing theme is also from the initial emphasis on product functions, to pay attention to social attributes, and finally integrated into the way of life and promoting values, advertising evolution process witnessed the brand-building process. Coca-Cola Company has become not only a simple drink to quench thirst, but also our way of life and cultural symbol, conveying the values of "peace and beauty" and the personality of "positive and happy".
Chart: 2017 soft drink brand value ranking
Source: Euromonitor, China International Capital Corporation Research Department
From "3A" to "3P", the brand strength is continuously strengthened. In the process of formulating the marketing strategy, Coca-Cola Company changed from the initial "3A" strategy, that is, "Affordable, Acceptable and Available", to the "3P" strategy in the 1980s, that is, "value for money (Price to Value), first choice in mind (Preference), Pervasiveness". The change of marketing strategy reflects the change of the company from product-oriented to culture-oriented and values-oriented. The company pursues to establish all-round relations with consumers, establish brand culture and strengthen brand awareness.
Chart: Coca-Cola Company's "3A" and "3P" marketing strategy
Source: "the Evolution of Coca-Cola Company Brand Culture", China International Capital Corporation Research Department
Products: positioning the public, consistent brand image with tangible brand culture
Pricing: positioning popular drinks and creating a culture of equal consumption. When Coca-Cola Company launched in 1886, the unit price was 5 cents, which was located in the mass market, which was 7-8 cents lower than the mainstream beverage price in the market. In the following 70 years, Coca-Cola Company maintained a price of 5 cents, expanded the market with sales thinking, and became the representative of American mass consumer goods. In the process of expanding the international market, the company also sets prices according to local market conditions to ensure that product prices still fall within the "affordable" range to meet the daily consumer needs of the mass market. The culture of equality and mass consumption represented by Coca-Cola Company constitutes an important part of his brand culture.
Logo maintains consistency for a hundred years, and the differentiated arc bottle has become a unique cultural logo. Since the company designed the beverage name "Coca Cola" and Spencer font Logo based on the names of Coca and Kola in 1886, the product name has been in use today, and the Logo marked by "Coca Cola" has maintained consistency in more than 130 years of history. In order to reduce the competition of imitators in the market, Coca-Cola Company launched the classic arc bottle in 1916 to enhance the degree of brand recognition and differentiation. According to a 1949 survey, only 1 per cent of Americans could not distinguish Coca-Cola Company by the shape of the bottle. In the following 100 years, the company's packaging has retained the design of its classic arc bottle, and through its marriage with art and culture, enrich the connotation of the brand, arc bottle has also become a unique cultural logo of Coca-Cola Company.
Chart: the name of Coca-Cola Company and the Historical Evolution of Logo
Source: "the Evolution of Coca-Cola Company Brand Culture", China International Capital Corporation Research Department
Chart: the evolution of Coca-Cola Company arc bottle
Source: China International Capital Corporation Research Department, the company's official website
Brand: marketing is the gene of Wang Zhigen Company, and brand building is integrated into cultural connotation.
Don't hesitate to invest in advertising, pay attention to brand and strong marketing take root in the company's genes. At the beginning of its establishment, Coca-Cola Company adopted the publicity model of large-scale brand marketing and was never stingy in the investment of advertising expenses. In 1892, Coca-Cola Company's marketing budget was $11000; in 1901, the budget exceeded $100000, with tax income of nearly $1 million and advertising spending of more than 10%; and the marketing budget in 1911 exceeded $1 million for the first time. By 2019, Coca-Cola Company's global advertising spending was $4.25 billion, and the advertising spending rate remained at 11.4%. Compared with other major FMCG companies in the United States, Coca-Cola Company's advertising investment intensity is also in a higher position.
