2. Student Names & McGill ID
BRILLANT, Aïsha 260194236
CHENG, Chin-Yun 260014110
JOLIN LESSARD, Audrey 260180785
LEBLANC, Geneviève 260188501
MURCIA, Nicolas 260177704
NGUYEN, Jean-Louis 260078995
TIAN, Yu 260177360
Course Information
Marketing Management I
MCGR 352, Section 005
Professor: Constantina Kavadas
Marketing Plan
Part 1: Market and Consumer Profile
Date of submission: Wednesday, March 29th, 2006
2
3. The following marketing plan forms the basis for the introduction of an innovative new
product by the Coca-Cola Company. The analysis allows us to outline the best strategies
to follow for the achievement of the company’s strategic goals. “Bubble Buzz” will be
marketed as a unique functional drink while striving to reinforce the company’s status as
the leader in innovation and successful product launches. The marketing strategies will
enable to reach a market size of an estimated 8,688,300 people (targeted) with a
forecasted sales growth prospect of 7.3% over the next 4 years ($243,029.47 profits),
while satisfying the needs of the still-unserved market for ready-to-drink bubble tea.
Success will be reflected by a sizeable capture of market shares within this market, while
strategically carrying the company up to the top spot as the market leader in the
functional drinks segment of soft drinks. Export potential will be considered in China.
Brief description of the company
The Coca-Cola Company’s core undertaking is
to benefit and refresh everyone it reaches.
Founded in 1886, we are the world’s leading manufacturer, marketer, and distributor of
non-alcoholic beverage concentrates and syrups, which are used to produce nearly 400
beverage brands that make up for our wide portfolio. Our corporate headquarters are
established in Atlanta, and we are holding local operations in over 200 countries around
the world. Our activities cover all sectors of the beverage industry. We are the second
leading player in functional and Asian specialty drinks, while ranking number one in
value for the ready-to-drink tea sector (ref.1, p.1).
3
4. Brief description of the new product, & strategic role in the future position of the company
“Bubble Buzz” will be a bottled beverage
and will be positioned as the only ready-to-drink Bubble Tea product available on the
market. The beverage will have a green tea base with enhanced fruit flavors (passion
fruit, strawberry and lime) as well as tapioca pearls. It will bring an entirely unique
drinking experience to its consumers. It will present itself as a funky and unusual
alternative to traditional tea while providing the great taste of authentic fruit juice in an
attractive and convenient packaging. The strategic role of Bubble Buzz for The Coca-
Cola Company is centered around three objectives:
• To stay at the forefront as the market leader in innovative product introductions and
successful product launches;
• To strengthen and satisfy the needs of the more adventurous Generation Y consumers
with a new eye-catching and FUNctional product;
• To become the market leader in the functional drinks segment with increased market
shares.
INDUSTRY ANALYSIS
Consumption: The sales volume for the functional drinks segment (ref. D2) in Canada
has reached $342.2 millions in 2004 for a volume of 125.9 million liters (ref.2). This
product segment has shown a steady growth since 1999: an increase of 13.5% over a
period of 6 years (Appendix A). The consumption rate per capita in 2004 has reached
4
5. 3.94 liters, which represents a 4.0% increase compared to 1999 (ref.3). The growth of this
particular market is largely due to a slow shift in consumer trends.
Trends: Through the early 1960s, soft drinks were synonymous with “colas” in the mind
of consumers. In the 1980s and 1990s, however, other beverages (from bottled water to
tea) became more popular. Coca-Cola and Pepsi responded by expanding their offerings
through alliances (e.g. Coke & Nestea) and acquisitions (e.g. Coke & Minute Maid), but
also by focusing efforts on portfolio diversification. Today, while the soft drink industry’s
value has increased in 2004, the volume sales of carbonated soft drinks has declined due
to a large proportion of consumers who are opting for the trend towards healthier
alternatives in the functional drink segment (energy drinks, smoothies, milk & juice
drinks, sports drinks) as well as bottled juices and water (ref.5). Companies have been
actively engaged in new product developments in order to counter the growing concerns
about negative health impacts of high-fructose drinks, but also to increase the demand in
a market where product offerings are quickly maturing (ref.4). New flavor introductions
and health-conscious formulations have been launched in an attempt to offset the decline
in carbonated soft drink sales (ref.6). The functional market is expected to show sustained
growth and consumer interest in the future years as consumption shifts to trendier,
healthier and more sophisticated products (ref.7).
Profitability & future growth potential: In 1993, Concentrate Producers earned 29%
pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total
industry profitability of 14%. While the functional drinks sector only accounts for 3.7%
of the total soft drinks sales in 2004 (Appendix B), estimates are forecasting a growth of
7.3% in sales and 11.0% in volume consumption by 2009 (ref.4).
5
6. SWOT ANALYSIS (Strengths and weaknesses, opportunities and threats)
Strengths Weaknesses
Brand strength Reliant upon line extensions
Effective stride in new markets Reliant upon particular carbonated drinks
Results of operations Brand dilution
Strong existing distribution channels Entrance into difficult non-core categories
Saturation of carbonated soft drink segment
Opportunities Threats
New product introductions Strong competition
Brand is attractive to global partners Potential health issues
Free trade
Explanations in APPENDIX C
COMPETITION
Coca-Cola’s top competitors for the soft drinks industry are PepsiCo (31.6%) and Cadbury-
Schweppes (15.8% of market), which combined, represent about 48% of the total market
(ref.9). Coca-Cola is leading with 43.7% of the total soft drinks market.
