Last year’s sales increase, buoyed by some much-needed warm, sunny weather should serve as a reminder that this sector continues to provide opportunities for growth.Water and energy drinks stand out as the winners from 2013 and despite some of the claims by campaigners, the soft drinks industry continues to lead the way in providing choices for health-conscious consumers. Specialist food and drink consultancy, Zenith International, has been commissioned to produce the 2014 BSDA UK Soft Drinks Report. All data and insights contained in this report were produced using Zenith’s internal market databases and primary research.In compiling its research, Zenith relies on the goodwill and co-operation of companies active in the marketplace. During Zenith’s annual research into the UK soft drinks industry, over 100 soft drinks producers are contacted. This includes larger branded operators, retailer own label specialists, contract packers and a significant number of smaller independent companies.Based on individual producer volumes for the year, market sector and segment totals are calculated from the ‘bottom up’. At a sector and segment level, adjustments are then made for any double counting of contract and licensed bottling. Estimates for unauthorised soft drink imports sold through the ‘grey market’ are also included. This is more pronounced in categories such as carbonates rather than dilute-to-taste drinks, for example. The market figures presented therefore encompass all aspects of the market including: take home, impulse and on premise; water cooler volumes for the office; home dispensed carbonated soft drinks; and draught dispensed carbonates.Following a detailed review of all data files received, certain adjustments have been made to historic volumes. There is a soft drink for every occasion and consumers are entitled to choose from an ever increasing wide range of drinks. However, the industry recognises the role it can play in encouraging consumers to make healthier choices.Companies are investing heavily in sugar-free alternatives and the evidence from the first few months of 2014 suggests this is the direction consumers continue to head in.Investment in innovation and skills underpins the contribution the soft drinks industry makes to Britain’s economy. Analysis shows the wider supply chain has a value added impact of £7.7 billion and supports a total of 135,000 jobs.
Method–How to expend market share
Coca-Cola company use 5 to 6 methods for expending market share.
- Focus on the best lines – Coca-Cola concentrates on its most profitable lines. In 1984 77of Coca-Cola’s operating income came from soft drinks. Today the figure is 97 By selling off businesses not sharing the same attractive financial fundamentals as the soft drink business Coca-Cola now operates only in the area of high-return business.
- Reinvestment – Re-investing profits is the key to ongoing business development. If profits are made today it is important to make sure of a base from which profits may be made tomorrow. In the 199Os Coca-Cola has concentrated its profits on re-investment. In 1983 the company’s dividend payout ratio was 65i.e. most of its profits were paid out as dividends to shareholders. Since then Coca-Cola has been increasing dividends at a slower rate than earnings growth, so that today, 6Oof profits ($66O million in 1994) was available for reinvestment.
Focus on the consumer – All successful businesses today are based on focusing on the consumer. If a company meets the requirements of its consumers (and indeed exceeds these requirements), then you have a sure-fire recipe for success.
An important measure of success is the volume and value of sales that you make.
The world-wide success of Coca-Cola is illustrated in the chart below:
Coca-Cola has set out to become the world’s number one consumer marketing company by taking clear actions to differentiate their products.
- Differentiation with customers – The direct customers of Coca-Cola are outlets such as service stations, newsagents, leisure centres, cinemas, clubs, supermarkets and many other retailers selling soft drinks. In this area the emphasis in marketing has therefore been on providing superior delivery, promotional services and sales support. All of these elements clearly differentiate Coca-Cola as being the beverage supplier most likely to generate profits for retailers.
- Differentiation with consumers – The end consumers of Coke are the millions of people who consume soft drinks world-wide. Over many years Coca-Cola has expanded its markets horizontally in country after country, until there is virtually no place on earth where people do not drink Coca-Cola. Today this horizontal growth is almost total, with fewer than 20 countries not taking the product. Coca-Cola is therefore now trying to develop the brands vertically.
This simply means creating a deeper consumer desire for that brand than existed the day before. It involves giving people additional reasons to buy Coca-Cola brands instead of reasons to buy competing ones. That is the essence of differentiation. It is not an easy task, because already 5.6 billion people have a well established understanding of what Coca-Cola means to them. However, there are considerable strengths which support Coca-Cola in this task namely:
- The trademark which is so widely known and part of the public imagination.
- Coca-Cola is continually building on its existing expertise in marketing and consumer understanding, and is supported by access to a wealth of financial and creative resources.
- Coca-Cola has an ‘action orientation’. Instead of waiting for change to happen it is at the leading edge, driving action forward.
- Win the largest market share – Being the major player in a business market is the key to business success. A company only becomes the major player in a market by being the best, and being the best means having a detailed understanding of its consumers’ requirements and then exceeding these requirements.
Once a company is a major player then it has considerable advantages to draw upon. These advantages are based on having a higher return on capital than its rivals and the opportunity to plough this return into fresh investment. Such areas for investment are marketing, product research and development, and other aspects of sound business growth.