Chart: average advertising spending rate of major FMCG companies in the United States from 2017 to 2019
Source: annual reports of companies, China International Capital Corporation Research Department; Note: PepsiCo Inc's revenue includes food division (accounting for about 54% of total revenue)
Adhere to the theme marketing model, brand demand from function to personalization. With the changes in the consumer environment and social hotspots, Coca-Cola Company designs a marketing plan every few years. Although the publicity media are constantly changing, from print media such as newspapers and posters to radio and television advertisements to new media, the company's theme marketing model is consistent. From 1886 to 2016, the company has at least 43 thematic marketing activities, during which countless marketing models have been created. The evolution of Coca-Cola Company's advertising theme well interprets the "brand pyramid model" put forward by Professor Channadoni of the University of Birmingham, that is, a successful brand contains five elements. from the outside to the inside, they are characteristics, interests, emotional returns, values and personality.
Chart: brand pyramid model
Source: "Brand winning: from Brand Prospect to Brand Evaluation", China International Capital Corporation Research Department
Advertising: from function to social, personality and lifestyle, the brand connotation is gradually profound. At the beginning of Coca-Cola Company's development, the United States was also in the initial stage of the development of mass consumption, and its advertisements emphasized the functional characteristics of "refreshing and delicious" and "refreshing and refreshing spirit" in order to accelerate consumer education and promote category penetration. The change of Coca-Cola Company's advertising theme not only shows the process of establishing the brand, but also shows the evolution of American society and consumer environment. Under the special background, the cultural connotation and image of the brand are fuller and richer.
Chart: Coca-Cola Company's marketing theme changes in different American social and consumer times.
Source: the company's official website, China International Capital Corporation Research Department
IP marketing: successfully build IP, achieve brand binding. Coca-Cola Company has successfully reshaped the IP image of Santa Claus and Polar Bear to further enrich the brand culture. Since 1920, Coca-Cola Company began to launch marketing activities at Christmas, broadening the consumption scene to winter, while more successfully binding with important festivals. In 1931, the company further cooperated with illustrator Haddon Sundblom to create a modern version of "Coca-Cola Company" of Santa Claus-red clothes, white beard and smiling face, which has become one of the most widely used images of Santa Claus today. Also as early as 1922, Coca-Cola Company began to launch packaging with the image of a polar bear; in the 1993 "Forever Coca-Cola Company" marketing campaign, an animated version of the polar bear advertisement "the Northern Lights" portrays a lovely, innocent, playful and joyful polar bear, which successfully makes Coca-Cola Company's "Polar Bear" very popular among consumers all over the world and becomes a happy cultural symbol.
Chart: Coca-Cola Company's image of Santa Claus
Source: China International Capital Corporation Research Department, the company's official website
Chart: Coca-Cola Company's polar bear image
Source: China International Capital Corporation Research Department, the company's official website
Sports marketing: marriage of sports events to expand the international influence of the brand. Sports marketing is an important part of Coca-Cola Company's global brand promotion, mainly aimed at the two major international sports events, the Olympic Games and the World Cup. The company first participated in sponsoring the Amsterdam Olympic Games in 1928 and formally signed a sponsorship contract in 1932. The cooperation continues to this day, and it is the longest-running sponsor in the history of the Olympic Games. Coca-Cola Company's advertisement appeared at the World Cup in the 1950s; the company formally signed a sponsorship contract with FIFA FIFA in 1976, and the cooperation continues to this day. Sports is a worldwide language, which transcends cultural differences and language barriers, and can help brands achieve cross-cultural and global communication. At the same time, international events have the values of optimism, happiness, diversity and inclusiveness, which are consistent with the values shaped by Coca-Cola Company.
Content marketing: narrowing the distance between brands and consumers. In the new social media era, companies pay more attention to two-way interaction with consumers and integrate brands into life through innovative marketing. At present, Coca-Cola Company is stationed in almost all social platforms, operated by a special digital marketing team, and is committed to the new model of content marketing. Coca-Cola Company launched the "name bottle" campaign in Australia in 2011 to create brand freshness and give products social attributes through bottle customization. Coca-Cola Company China launched a "nickname bottle" campaign in 2013 to achieve the same effect.