In the functional drinks sector, PepsiCo is the current market leader with 60.5% of the
market shares in 2004. Coca-Cola Co is second with 32.8% (ref.2, see Appendix D1). Bubble
Buzz will launch into a currently unserved subset of that market (RTD “Ready-To-Drink”
Bubble Tea), which is until now unexisting. It is anticipated that the following brands could
potentially compete with Bubble Buzz in the functional drinks market: Brisk, Lipton Iced
Tea, Sobe (owned by PepsiCo), as well as Snapple’s and Hawaiian Punch (owned by
Cadbury/Schweppes). Bubble Buzz also creates a potential situation for cannibalism with
Coca-Cola’s very own brands of iced tea and other functional drinks.
The current market for traditional Bubble Tea is fragmented, since the distribution is
restricted to local outlets and selling points such as counters and small Bubble Tea shops in
scattered locations across Canada. However, direct competition from these local players is
not anticipated, since the marketing roll-out will initially emphasize on product awareness
and both sales channels do not reach or serve the same market (retailing vs.
6
7. counter/restoration). A strong distribution system already exists with Coca-Cola, since
partnerships and channels are already in place. This will facilitate the product’s reach into its
target market. Further data concerning competing market shares and distribution channels are
available in Appendix D(1-3).
Barriers to entry:
Business practices Manufacturing
Due to the number of competitors, it will Producing bottled Bubble Tea requires
be hard to prevent imitation behaviour sizeable capital investments for the
(especially from PepsiCo) specific needs of the manufacturing chain
Risk of competing with emerging (from ingredients to final packaging
private labels (e.g. President’s Choice) specifications)
Given the wide array of brands The marketing campaign to make this
(saturation in the soft drink market), it unknown brand popular requires more
becomes a challenge for Bubble Buzz to promotional expenditures than a
stand out traditional brand extension
TARGET MARKET
Segment identification: RTD (Ready-to-drink) bottled Bubble Tea, to be established
within the Functional Drinks sector
Segment needs: The product will cater to both physiological needs (hydrating and
nutritional value) and social needs (perception of a social, fun drink with a sense of
belonging within peer consumer groups) – (ref.11, p.127).
Segment trends: The current trends include a shift away from junk foods and carbonated
drinks, a growing interest for healthier / beneficial products for the “mind and body” (ref.
10), the trend towards the availability of on-the-go products for those with an active
lifestyle, as well as the trend for personalization through customization (or for beverages,
through variety-seeking in a wide introduction of flavours – ref.6).
Segment growth potential: Statistical reports anticipate a segment growth of 1.72% over
the next 9 years (2015) for the 10-29 years old subsets (ref.12). Refer to Appendix E.
7
8. Size of the segment (population): 8,688,300 (329,600 L). Refer to Appendix E.
8
9. SEGMENTATION VARIABLES AND BREAKDOWNS FOR CANADIAN CONSUMER MARKET OF
BUBBLE TEA
MAIN DIMENSIONS VARIABLES BREAKDOWNS
Region Nationwide (all provinces and territories) with emphasis on
urban / metropolitan areas, and adapted strategies for all
geographical groups
Area size 5000-19,999 to 4,000,000+
Density Urban, suburban
Climate All (East, West)
Age 10-29 years old (teenagers, studying age and young adults)
Gender Male and Female
Income All under $30,000
Occupatio Students; new graduated; new workers; young professionals
n
Education Elementary 4th grade, High school, CEGEP and University
Race All: Asian, Black, White, Native; other; with adapted strategy
for Asian consumers already familiar with Bubble Tea
Home Renting apartment/condo, living with parents
ownership (Highly discretionary in personal spending)
Personality Brand conscious, anchored in popular culture, inclined for
differentiation and sophistication, very tolerant towards
multiculturalism and internationalism (open-minded), quick
maturation with modern products
Lifestyle Most of them dependent on parents, no major responsibilities,
highly influenced by peer groups, active life, importance of
school, work and social life
Benefits COMMUNICATION BENEFITS
sought -Nutritional information
-Informational text on history of product
FUNCTIONAL BENEFITS
-Healthier than soft drinks
-Convenient, easy to take out
PERCEPTUAL BENEFITS
-Quality/Premium price
-Social standing/good-looking
Usage rate Seasonal (peak in summer), daily-basis, weekly basis
User status Non-user, regular user (current user through existing bar-shops)
Loyalty None, medium, strong
status
Positioning strategy: The only RTD bottled bubble tea available. Funky & eye-catching
bottle, functional packaging, premium-priced, cool, new and unusual, unique drinking
experience, aspects of play (tapioca pearls, oversized colored straw), variety of flavors,
sweet, refreshing, for hip & young people, healthier alternative to heavy-sugar drinks.
