Changing Sales and Selling Environment
Overview of the soft drinks industry
The soft drink industry consists of establishments that basically engaged in manufacturing of non-alcoholic, carbonated beverages, mineral waters and concentrates and syrups for the manufacturers of carbonated beverages. Principal activities and products are aerated waters, carbonated beverages, mineral and spring waters, soft drink concentrates and syrups and softdrink preparation carbonating as well as Asian specialty drinks, functional drinks, and ready-to-drink coffee and tea (Consumer Business, 2005). The soft drink industry is divided into two segments namely production of soft drink syrup and manufacturing and/or distribution of soft drinks in retail level.
Within the broad beverage industry, the soft drinks market has been showing significant growth in most countries in the recent years especially in the emerging markets with consumption that arises around 5% a year. While the US remains the biggest market, the Asian market is predicted to be the next significant driver of sales and growth in the future in terms of volume and sale. The carbonated softdrinks continue to dominate the market as sugar- and caffeine-free drinks are continuously being rolled out in addition to the traditional flavored beverages. Further, the softdrinks industry has also witnesses a recent surge in new products as consumer requirements continues to demand for healthier products (Regmi, 2001).
Product safety, quality, consumer demand and channel complexity, including the growing influence of retailers on the supply chain, have seen as factors that vehemently shape the selling mindset of players in such industry. The selling concept of soft drink companies is to drive profitability while also creating value for owners and shareholders (Regmi, 2001). As such, there are four basic elements that softdrink firms are adhering into: revenue protection and enhancement, cost reduction/margin improvement, improved asset utilisation and regulatory/assurance.
Global, regional and even national selling decisions are not without the market trend challenges including those that influence the selling strategies such as the complex distribution system composed of multiple sales channels. With complicated sales channels, the softdrink industry operates within several unique characteristics such as marketing to consumers or selling to retailers through wholesalers and communicating directly with the retailers as well as multiple distribution channels and seasonal demands (Consumer Business, 2005). As such, the industry is a multi-channeled industry three broad customers such as the modern trade or large chain retailers, the small individual retailers and the indirect channel (wholesalers).
Branded softdrinks manufacture always aimed at getting closer to the consumer hence many of the larger softdrinks companies are piloting direct-to-consumer marketing approaches (Girard, 2008). Because of the direct relationships with the consumers, softdrink retailers have a deeper understanding of the consumer behaviour. The relationship marketing in the soft drinks industry centers three primary aspects including customer satisfaction, building brand equity and creating and maintaining relationships (Sorce, 2002). For their direct selling channels, larger chain retailers, for instance, have a direct access to the consumers so they have this tendency to protect the relationship between a softdrink company and the consumers. While the small individual retailers with huge numbers of small point sales, the one-to-one focus is being achieved while also maintaining the one face to the consumer concept unique in the soft drink industry. For the indirect channels like the medium-sized organisations, they contribute in building the brand equity especially that they have they possess the role to play in beverage distribution. These wholesalers acquire critical information regarding individual points of sales in terms of volume, assortment and even presence of competitor’s products (Consumer Business, 2005).
There are two primary players in the softdrinks industry: Coca-Cola and PepsiCo, dubbed as the ‘Cola wars’ or the emergence of the duopoly competition. The term Cola war was invented to describe the extent of campaigns of mutually-targeted advertisements between the two cola giants (Cola Wars, 2008). Through these advertisements, the two companies attack each other and therefore a tough competition that strategically hampers the profitability of each other (Girard, 2008). The discussion of the sales and selling strategies of Coke will be on the next section.
Sales and selling strategies of Coca-Cola
Coca-Cola, Inc. is the number softdrink company in the world in terms of market share. Today, Coke has 300 brands with diverse packaging also such as bottle, aluminum cans and plastic bottles. Coke chose to concentrate their operation on the first segment while intimately depending on independent bottlers companies. Basically, the company is engaged into blending raw material ingredients (product planning), packaging in plastic canisters (market research) and shipping to bottlers (advertising). For Coca-Cola, marketing strategies are used to differentiate the products from the competitors and to obtain competitive advantage. The pricing strategies differ depending on the location where it is sold (Datamonitor, 2007).