Chart: list of Facebook Inc fans as of February 2020
Source: Statista, China International Capital Corporation Research Department
Chart: Coca-Cola Company's "name bottle" marketing
Source: Coca-Cola Company Australian official website, China International Capital Corporation Research Department
Channels: ubiquitous "Coca-Cola Company"
The channels are widespread, and where there are people, there is Coca-Cola Company. After more than 130 years of development, the company has built the world's largest beverage distribution system, selling Coca-Cola Company in more than 200 countries or regions. Through its meticulous management, it has penetrated into major channels, including supermarkets, convenience stores, retail stores and so on. In 2019, the company has 30 million sales outlets worldwide, covering about 60% of the world's retail stores; in addition, the company also has 16 million vending machines. According to the company's website, 94% of people around the world know the Coca-Cola Company brand, as it pursues, Pervasiveness.
Multi-channel expansion, obvious advantages of catering channels. Coca-Cola Company started his internationalization early and ploughed deeply for a long time, and has obvious advantages over his competitors in traditional channels and special channels. There is little difference in retail channels between Coca-Cola Company and PepsiCo Inc in the North American market, but Coca-Cola Company still has obvious advantages in catering channels. In terms of catering prefabrication channels, as early as the 1970s and 1980s, the company reached a strategic cooperation agreement with the major fast food giants represented by McDonald's Corp, Subway and Burger king. In the process of realizing store expansion in the United States and international markets, fast food giants have also helped Coca-Cola Company achieve rapid expansion in catering channels. According to Euromonitor, Coca-Cola Company accounted for 57.3% of the US carbonated beverage market in 2019, far higher than the 16.5% of PepsiCo Inc, who came in second.
Chart: Coca-Cola Company works with major American fast food chains
Source: performance materials on the company's official website, China International Capital Corporation Research Department; Note: Sierra Mist is a PepsiCo Inc product, sold only in the United States
Chart: the market pattern of carbonated drinks in different channels in the United States in 2019
Source: Euromonitor, China International Capital Corporation Research Department; Note: data are counted according to the caliber of sales.
The Secret of Globalization-- franchise and Localization Operation
One hundred years of globalization, franchising and localization help
It has been nearly a hundred years since Coca-Cola Company officially launched the globalization strategy in the 1920s. Coca-Cola Company ranks first in the world and its major market share in 2019. According to Euromonitor, Coca-Cola Company has a global soft drink market share of 18%, with a market share of 35% and 30% in Latin America and Australia, significantly ahead of his competitors. We believe that the success of Coca-Cola Company's globalization is inseparable from its franchise expansion model and local operation philosophy.
Coca-Cola Company's globalization process:
Chart: Coca-Cola Company's globalization process
Source: company website, company annual report, "Coca-Cola Company Brand Cross-cultural Communication Research", China International Capital Corporation Research Department
Franchise-- the balance between Channel Control and Light assets
Master the center of the value chain and accelerate the expansion of the light asset model. The use of franchise model enables Coca-Cola Company to focus on advertising and brand building. As the production of concentrate is the center of the value chain, the company has a strong say in the value chain. Coca-Cola Company accounts for about 25 per cent of the invested capital of the industrial chain and earns nearly 50 per cent profit. Coca-Cola Company's ROE was 34.1% in 2018, while the average ROE of its five listed bottlers was only 8.9%. Coca-Cola Company operates the entire franchise network at a lower cost. At the same time, the company controls its bottler indirectly by controlling the production of concentrated liquid, which has a very strong control over the industrial chain.
Chart: Coca-Cola Company franchise model
Source: China International Capital Corporation Research Department, the company's official website
Chart: comparison between Coca-Cola Company and his main bottler ROE in 2018
Source: Capital IQ, China International Capital Corporation Research Department
An introduction to the historical evolution. Coca-Cola Company bottler system is not immutable, in order to better carry out global management, the company's bottling system has experienced several changes: light assets > heavy assets > light assets:
Chart: evolution of Coca-Cola Company's franchise system
Source: company Annual report, China International Capital Corporation Research Department
Return to the light asset model, channel quality and control are better. With the evolution of the bottler system, Coca-Cola Company continues to refine the global management, the channel control continues to strengthen, and the channel moat is further strengthened. Benefiting from the strategy of reengineering the franchise system, the company returned to the light asset model, with Coca-Cola Company's share of bottling investment income falling from 52 per cent in 2015 to 19 per cent in 2019 and rising to 39 per cent from 26 per cent in 2015. At present, most of the company's global bottling business is carried out by strategic bottlers or large independent bottlers, and quality control has been improved.