9
10. CUSTOMER ANALYSIS
Profile:
Name: Bob Thomson
Date of Birth: 25.03.85
Age: 20
Occupation: University Student
Country: Canada
Needs: Healthy lifestyle/Social belonging
People: Roommate/Friends/Family
Places: Clubs/Coffee shops/University/Gym
Activities: Basketball Team
Due to his active and quick-paced life, Bob wakes up at 6:30AM every morning. Today,
he puts on his trendy Lacoste Polo and Diesel Jeans, and of course, he always has his
Puma shoes on. After having called his friends with his new Samsung camera phone, he
leaves his apartment and goes to his gym by metro, while listening to his favourite music
that he downloaded to his iPod. Bob usually likes to work out before he has to head to
University. That way, he feels he has more energy and feels ready to confront his busy
day attending courses and getting things done. On his way to school, Bob knows he is
thirsty and he feels the need for something very refreshing. He stops at a convenience
store next to the gym. Standing in front of all the choices in the beverages aisle, one
particular bottle catches his sight. And he instantly recognizes the brand. He knows that
this is a bottle of Bubble Buzz, because not only does his other friends often drink it, but
he also heard them talk about this brand new product that Coca-Cola just launched. He
also previously saw Bubble Buzz ads when he surfed on his favourite websites. He grabs
a bottle, and takes a closer look at the nutritive information label. He is very pleased to
see that the new drink is more nutritive and definitely healthier than the other soft drinks
that were available on the shelves next to it. The higher price of the product doesn’t
bother him, since he perceives “Bubble Buzz” as a high-quality, functional product,
10
11. which is manufactured by a well renowned company. Plus, he did not feel like simply
buying bottled water, or carbonated soft drinks. Because of his inclination towards more
sophisticated tastes, and because he likes to try new products on his own, he thinks this
bottle is worth the price. Because of his busy schedule, Bob prefers to save time as much
as he can. Thus, he decides to buy two bottles. One to quench his immediate thirst, and
another one that he wants to save for later in the day. He sees that the packaging is so
convenient and easy to carry, and so when he exits the store, he puts the second bottle in
his backpack. He attends all of his classes. During his break, he always hangs out with his
friends. A lot of them are drinking from different “Bubble Buzz” flavours. He opens his
second bottle, since he had such a great experience with the first one. He liked that the
beverage was so unusual, yet refreshing. The drink surpassed many of his expectations.
He has no doubt about it. Bob will continue to buy Bubble Buzz for its good taste, and
also because at his age, he sees it is the coolest trend right now.
Based on the aforementioned analysis, Bubble Buzz appears to be a profitable and
innovative product with a strong outlook for market share presence and segment growth
opportunity. Upon implementation of the marketing plan, the Coca-Cola Company will
regain increased market shares and claim its targeted situational position of market leader
in the functional drinks segment as well as keeping its long-standing consumer
recognition for innovative and successful product launches in diversified markets.
Projected profits will be $243,029.47 (see financial projections).
11
13. The objectives of the marketing plan are strategically centered around 3 criteria: to create
a strong consumer awareness towards a completely new bubble tea product from Coca-
Cola, to establish a wide brand recognition through the capture of market shares in the
functional drinks segment, and to become the top market leader in that particular segment
within the forecasted sales figures.
PRODUCT STRATEGY
The core
o Bubble Tea beverage in a pre-bottled, ready-to-drink format.
The actual product
o Packaging and labeling: see figure below
o Branding: colorful, aspect of play, round shaped, prominent Bubble Buzz logo written in
modern font, catchphrases such as “Think outside the Bubble” and “Get Your Buzz”.
o Trade name: Bubble Buzz™, a Coca-Cola product
o Brand personality: energy, funky, cool, functional, original, funny, healthy, etc.
o Brand equity: Coca-Cola provides a quality, consistent, innovative and accessible soft
drink reputation.
Augmented product
o Nutritional information, Status (social drink), Features promoting the website, Health
benefit of a green tea base (ref.17)
Marketing considerations
o Product life cycle: Bubble Buzz is a low-learning product. With a strong marketing
campaign, “sales [will] begin immediately and the benefits of the purchase are readily
understood” (ref.11, p.301). Since Bubble Buzz is prone to product imitation, Coca-
13
14. Cola’s strategy is to broaden distribution quickly, which is currently feasible thanks to the
company’s high manufacturing capacity.
o Product class: Food & beverage Soft Drinks Functional Drinks (refer to Appendix
D2 for a break-down of the functional drinks market).
o Bubble Buzz follows the practice of product modification (ref.11, p.304): Coca-Cola is
introducing an existing beverage (bubble tea) but redefines the drink with a new, more
convenient package. Bubble Tea will now become a widely available drink in multiple
retailing (distribution) channels.
PRICE STRATEGY
The price strategy that will be undertaken should consider the following aspects:
1. Consumer demand
2. The product lifecycle
14
15. 3. Potential substitutes
Customer demand
Customer demand is a crucial factor which is driven by tastes, income and availability of
others similar products at a different price (mentioned later in the potential substitutes
section). For a lot of consumers, value and price are highly related: ‘’the higher the price,
the higher the value’’. Consequently, Coca-Cola’s intention to position Bubble Buzz as a
unique, innovative and attractive product gives it a certain control over Bubble Buzz
price. To be able to implement higher pricing though, the minimization of the non-
monetary costs to customers should also be include along with awareness of the product
(notably by advertising) and value (benefits) .
