Free Essays

Coca Cola: Past, Present, Future

Coca-Cola’s history began in Atlanta, Georgia on May 8th , 1886 [1] when the curiosity of a local pharmacist, Dr. John S. Pemberton [1], drove him to create the most popular soft drink in the world today [2]. Dr. Pemberton developed a syrup originally as a patent medicine to heal headaches and drowsiness with the majority of the ingredients containing coca leaves (cocaine) and kola nut (caffeine) – hence the name Coca- Cola [1]. This was then mixed with carbonated water to create the now famous Coca Cola product. Coca-Cola proved to be a hit at its opening location in the local community, Jacob’s Pharmacy [1].

Shortly after the creation of the carbonated beverage, Dr. Pemberton died and he sold portions of his business to various parties, with the majority going to Atlanta businessman, Asa G. Candler [1]. Under Mr. Candler’s leadership, the distribution of Coca-Cola expanded to soda fountains beyond Atlanta to other states in America. In 1888, Candler established The Coca-Cola Company and purchased exclusive rights to the formula [1] . The year 1919 was a significant year for Coca Cola because it was when they issued their first Initial Public Offering (IPO) at $40.00 a share [10].

In 1919, it was obvious that $40 was too expensive for a share as there was very little demand for the shares, most likely due to the high price; Coca Cola dropped their share price to $20.00 [10]. This strategic moved proved to be successful as numerous shares started to be purchased and the brand name of Coca Cola became internationally known. From selling nine drinks a day at Jacob’s Pharmacy to now selling over 19,400 beverages every second around the world [2], it is clear that Coca-Cola has positioned themselves to the point where people in the wilds of Africa are familiar with its carbonated taste.

Over the past 5 years, Coca Cola has enjoyed an annual growth rate of 8.21% [5]. This year alone, the Company’s revenues increased 3% to $36.56B while net income increased 3% to $7.15B [27]. The Coca Cola market capitalization, the total dollar market value of all of a company’s outstanding shares, is an impressive 168.82B [27]. From the initial IPO offering of $20.00, the stock price has risen 100% to just over $40 a share [10], which goes to show how far the company has come. It is clear that Coca Cola is a strong company that is only improving, and it does this creating a strong brand identity and ongoing innovation [3]. With such a strong presence in the soft drink industry, Coca Cola has been able to market and position them in such a way that has allowed them to become a familiar household name to the worldwide population.

This has enabled Coca Cola to align themselves with a variety of national and international events of various kinds. It has expanded its product line to include over 3500 products such as energy drinks, juices, sport drinks, water, coffee, and tea, and has established their brand in more than 200 countries [24]. This makes the company a lot more diverse in their offerings which not only opens up more opportunity for increased sales, but also allows them to keep up with the changing demands of society along with their competitors. In this recent decade soft-drink companies have been under a lot of scrutiny on the effects the beverage has had on a person’s health.

A large amount of attention has been targeted at Coke for their participation towards producing a product that leads to obesity [16]. The ingredients of Coca Cola have also sparked a lot of controversy on obesity due to the enormously high sugar and caffeine content and the fact is it the most acidic beverage on the market [15]. As the ingredients of carbonated beverages are becoming more important to the lives of consumer, Coca Cola recognizes that the innovation of new, healthier products is vital to the future success of the company. This innovation of healthier Coca Cola products and their current strategies will be the focus of this paper, particularly with respect to the recent London Olympic Games.

Sources of information required for this paper were varied due to the conflicting nature of opinions. The most relevant sources of information were from the Coca Cola Company itself along with input from shareholders and credible online media sources that collaboratively provide comprehensive insight about Coca Cola’s history, current initiatives, and its future.