Chart: the proportion of companies' bottling investment income declined from 2015 to 2019.
Source: Capital IQ, China International Capital Corporation Research Department
Chart: the company's ROE continues to improve from 2015 to 2019
Source: Capital IQ, China International Capital Corporation Research Department
Global thinking, localized action
Coca-Cola Company is committed to becoming a global village drink and spreading the happy culture it represents to the world. In the process of globalization, the company puts forward "global thinking, localization action", which is mainly reflected in two aspects: product and marketing.
► products: 1) promote core products: Coke, Sprite, Fanta, Diet, Coke Zero and other core products, with a global strategic height. Take the Mexican market as an example, the company continues to introduce new products and categories, such as American sharp sports drinks and Maid juice, etc., and successfully became a non-carbonated beverage Top1 in 2018. 2) develop local products: for example, Coca-Cola Company launched Ayataka tea in Japan in 2007. After being well received in the Japanese market, it has also been successfully promoted to Southeast Asia and other markets. Coca-Cola Company's internationalization enables the company's products to achieve cross-selling in the global market, enterprises can not only maintain the vitality of product innovation, but also maximize efficiency and scale.
► marketing: 1) Global marketing strategy: Coca-Cola Company launches a global marketing program every few years to design advertisements with common cultural and emotional elements, such as personality, emotion, lifestyle, etc., to promote brands around the world, such as "Taste the feeling" in 2016. 2) excellent local marketing programs have global replication: in 2011, Coca-Cola Company Australia "name bottle" swept all over Australia, the company immediately introduced the marketing means to Europe and the United States, but also achieved very good marketing results.
Diversification: from carbonic acid to full category, to build a global soft drink giant
In the 1950s, Coca-Cola Company established extensive brand awareness and fine sales network around the world by virtue of strong brand marketing and superior international management experience. Coke was successfully built into a well-known beverage item in the world. In 1950, the company's sales revenue reached 300 million US dollars, all contributed by Coke products. After nearly 70 years of operation and promotion of a single standardized product, the company has launched a diversification strategy to respond to the life cycle risks of a single category and the problem of intensified competition. Diversification expanded from carbonic acid brand to multi-category expansion. Coca-Cola Company achieved further expansion by virtue of complete channels and brands. In 2017, he put forward the vision of becoming a "full-category beverage company". In 2018, the company launched about 600 new products, of which more than 400 were non-carbonated products. The contribution of new product sales increased from 9% in 2015 to 17% in 2018.
Chart: the company's major carbonated and non-carbonated beverage brands launch the timeline
Source: China International Capital Corporation Research Department, the company's official website
From cola to carbonic acid: expand the product line and consolidate the strong business
Expand the brand, enrich the product line, and consolidate the advantage of carbonated beverage market. Since 1950, Coca-Cola Company has been facing fierce competition from Pepsi. From 1950 to 1970, PepsiCo achieved a rapid rise through cost-effective and accurate positioning of young consumers. The market share of carbonated drinks in the United States rose from 13% to 24%, while the market share of Coca-Cola Company fell from 48% to 35% in the same period. To cope with the competition, Coca-Cola Company has successively launched orange-flavored soda Fanta, lemon-flavored Sprite and low-sugar cola Tab since 1955 to enrich the carbonated beverage product line. Since 1982, with the improvement of consumer health awareness, the company has extended the Coke product line for the first time and launched Diet Coke, which has led the share of the carbonate market to stabilize and pick up. The diversification strategy not only effectively hedges the life cycle risk of individual products, but also promotes the further expansion of the American carbonated beverage market. The sales of carbonated drinks in the United States increased nearly 10 times from 1950 to 1998.