The product lifecycle
The company should take advantage also to the fact
that the newer the product and the earlier in its
lifecycle the higher the price can usually be. It ensures
a high profit margin as the early adopters buy the product and the firm seeks to recoup
development costs quickly and it also brings a certain prestige to the product.
Potential substitutes
Coca-Cola is constrained by the monopolistic market in which it competes. The main
characteristic however is product differentiation.
Other constraints (See Appendix M)
PROMOTION STRATEGY
Objectives:
• To initiate strong awareness about the launch of Bubble Buzz throughout
Generation Y (10-29 years old) consumers as well as their parents.
15
16. • To win market shares over our top functional drinks competitor, PepsiCo.
Message:
The promotional outputs will convey the clear message that “Bubble Buzz is a healthy
drink for sporty and young people who simply enjoy taking care of their body and life.”
Concepts:
• “Think outside the bubble”: Be Bold, Be Original, Be Different, Be Yourself.
• “A good spirit in a good body.”
• “For the out-of-the-ordinary individuals who like to challenge themselves.”
Media selection:
Before choosing the appropriate medias, it is important to note that Generation Y consumers
only give partial attention to media. However, they can be reached through integrated
programs. They are typically using more than one communication media at a time; a
behaviour that is often called “multitasking”. This group of consumers doesn’t give its full
attention to one single message, but rather uses continuous partial attention to scan the media.
Marketers can still communicate with Generation Y by using a variety of targeted
promotional tools. Another important tactic to reach our target market is through “Viral” or
“Buzz” marketing, which Coca-Cola will heavily use in this campaign (campus, contests).
Advertising:
Refer to APPENDIX H for detailed explanations
Output Examples
Television MTV, Much Music, VrakTV, YTV
Radio MIX96, CKOI 96.9, 94.7 FM, Universities
Magazines For girls: Cosmo, Elle
For boys: Sports Illustrated (or Kids edition)
Internet Banners on select websites (gaming, sports, etc.)
Official promotional website: www.BubbleBuzz.ca
Outdoors Billboards and prints in select areas including:
Campuses, transportation (bus, metro, stations)
Tourist areas in high seasonal periods
Outskirts of key cities in geographical reach
16
17. Others Not relevant
Personal Direct contact with retailers, sales kit strategies to be
selling explained later in the text.
Public Stands or special displays and events in schools, malls,
relations sports events (i.e. 2008 Beijing Summer Olympic
Games), sponsorship activities
Publicity Conferences, press releases (print and online), buzz
marketing through TV coverage
Promotional Mix:
Consumer oriented:
• Contests: “Win another Bubble Buzz flavour”, “Uncover a secret code underneath the
bottle cap and win sporting goods and electronics by logging on the website”, “Win a trip
for the 2008 Olympics in Beijing”. (Arguments: It will increase consumer purchases and
encourage consumer involvement with the product).
• Samples: distributed in supermarkets, school/universities. Samples are a way to avoid
product resistance since people are not used to find bubbles in their drinks. Arguments: It
will encourage new product purchases and it represents low risk for consumers since they
get it for free. They have nothing to loose by trying it.
• Point-of-purchase: in supermarkets (to reach the parents of generation Y). Arguments: It
is also a mean to increase product trial and provides a good product visibility.
• Others: In subsequent years, engage in product placement in TV shows or movies.
Trade oriented:
• Allowances and discounts: case allowance (Arguments: The “free goods” approach will
be used so it can encourage retailers to buy more of the product to get a certain amount
for free).
• Cooperative advertising: to encourage retailers to buy our product and to maintain our
high level of advertisement that consumers expect from Coca-Cola.
Other considerations:
• Scheduling of the advertising: Pulse scheduling (promotional presence year-round, but
emphasized and intensified before and during summer).
• IMC (integrated marketing communication)
Target Audience:
• Intermediary: personal selling will be more often used
17
18. • Ultimate consumer: Coca-Cola will use more of mass media because the amount of
potential buyers is large.
PLACE (DISTRIBUTION STRATEGY)
Bubble Buzz will be distributed through these channels: supermarkets, convenience
stores, independent food stores, discount stores, multiple grocers, vending machines,
direct sales.
Requirement for success analysis:
C.M. per bottle = 382,159.36 / 328,000 = $1.17
Break-even: (113,453.56+25,676.33) / 1.17 = 118,914 (bottles)
Market share: 118,914 / 1,000,000 = 11.9%
In one year, if Coca-cola can sell 118,914 bottles of Bubble Buzz, or in other words
achieve 11.9% of the functional drink market share, it will break even.
After this point, every bottle Coca cola sells will generate average $1.17 towards the
profits. The potential profits can up to $1,030,770.001 based on our target market.
Expected Costs:
COGS: $597,124 * 36% = $214,964.64
O/H: $597,124* 38% = $226,907.12
Expected Revenues (total) = $597,124
(refer to Appendix J)
1
$1.17*(1-11.9%)*1,000,000 = $1,030,770
18
19. China is the target country we’re going to expand our product.
Reasons:
1. With a total population of 1,313,015,000 in the end of 2005 and 327,714,000 in our target
market (age 10 to 25 years old), compared with the total population of Canada---304,453
million, there definitely is a great potential worth to work on.
