To: Mr. Muhtar Kent, CEO
From: Erica Wei, Corporate Analyst
Date: May 1st, 2013
Subject: Increasing Marketing Focuses in Asian Markets
As society becomes more health conscious, domestic consumers are looking for healthier products. Increasing public concern of health issues, such as obesity, poses new challenges for the carbonated soft drink (CSD) industry, which has experienced declining growth in demand for recent years (Exhibit 1). As the United States has been Coca-Cola’s largest source of revenues by country and the company relies heavily on its domestic CSD market, this trend threatens the company’s future profitability. Coca Cola must dedicate more resources to the emerging markets of Asia in order to capture …show more content…
High Capital Involvement – As the Asian market is large, capital resources required to push sales and production may raise concern. However, given the CSD concentrate manufacturing industry is one of very little cost in terms of manufacturing (one factory is can supply a nation’s market), the additional costs to be incurred under this strategy should not cause any issues for Coca-Cola’s regular operations. Marketing costs will, however, see a spike as brand image determines market dynamics in the low product-differentiation CSD industry.
PepsiCo – As the next largest player in the CSD industry second to Coca-Cola, Pepsi has also been making advances into Asian markets and will remain as a major competitor for Coca-Cola. However, Pepsi differs from Coca-Cola in strategy, mostly focusing in snack products. While Coca-Cola generates almost entirely its revenues from beverages, Pepsi divides its sales approximately evenly between snacks and drinks, and hence has smaller capacities in terms of increasing promotional budgeting for CSDs (Sparks). Furthermore, as opposed to Coca-Cola’s 70 per cent global market sales of overall revenue, Pepsi’s 50 per cent gives it a weaker global distribution network and will allow Coca-Cola to advance faster (Sparks).
Even though threats exist for Coca-Cola’s operations, the future is optimistic as many opportunities remain to be explored. Considering that