There are two basic marketing strategies: extension or product differentiation and innovation (Girard, 2008). The former was seen as a response to the increasing consumer demand while the second introduces new purchasing methods such as vending machines via SMS and the Fridge Pack consisting of cans packed 2-by-6. Marketing also depended on the targeting of Coke products at individuals and groups of all ages and demographics. Marketing, in addition, comes in different styles and forms such as network television, radio and print media.
To achieve brand visibility and become well-known to widest possible markets and most consumers reach, a number of new commercials are introduced each year. Coke is getting their products advertised more frequently by means of own advertising as well as through sponsorships and other organizations. For example, Coke products appear in McDonald’s advertisements, appearing on side boards of basketball arenas and other sporting events and also appearing on social events as sponsors in effort to be a household product and to demonstrate goodwill (Chain Drug Review, 2003).
Coke has five core channels such as food stores, convenient stores, fountain, vending machine and mass merchandisers. Coke’s customers range from far-reaching, international chains of retailers and restaurants to major corporations to small and independent businesses to corner markets down to local pushcart vendors (Chain Drug Review, 2003). Within each region are different dealers that orders through three primary categories: bulk, sideload and full service. Coca-Cola system ensures that dealerships are assisted upon. So the company opened their distribution system and embraced the DSD system or the direct-to-store concept. The movement is from wholesalers channels into DSD channels.
In the distribution of products, the wholesalers have no involvement; but rather conform to agent network. The company divides a country into various regions and established a franchisee within these regions. Franchisees have own bottling plants and has the autonomy to manage daily operations (Hughes, et al, 1998, p. 14). Coke has long-term relationships with their retailers and distributors making possible the defense of the position by means of discounts and other tactics as well.
Further, the pricing strategies differ depending on the location where it is sold including retail stores, convenient stores and petrol stations. Nonetheless, the company recommends selling Coke products at a fixed price especially in retail stores where traffic is high (Gould, 1995). Advertising, personal selling and publicity are the three most common forms of promotional strategies while the place of distribution strategies include indirect distribution via intermediaries and intensive distribution wherein products are sold in almost every outlet.
To ensure product quality, Coke creates values through its sales activities of marketing unique brands. Coke must oblige with marketing and production requirements and also maintain safety and liability or processing obligations. Moreover, value is created by means of creating, establishing and stabilizing product demand. To wit, a unique brand differentiates itself from the others to create its own demand. Identity, in addition, limits competition from other beverage producers who might be willing to sell at low, low prices or try to produce and sell products of low quality. Coke brands from production to promotion have unique locations and geographic features that are not easily duplicated exactly by competitors especially in introducing the DSD concept (Gould, 1995).
Key issues to address
Through managing the subsistence of beverage leadership, Coke continued to deliver unit case volume growth. The sustainability of the business too is motivated by the expanded portfolio that makes way for the offerings to new customers and satisfying the evolving needs nutrition occasions of the current customers. Brand-wise, the original Coca-Cola is still the best known brand globally as it also offers the ultimate refreshment for young people. These are proven by the ranking – 4 of the top 5 nonalcoholic sparkling beverage brands are owned by the Coca-Cola Company; number of associates – 90, 500 worldwide; operational reach – 200+ countries; consumer servings – 1.5 billion per day and beverage variety – more than 2, 800 products.
In terms of systemic integration, adding value was proven to be more profitable for consumers. As the company focuses their attention in creating beverages and eventually marketing them, they were enabled to “understand and meet the diverse and ever-changing beverage needs and desires of the consumers globally” hence acquiring the competitive edge to boot (Gould, 1995). Driven by the Coca-Cola system, the company is now no. 1 in sales of sparkling beverages, juices and juice drinks, no. 2 in sales of sports drinks and no. 3 in sales of bottled water.