2. absolute expenditure on food and non-alcoholic beverages is expected to increase from
1,777 billion in 2005 to 2,154 billion in 2010 (though the proportion of consumer
expenditure on this part is decreasing from 28.39% to 25.75% )
3. Soft drinks industry is one of the fast growing industries in China, especially
fruit/vegetable juice, RTD tea, and Asian speciality drinks and bottled water have shown
a sharp increase during 1998 to 2003.
4. Bubble tea was originated in Taiwan. Soon after its introduction in China, it became one
of the most popular beverages sold in tea stores on the streets due to the similar taste and
similar cultural background. So, it is a good chance for us to enter into this market.
5. Since we are the top sponsor for the upcoming Beijing Olympic in 2008. With more
opportunities to expose to the public, it is going to benefit our sale there.
Our entry-strategy for entering China is through licensing.
Reasons:
1. We have already provided licenses for manufacturing our products in China (licensing the
bottlers and supply them with our syrup required for producing). Therefore, added in one
or two more products in our production chain would not be that difficult.
2. It is relatively low risk when compared with direct investment there. It is low cost to
export our new products there since we can maintain lower labour cost and lower material
cost if we produce our products locally, especially in China.
19
20. Changes to be made:
1. Price: Price sold in China is going to change to accommodate the local desire. As we set
our price sold in Canada $2.00. Compared to the price sold in the bubble tea store ($
3.50), it is about 57.14%. So, with the information we gathered from the tea store in
China2, the price sold there would be 57.14% of what sold in the tea store---$12 Yuen in
China currency. Then, it would be around $7 Yuen, about CAD$13.
2. Naming the product: In order to be recognized and accepted more easily for the local
market, we need not only translate our product name but also make sure there’s not
hidden unintended meaning that would damage our product.
3. Develop other flavours that would attract the local market: Since milk based bubble tea
sell better in China, we will add in this product line. Also, we will avoid using too many
artificial colors as they are not appreciated as much as in Canada. Moreover, people in
China are becoming more and more health concerned, especially the amount of sugar and
additives added in the drinks. We will make some changes in the ingredients used to
appeal the local market, i.e. less sugary drinks.
4. Promotion: In contrast to the radio ads in Canada, we will use more TV and Web
advertisement there due to the highly exposed environment in China. Also, we will put
more emphasis on the ads on the public transportation such as underground/subway
system and bus service due to the more frequent use of the public transport service there.
Also, since the outdoor display screen is quite popular in big cities, we will also take
advantage of it.
2
Appendix L (Prices in China)
3
The change of currency: CAD$1= CNY$ 6.88
20
21.
22. APPENDIX A (ref.2)
Off-Trade Consumption Indicators (Functional Drinks)
350.0
300.0
250.0
Million Litres / 200.0
Million $CDN
150.0
100.0
50.0
0.0 1999 2000 2001 2002 2003 2004
Volum e 115.3 117.8 119.7 122.1 124.0 125.9
Sales 296.7 312.1 318.1 324.7 327.4 342.2
APPENDIX B (ref.4)
Off-Trade Sales of Soft Drinks by Sector: Value 1999-2004
C$ million 1999 2000 2001 2002 2003 2004
Carbonates 4,651.40 4,726.30 4,828.20 4,991.10 4,959.60 4,938.90
Fruit/vegetable juice 2,135.20 2,239.60 2,347.00 2,454.60 2,497.60 2,613.10
Bottled water 385.9 447.3 551.2 666.8 763 859.4
Functional drinks 296.7 312.1 318.1 324.7 327.4 342.2
Concentrates 193 186.5 171.3 166.5 159.2 161.9
RTD tea 234 257.4 265 275.4 286.8 307.4
RTD coffee 0.2 0.4 0.6 0.8 0.9 1.1
TOTAL 7,896.40 8,169.60 8,481.30 8,879.90 8,994.50 9,224.10
Off-Trade Sales of Soft Drinks by Sector (2004)
Carbonates
Fruit/vegetable juice
Bottled water
Functional drinks
Concentrates
RTD tea
RTD coffee
TOTAL
23. APPENDIX C (ref.1 & 8)
STRENGHTS
Brand strength (see Appendix F for brand rankings)
The Coca-Cola Company is the largest manufacturer, distributor and marketer of nonalcoholic
beverage concentrates and syrups in the world. The Coca-Cola brand is unarguably one of the
most recognizable brands in the 200 countries where it sells its products. The strong brand name
is one of the basis for the company’s competitive advantage on several of its core markets.
Effective strides in new markets
Coca-Cola has partnered with several companies (such as the joint venture with Nestlé) in order
to increase the ability to react to demands and changes in the markets of iced tea, coffee and
juices. The developing markets are more complex than the carbonated soft drinks.
Results of operations
In 2004, net-operating revenues totaled approximately $21.9 billion, an 8% increase
from 2002. Gross profit totaled $14.3 billion in 2004. The company generated $5,968 million
from its operating activities and re-invests heavily into its business. The ability to generate
significant cash flows is one of the its key strengths (ref.16).
Strong existing distribution channels
Coca-Cola has operations worldwide and is well established in its distribution channels (such as
store retailers or vending machines). Therefore, a new product launch can typically rely on the
existing distribution system in order to reach the majority of its target market while requiring no
major supply / delivery developments.