Chart: share changes of Coca-Cola Company and PepsiCo Inc from 1940 to 1998
Source: "Transformation and continuity the carbonated soft drink bottling industry and antitrust policy since 1980", China International Capital Corporation Research Department
Chart: total sales of carbonated drinks in the United States from 1940 to 1998
Source: "Transformation and continuity the carbonated soft drink bottling industry and antitrust policy since 1980", China International Capital Corporation Research Department; Note: sales unit is "Unit Case", each unit is 5.68L beverage.
Chart: when and how the company's major carbonated beverage brands are launched.
Source: company website, China International Capital Corporation Research Department; Note: Fanta first launched in Europe in 1955 and began to enter the United States and other markets in 1960
Multi-brand development, the diversification of carbonic acid categories has achieved remarkable results. Although Coca-Cola Company brand is still the main part of Coca-Cola Company's sales revenue in 2018, the revenue contribution of the four extended carbonated brands, including Sprite, Diet Coke, Fanta and Coke Zero, has also reached about 26%. It has also successfully entered the global Top6, strengthening the competitiveness of the company's carbonated beverage category. Compared with Pepsi, Coca-Cola Company with its global channel advantages and stronger brand operation, the market share of carbonated beverage brands are higher than Pepsi's target brands, showing strong competitiveness.
Chart: the proportion of the company's top ten brands in sales in 2018
Source: the company's official website performance materials, China International Capital Corporation Research Department
Chart: share of the world's top 10 carbonated drinks in 2019 (sales volume)
Source: Euromonitor, China International Capital Corporation Research Department; Note: red is Coca-Cola Company brand, gray is PepsiCo Inc brand
The taste is diversified to cater to the subdivided needs of consumers. The company promotes standard products in its early days and has not developed other flavors since it was established nearly 100 years ago. With the gradual emergence of many restaurants with homemade cherry flavor Coca-Cola Company on the market, the company broke with the tradition and launched cherry flavor Coca-Cola Company in 1985 and began to offer a variety of tastes to meet different customer preferences. Cherry Coca-Cola Company is widely loved by American consumers and has become Buffett's favorite. In 2009, the company developed a free-matching vending machine ("Freestyle") to provide a variety of DIY-style flavors. In addition, in recent years, with the change from traditional sales-oriented to value-oriented, the company has further refined the distinction in the packaging of core products, created a series of small packaging, and significantly improved the product structure.
Chart: research and development of Coca-Cola Company's new products and new packaging
Source: the company's official website performance materials, China International Capital Corporation Research Department
Chart: growth rate of Coca-Cola Company's retail sales in 2016-2019
Source: company annual report, company website performance materials, China International Capital Corporation Research Department
From carbonic acid to full range, to create a comprehensive soft drink faucet
Actively carry out diversified layout of categories, and seek wider expansion opportunities for epitaxial mergers and acquisitions. With the development of carbonated beverage industry becoming mature, Coca-Cola Company acquired Maid Source in 1960, entered the fruit juice category, and started the diversified development of the category. Since then to the 1990s, the company has entered ready-to-drink coffee, bottled water, sports drinks and other fields. With the slow growth of carbonated beverage market around 2000, the pace of category diversification has obviously accelerated, and the company has successfully launched a number of $1 billion brands in fruit juice, tea, bottled water and other fields, such as Simply, Fuze B, Vitamin Water, Ayataka and Binglu. The company has achieved diversified expansion mainly through epitaxial mergers and acquisitions and internal research and development:
Chart: global soft drink segment sales CAGR 2005-2019
Source: Euromonitor, China International Capital Corporation Research Department
Chart: when and how the company's major non-carbonated beverage brands (mostly $1 billion) will be launched
Source: China International Capital Corporation Research Department, the company's official website
Chart: Coca-Cola Company's different subcategories enter the timeline and represent products
Source: China International Capital Corporation Research Department, the company's official website
Multi-category coordinated development, non-carbonated market segment also occupies a leading position in the market. The company's non-carbonated beverage sales contributed only 11% in 2000 to 30% in 2018, with bottled water and sports drinks contributing significantly. According to Euromonitor, Coca-Cola Company ranked first in carbonated drinks, fruit juices, bottled water, ready-to-drink tea and ready-to-drink coffee among the seven global soft drink market segments in 2019. Diversified development strategy provides Coca-Cola Company with a wider space for expansion. The company has successfully developed from a carbonated beverage leader to a full-category beverage giant, and its competitiveness has been further enhanced.