The London 2012 Olympic Games were held from July 27th to August 12th and to nobody’s surprise; Coca Cola was a proud sponsor of the Games for the 84th year in a row [2]. However, this year there was controversy surrounding their Olympic sponsorship due to the conflicting nature of Cokes public perception and the aims of the London Games [16]. Coca Cola products are often perceived as unhealthy, whereas the theme of the London Games was that of health and sustainability [21]. “London won the right to host the 2012 Olympic Games with the promise to deliver a legacy of more active, healthier children across the world [11],”the Green Party’s Jenny Jones said and she further stated, “yet the same International Olympic Committee that awarded the games to London persists in maintaining sponsorship deals with the purveyors of high calorie junk that contributes to the threat of an obesity epidemic [11].” It was imperative for Coca Cola to maintain their ongoing sponsorship of the Olympic Games as it is a global platform for the company to spread its brand identity. After some negotiations, Coca Cola was given the right to be a sponsor based on a promise to the London games to be environmentally friendly and to promote a healthy and active lifestyle [24] .

Coca Cola stepped up their multifaceted marketing campaign and innovated numerous strategies in order to support the London Olympics proposed themes [17]. Coca Cola used its sponsorship of the London 2012 Olympic and Paralympic Games to encourage consumers to lead more active, healthy and sustainable lifestyles [15] . The sixteen days during the Olympics was a perfect time for Coca Cola to build up their global reputation and attract as many consumers as they could. Coca Colas first strategy was to innovate more that products that were much healthier, especially for the athletes and supporters that would be consuming them. With this new strategy in mind, Coca Cola innovated a variety of healthy new sport beverages, sugar-free water and an assortment of healthy juices [15]. This was the widest range of drinks ever offered at an Olympic and Paralympic Games [15].

Coca Cola further proved their dedication to a healthy Olympics by creating and sponsoring a group of eight Olympic athletes, known as the “8 pack”, who would serve as “Ambassadors of active living” [15]. This campaign was designed in order to encourage health and physical activity, especially among the youth [15]. Coca Cola promoted their new healthy products with these athletes to help encourage and inspire people to lead active, balanced lives [15]. With regards to the sustainability theme, Coca Cola pledged to support the zero waste ambitions as well as trying to become CO2 neutral [29]. At all the London venues, all Coca-Cola decided to serve all of their products in 100% recyclable plastic bottles[23].

This resulted in the recycling of 10.5 million plastic bottles at the Olympic and Paralympic games and most of the recycled bottles were back on the shelves within 6 weeks [23]. This initiative by Coca Cola was well received by the public and the London Olympic committee as it was an environmental success and was aligned strongly with the themes of the games. The company was awarded the ISO Sustainable Management System award in recognition of all the healthy initiatives the company undertook and all the vital work they performed in order to ensure the games would be more sustainable than ever [21].

A member of the Coca Cola Company said, “The appropriateness of our fit as a sponsor of the Olympics really went up as well as people recognized we could play a meaningful role as a healthy sponsor of the games.” [21] It certainly did, and research commissioned by Coca-Cola has shown that 70 per cent of visitors surveyed at the London 2012 said they would now be more likely to recycle at home [23]. Coca Cola pledged to support the London 2012 themes of exercise, well-being, and sustainability, where they undoubtedly succeeded [17]. As Tom Degun, an Olympic reporter said “All rather impressive, a clear illustration of how Coca-Cola played an enormous role in making London 2012 the most sustainable Games of modern times [21].”

The following graph illustrates Coca Cola’s stock performance over the period of June 1, 2012 to August 21, 2012. The exposure and initiatives that Coca Cola had at the summer Olympic Games proved to have a significant impact on the company’s stock performance. At the beginning of June, Coca Cola’s stock price was at $36.54 [12], but as the next two months passed, that share price rose to a high of $40.56 [12], an 11% increase. The substantial increase in stock price over the summer could be attributed to the London 2012 Olympic Games and Coca Cola’s role as a main sponsor. The amount of attention Coca Cola attracted from their innovating marketing campaign had a large impact on worldwide consumption of their products. Furthermore, the publicity Coca Cola received gave confidence to investors that the company was heading in the right direction.