WEAKNESSES
Relying upon line extensions
Coca-Cola is relying on brand extensions increase sales in specific lines, particularly its long-time
carbonated soft drink products (i.e. the introduction of Vanilla Coke helped maintain sales for the
core Cola beverages). However, there is a strong risk of cannibalizing existing sales in the long
term (for example, Bubble Tea might deter on sales for iced tea).
24. Reliant upon particular carbonated drinks
The long-time presence of Coca-Cola’s Coke beverage has established this particular line as a
flagship product. While the core Coke products bring a solid base of sales and loyalty to the
company, consumers’ expectations also become more and more anchored and single-lined, taking
away freedom in the areas of line diversification and product modifications (taste, packaging,
price).
Brand dilution
The tremendous amount of existing brands and new product being introduced by the company
could diminish the value and differentiating strength of each product that is being manufactured.
Entrance into difficult non-core categories
The Coca-Cola Company is a truly global multinational business giant. While some categories of
products are distributed in many areas of the globe (Coke, Powerade, etc.), geographical needs
already require that these global brands are heavily adapted to their target region. Furthermore,
many smaller and diversified product lines are more or less popular in one particular region over
another. Therefore, the process of diversifying the production and marketing each product
involves costly investments. These capital requirements typically increase as the product becomes
heavily focused (for example, since the Coca-Cola brand is highly recognizable worldwide,
marketing a bottle of Coke in Japan would be less difficult than marketing a bottle of “Qoo” in
that same country – “Qoo” being a lesser-known non-carbonated drink which was one of Coca-
Cola’s newest brand introduction in 1999).
Saturation of carbonated soft drink segment
Due to the countless number of brands available on the market, it becomes increasingly difficult
in the soft drinks segment to innovate and create new products that genuinely stand out from their
competition. And as we have seen, an analysis of the industry has shown that growth in the soft
drinks market becomes difficult and challenging when the conditions and consumer trends cause
a market demand that stays stagnant.
OPPORTUNITIES
New product introductions
The functional drinks market is one that particularly allows more innovation opportunities and
gives greater freedom for creativity in the design, production, manufacturing, distribution,
promotion and retailing choices and processes.
25. Brand is attractive to global partners
Because of the company’s size (including value, brand name and operating revenues) and wide
portfolio base, Coca-Cola enjoys a strong purchasing power over its suppliers, and also attracts
large partnerships with various levels of consumer reach (e.g. Burger King, movie studio
promotions, sponsorship agreements, etc.). Existing brand awareness also provides an
international playing field for powerful marketing strategies.
THREATS
Strong competition
Coca-Cola is competing in a global market that is characterized by an oligopoly between several
(but few in numbers) competitors. The fight for market shares and sales in crowded markets
becomes a complex one.
Potential health issues
The current trend of consumer and consumers groups’ awareness towards goods and services is
both beneficial and threatening for companies in the food and beverages industry. Over the last
few years, concerns over health issues have risen in the media through an expanded and ever-
growing network of “knowledge outputs” (journals, TV channels, internet and so on). The move
of the younger generation towards a healthier lifestyle call for careful planning and decision-
making in new product developments. Large companies can also easily become the target of
consumers’ apprehension.
Free trade
In an era of globalization, large international competitors can come out with comparative
advantages (the constant fight to remain the first mover and market leader in a long-term
spectrum). Issues arise when dealing with price competition and economic growth. Trade
organizations are also faced with public pressure which can disrupt operations in one or more
areas of the company.
26. APPENDIX D (ref.2 & 5)
D1. Off-Trade Company Shares of Functional Drinks by Value 2000-2004
% off-trade value rsp 2001 2002 2003 2004
QTG Canada Inc (PepsiCo) 56.4 58.2 59.5 60.5
Coca-Cola Ltd 32.2 32.4 33.1 32.8
Monarch Co, The 7.5 5.8 4.5 3.3
South Beach Beverage Co 1.1 1.1 1 1
GI Energy Drinks Corp 0.1 0.1 0.2 0.2
Snapple Beverage Group 0.1 0.1 0.2 0.2
Private label 0.8 0.8 0.8 0.8
Others 1.7 1.4 0.7 1.4
TOTAL 100.0 100.0 100.0 100.0
D2. Functional Drinks Sectors (Segmentation) by Value, 2005
*Based on United States report
D3. Functional Drinks Sales by Distribution Format (2004)
Distribution Channel % Sales
Supermarkets/hypermarkets 30.8
Independent food stores 2.8
Convenience stores 1.5
Discounters 5.9
Direct sales 0
Vending 0.1
Others 58.9
Total 100
27. APPENDIX E (ref.12)
Population by Age: 1990-2015
'000
1990 1995 2000 2005 2010 2015
10-14 yrs 1,877 1,997 2,056 2,111 1,963 1,868
15-19 yrs 1,938 1,980 2,096 2,157 2,228 2,068
20-24 yrs 2,124 2,009 2,070 2,264 2,348 2,426
25-29 yrs 2,583 2,185 2,076 2,209 2,438 2,529
TOTAL 8,741 8,891 Total (Canada) = 32,241
Source: National statistical offices, Euromonitor International
Note: as at January 1st
Functional Drinks:
Consumption growth (Liters) from 1998 to 2003: 0.06 per year
Projected consumption (Liters) in 2005: 4.12
Market size calculations (ref.14 & 15):
Total Canadian (10-29yo) Soft Drink Yearly Consumption (L)
# Male 10-29yo Yrl Consumption (soft drinks)
(Population) (Liters)
4,436,800 4,858,296 Total yrl consumption
(soft drinks – Liters)
# Female 10-29yo Yrl Consumption (soft drinks)
(Population) (Liters) 7,961,891
≈ 8 million Liters
4,251,500 3,103,595
Total Canadian (10-29yo) Functional Drink Yearly Consumption (L)
8,000,000 L x 4.12% (functional drink market share) = 329,600 L
329,000 L is approximately equivalent to 1,000,000 cans (355mL volume)
MARKET SIZE:
8,688,300 people
329,600 L
≈ 1,000,000 cans
The market size represents our targeted pool of consumers. Further analysis in the marketing
strategy plan will allow for estimates of the forecasted sales in the market segment specific to the
RTD Bubble Tea drinks.