Chart: the structure of company beverage sales in 2000
Source: company Annual report, China International Capital Corporation Research Department
Chart: structure of company beverage sales in 2018
Source: company Annual report, China International Capital Corporation Research Department; Note: Monster beverages and Costa coffee are not considered.
Chart: global soft drinks segment Top3 market share in 2019 (by retail sales)
Source: Euromonitor, China International Capital Corporation Research Department
The global channel system promotes diversified expansion. Coca-Cola Company's successful diversification strategy, in addition to its excellent product research and development and resource integration capabilities, its global coverage of the channel system also provides a broad space for cross-penetration; the company's local mergers and acquisitions or R & D of excellent products, can be promoted to the global market through the global network. For example, the Del Valle juice brand that the company acquired in 2007 was sold only in Mexico and Brazil that year, and then successfully promoted to the Latin American market in the following 10 years, and the sales of the products also expanded fivefold; similarly, the British brand Smoothie beverage acquired by the company in 2009 was also successfully extended to Western Europe in 2017, with sales tripling. Diversified operation and global channel system are the two core competencies of Coca-Cola Company, which complement each other and help the company expand.
Review of Financial and Market performance
In 2019, Coca-Cola Company realized income and net profit of US $37.3 billion and US $8.9 billion, with a compound growth rate of 6.7% and 11.1% in the past 30 years. Since 1981, the market capitalization performance of the company can be divided into three stages: rapid improvement, shock decline and re-promotion, which is mainly affected by ROE fluctuations, net profit growth and external environment such as the financial crisis. The historical valuation level fluctuates from 7.4 times to 68 times dynamic Pmax E, and 28.8 times at the center. The valuation changes are mainly affected by international expansion, business adjustment, sales growth and other factors.
Chart: Coca-Cola Company's market capitalization and valuation performance since 1981
Source: Capital IQ, China International Capital Corporation Research Department; Note: dynamic Pmax E is derived from deducting non-net profit.
The reference significance of Coca-Cola Company's Development to Chinese Beverage Enterprises
China's soft drink market is still fragmented, with only 21% of CR3 in 2019. Leading companies such as Coca-Cola Company China and Master Kang have wider channel coverage, better brand awareness and stronger financial strength, and plan to integrate China's soft drinks market and continue to consolidate their leading advantages through high-end, category expansion, mergers and acquisitions. We believe that Coca-Cola Company's development has the following reference significance for domestic enterprises:
► marketing deepening, the establishment of national brands to deepen the moat. After Coca-Cola Company established the advantage of American market, the brand marketing strategy gradually deepened from product function to emotional resonance, social way and values transmission with the development of society, and established a deep brand moat. At present, domestic beverage leading enterprises have established strong channel advantages, but there is still room for brand depth, cultural connotation and national degree to be further improved by strengthening marketing.
► new product research and development helps product upgrade, category expansion to resist single product life cycle risk. Coca-Cola Company has successfully created differentiated market demand through accurate and forward-looking product research and development in the United States, Japan and other markets. new products not only provide the driving force for sustained revenue growth, but also open up more category expansion space to enhance the company's overall competitiveness.
► epitaxial mergers and acquisitions open room for further growth. Epitaxial M & An is an effective way for category expansion. Coca-Cola Company has entered many sub-categories such as energy drinks and coffee through epitaxial mergers and acquisitions since the acquisition of Maid into the fruit juice category, further improving the category layout and building a full-category comprehensive beverage enterprise. At present, when looking for the target of M & An and the collaborative management of post-M & A, domestic brands should pay attention to the target quality, collaborative integration and cultivation, so as to enhance the sustainability of continuous improvement of performance.
Risk
Demand is weak and competition intensifies.
By looking for overseas companies with core coverage, CICC reviews the evolution history of its products, market, technology, finance, valuation and other aspects from the time dimension, and explores the future development trajectory of domestic enterprises from past experience.