With all said, value creation at Coke is being reflected by the price consumers have to pay. The idea of value or what the consumers get with their money means more than just making food and drink affordable. For Coke, it meant increasing the variety and quality of goods or “affordability”. Notably, because of production and distribution technologies, affordability now comes with a new meaning. Affordability is nowadays characterised by availability, quality and choice. Since consumers always decide what value is, Coke decided to make value for them in three areas: choice, information and goodwill (Gould, 1995).
For Coke to strive further, there are improvement opportunities for its internal and external selling processes. Initially in the DSD system, since the approach is basically a global selling process (Consumer Business, 2005), what Coke can do is to localise the ‘accompaniments’ of the system. Coke should couple the process of a direct delivery with a cultural change specifically in how they could put value to their local employees including the delivery personnels. These could be considered as drivers of value as they have the sales skills, communication skills and the global knowledge of the Coke’s offerings, commercial priorities and initiatives.
Coke can also enhance its relationship with its indirect partners and in the process, narrow the gap between the manufacturers and distributors. The close cooperation of both the parties could benefit Coke in terms of protecting the competitive intelligence particularly in acquiring the greater share of mind compared to its rivals (Consumer Business, 2005). This would be also important because of the fact that market is increasingly becoming difficult to capture and classify. As such, the exchange of strategic information between these two would impact the Coke company in understanding sales volume and market intelligence on micro- mezzo- and macro levels.
Increasing the sales force effectiveness could be also achieved by Coke through incentives management. An effective sales force for Coke could ensure efficient product placement on the retail level. A beverage company’s sales force comprises 17-25% of the company’s cost basis and so the necessity of equilibrating the percentage of the total cost through optimising the performance of the sales force (Consumer Business, 2005). In motivating Coke’s sales force, incentive schemes must be strategically developed for the purpose of managing the sales behaviour as well. Specific measures that Coke could use are account revenue growth, profit results, number of new accounts, customer service metrics and account retention.
Coke, finally, could improve margins by means of optimising the telesales channels. An effective telesales process could increase revenues and complement other sales activities like the DSD and field assets management (Consumer Business, 2005). It could be accomplished by means of integrating the phone sales function with other operations of the firm. When applied to Coke, the telesales initiative could manage the contacts effectively and efficiently specifically those that are related to sales and customer service. Telesales could also help Coke in enhancing the client relationships and also support the selling of new business and expand and retain the current customer base. Such a function also enables Coke’s business processes to be integrated and standardised thus closing the loop, creating consistent customer experience within a multi-channel environment.
References
Big suppliers reenergize marketing – Coca-Cola Co. and Pepsi-Cola Co. have debuted advertising blitzes, 2003 February, Chain Drug Review.
Cola Wars Continue: Coke and Pepsi in the 21st Century, retrieved on 19 March 2008 from http://www.slideshare.net/adhirock/cola-wars-case/.
Consumer Business 2005, ‘Profitable growth and value creation in the softdrink industry,’ retrieved on 20 February 2009, from http://www.deloitte.com/.
Girard, R 2008, Coke and Pepsi’s New Marketing Strategy: Pull at Your Heart Strings, Polaris Institute.
Gould, W 1995, Coca-Cola, Cherrytree.
Hughes, J, Ralf, M and Michels, B 1998, Transform Your Supply Chain: Releasing Value in Business, Thomson Learning EMEA.
Kotler, P and Armstrong, G 2004, Principles of Marketing, 10th Edition, Pearson.
Regmi, A 2001, Changing Structure of Global Food Consumption and Trade, Market and Trade Economics Division, Economic Research Service, USDA.
Sorce, P 2002, Relationship Marketing Strategy, Rochester Institute of Technology, Printing Industry Center at RIT, Rochester, NY.
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