32. APPENDIX J
CALCULATIONS
Based on Coca-Cola’s previous financial statements, we will see the average
COGS/Revenues for year 2005, 2004, and 2003 is 36%4. Similarly, Operating Costs /
Revenues = 38%5 Moreover, since our target market are 1,000,000 cans annually
assuming Coca-cola maintains its market share in functional drink 32.8%, we predict our
sales as 1,000,000 * 32.8% = 328,000 bottles.
We use the ratio of average capital expenditures / net operation income for North America
to estimate the fixed cost we need for producing Bubble Buzz in Canada: 4.3%6 of the
total revenue.
Expected Revenues:
Supermarket Independent Stores Others Total
Price ($) 1.50 1.75 $2.00 -
Sales (%)7 30.8% 10.2% 59% 100%
Sales ($) 101,024 33,456 193,520 328,000
Revenues ($) 151,536 58,548 387,040 597,124
Note: “Independent stores” include convenience stores, independent food stores, and discount stores.
“Others” include multiple grocers, vending machines, & direct sales.
Expected Costs:
COGS: $597,124 * 36% = $214,964.64
O/H: $597,124* 38% = $226,907.12
Note about expected costs: O/H costs include operations overhead and general and
administrative overhead. The former is generally associated with the recurring
management or support of the activity, which is normally relevant cost. The latter
includes salaries, equipment, space and other activities related to headquarters
management, accounting, personnel, legal support, data processing management and
similar common services performed outside the activity, which are irrelevant. Because
there is no enough data to show the ratio of these two parts, we estimate half of the O/H
costs as irrelevant costs.
4
From table 1: (8,195+7,674+7,776) / (23,104+21,742+20,857) = 36%
5
From table 1: (8,739+85+7,890+480+7,287+573) / (23,104+21,742+20,857) = 38%
6
From table 2: (265+247+309) / (6,676+6,423+6,157) = 4.3%
7
From table 3
35. APPENDIX M
Pricing strategy (Other constraints)
The first possible constraint would be the regulations on pricing. Another constraint
would be that Coca-Cola must not set a price that is too high because competitors will be
attracted by potential profits and will follow by a lower price. After having taken all the
important factors into consideration, two price-level fixing approaches seem appropriate.
1. Profit-oriented approach: Target profit
One of the central objectives of this project being to become the market leader in
functional drinks, Coca-Cola is willing to stay among the top competitors, if not
becoming the greater, by achieving a certain target profit. This could be obtained by
establish a price that will largely cover variable and fixed costs while bringing
tremendous profits.
2. Competition-approach: Above market
Competitors and potential substitutes prices can also be part of the strategy. Having a
higher price could make customers aware of the additional benefits and the higher quality
of Bubble Buzz.
APPENDIX N
Promotion Schedule
Step Output Period of time Arguments
To make Canadian retailers aware of Bubble Buzz so they can
1 Personal selling February to September
order it in time for Summer time
Radio is the most listened media by students (based on
researches); the target market would hear our radio spot
2 Radio spots February to April
several times a day. This will ease the recognition of Bubble
Buzz in future promotion tools.
36. The target market will then match an image with the name of
3 Magazines ads Mid-March to June the product more easily. The recognition of Bubble Buzz will be
faster.
To send a widespread message over Canada that Bubble Buzz
4 Television spots April to September
is now available. Critical step in the promotion.
To get potential buyers to try Bubble Buzz and to create an
5 Sample distribution April to September
addiction to it.
Making a special section for the Bubble Buzz in Grocery store
6 Point of purchase April and September will help the new potential buyers to find our product faster and
more easily.
Putting adds in specific places where Generation Y hangs out
7 Outdoors May to September
will create an increased awareness of Bubble Buzz
We will use special events (sports and others) to promote
Bubble Buzz and also to get in touch with our potential market.
8 Public Relations May to September
It will allow Coca-Cola to interact with our Generation Y
Consumers.
When the summer will come to its end, we will use contest to
9 Contest August to end of September
give a second "push" to the sales of the Bubble Buzz.
Use of conferences and news to make the general public
10 Publicity All the time
aware of the existence of Bubble Buzz.
APPENDIX O
Other considerations for the promotion strategy
Product life cycle of Bubble Buzz:
Bubble buzz is at its Introduction stage; we thus must inform consumers in an effort to
increase their level of awareness. Awareness is our primary promotional objective. Then
the following months after the launch of Bubble Buzz , in its Growth stage, Coca-Cola
will have to persuade the consumer to buy the product, to gain preference and to solidify
the distribution.
Product Characteristics:
• Complexity: Bubble Buzz is more sophisticated than already existing functional and soft
drinks. Consumers can eat and drink it which has never been experienced before. Unlike
most functional drinks, it also requires a straw. Understanding and familiarity is different
when compared with other comparable drinks. We should thus use a little bit more of
personal selling to retailers, give more sample, and create advertising on how to use
bubble buzz than with other brands from the company.
• Risk: there is no financial, social or physical risk associated with Bubble Buzz thus
Personal selling is less needed.
• Ancillary Services: No support or service are required after the sale; refer customers to
the website or free 1-800 number for any questions or comments.
Stage of Buying decision:
37. Our target consumer are at the pre-purchase stage: advertising is more helpful at this
stage then personal selling because advertising informs the potential customer of the
existence of the product and the seller, but in this case the seller is already well known.
Channel Strategy: (ref.11, p.478)
For Intermediary: Push strategy, in order to gain retailer’s cooperation in ordering and
stocking the product.
For Ultimate consumer: Pull strategy: We want to direct our promotional mix at ultimate
consumers in order to encourage them to ask retailer for the product.
38. APPENDIX O
Justifications for advertising selections
-TV: channels for teenagers and for young adults: MTV, Much Music, VrakTV, YTV
Arguments: TV communicates with sight, sound and motion, which is needed for Bubble
Buzz. It is the only media that can reach 99% of the homes in Canada. Coca-Cola has the
budget to cover the high costs of this media.
-Radio:
94.7 FM, 96.9 FM
University Radios (McGill, UDEM, UQUAM, Concordia, UOTTAWA...)
Arguments: Radio is an already segmented medium. There are over 900 radio stations in
Canada. The average University or college student is a surprisingly heavy radio listener
and spends more time during the day listening to radio than watching network television
(book p.502) We could also use of “Interactive radio” as Pepsi has already done in the
past. (p.503)
-Magazines: We should take advantage of the fact that magazines have become a very
specialized medium. There are about 500 consumers magazines in Canada. Good color
production is also an advantage that create strong images which is the purpose of Coca-
Cola with its Bubble Buzz brand. Each magazine’s readers often represent a unique
profile.
Reaching:
-Young girls: COSMO
-Young women: ELLE
-Young boys: Sports Illustrated for kids
-Young men: Sports Illustrated
-Internet: Online advertising is similar to print advertising in that it offers a visual
message. It also has additional advantages , it can also use the audio and video
capabilities. As we are targeting our ads to young outgoing people, sound and movement
may attract more attention from viewers and has the unique feature of being interactive.
Interactive media would offer Coca-Cola the opportunity to reach younger consumers
who have developed a preference for online communication. Official Website
(www.bubblebuzz.ca)
-Outdoor: Billboards in specific geographical area would allow us get a good reach and
frequency. It is a low cost and flexible alternative. (Campus, malls, Bus and metro
stations)
39. REFERENCES (Direct)
1. The Coca-Cola Co. (Company Profile). Global Market Information Database (Euromonitor).
Jul 20, 2005. Accessed Feb 08, 2006.
2. Functional Drinks Off-trade Sales in Canada (Country Report). Global Market Information
Database (Euromonitor). Oct 03, 2005. Accessed Feb 25, 2006.
3. Functional Drinks, Canada, Retail Volume (Statistics). Global Market Information Database
(Euromonitor). Oct 03, 2005. Accessed Feb 25, 2006.
4. Soft Drinks in Canada (Industry Report). Global Market Information Database
(Euromonitor). Oct 03, 2005. Accessed Feb 08, 2006.
5. Functional Drinks in the United States. Datamonitor. Dec 2005. Accessed Feb 08, 2006.
6. COSGROVE, Joanna. The 2005 Soft Drink Report. Beverage Industry. Mar 2005; 96; 3;
p.22. Accessed via ABI/INFORM Global. Feb 08, 2006.
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8. The Coca-Cola Company. (Company Profile). Datamonitor. Jun 2005. Accessed Feb 08,
2006.
9. HANNAFORD, Steve. Industry Brief, Beverages I. Oligopolywatch.
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10. POPP, Jamie. Leading in a healthy direction. Beverage Industry. Dec 2004; 95; 12; p.22.
Accessed via ABI/INFORM Global. Feb 08, 2006.
11. BERKOWITZ, Eric N. CRANE, Frederick G. KERIN Roger A. HARTLEY, Steven W.
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40. 16. 2004 Annual Report – Form 10K (The Coca-Cola Co.). The Coca-Cola Co. US Securities and
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News Service. February 24, 2006.
41. OTHER CONSULTED REFERENCES
1. New Age Beverages in Hong Kong. Datamonitor. May 2004. Accessed Feb 05,
2006.
2. Boba Tea Direct. Boba Tea Direct LLC. http://www.bobateadirect.com. Date N/A.
Accessed Feb 06, 2006.
3. PREVILLE, Philip. Bubble Tea.
http://www.geocities.com/hello_tai_tai/bubbletea.html. Accessed Feb 02, 2006.
4. KING, Paul. Will bubble tea burst out across country or go bust?. Nation’s
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