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Due to obesity issue that has become increasingly serious in America, public, government and many anti-obesity associations realizes that sugary drink is the most significant factor. All of them want to reduce or control obesity among various groups especially juvenile obesity.
This proposal was commissioned to explain why Coca Cola should shift market focus on promoting healthy lifestyle and how to achieve this. The research draws attention to four reasons. Firstly an increase in consumer health awareness was accompanied with a shrinking in the sugar drinks market. Obviously consumer needs have been changed. Secondly the market of sugary drinks is tending towards saturation. Thirdly governmental regulation and bans will limit the development of company. Lastly, unhealthy advertisement strategy has led to public questioning and discontent.
Based on the current situation of Coca Cola, this proposal gives some suggestions to help Coca Cola keep the dominant role in beverage industry. Increasing the non-sugar dinks' selling can and will catch up with the changing consumer needs. Company should follow the government regulation and bans by reducing the sugar content of existing products.it also will improve company image and gain the support from government. Meanwhile the adoption of a promotional strategy that focuses on non-sugary drinks can increase brand influence and consumer loyalty.
The research obviously shows that the market prospects of non-sugary drinks will give Coca Cola a rare opportunity.
Coca Cola has been paying attention to sugary drinks for more than 50 years. Nowadays Coca Cola played the dominant role in beverage industry. At the same time, sugary drink has become the main product of beverage. The company is also profiting from sugary drinks. But now the external environment is changed, Grynbaum (2012) pointed out that the increase in city obesity rate over the past 30 years has been attributed to sugary drinks. Jules Hirsch of Rockefeller University in New York also asserts that people immoderately intake sugary drinks will lead to changing of obesity genes. The genes will cause serious obesity (Marchione, 2012). Therefore public has realized that sugary drinks are harmful for their health and tends to buy non-sugary drinks. With the public's discontent and questioning over sweetened drinks, government and anti-obesity advocacy groups make efforts towards new regulations that effectively ban sugary drinks' sales as well as advertisement in public areas. For instant, the New York City has banned sale of big sized of sugary drinks (Grynbaum, 2012).
As the leader of beverage companies, it is time to shift our focus towards promoting healthy lifestyle. The company can shift main marketing from sugary drink to non-sugary drinks and reducing the sugar content of existing products as well as changing the current advertisement strategy.
3. Discussion of factors
3.1 Changing consumer needs
Consumer needs is the mean factor that affects sales. In recent years, the disadvantages of sugary drinks are more and more obvious. Sugar drinks have been proven to contain a lot of sugar and hence calories. Excessive intake can and will lead to obesity and other more serious diseases in the future (Grynbaum, 2012; Marchione, 2012). Two-third of Americans is facing obesity issue. This is not a secret any more.
Consequently many people have started to actively manage their weight and change their lifestyles. The consumer needs has been changed by the rise in people's consciousness about the negative effects of sugary drinks. The analysis for Coca Cola on Trefis (2012) also pointed that "increased focus on the negative health impacts of carbonated drinks might erode some market share" (p. 6).
For teenagers' market, the situation is worse than adults, because children obesity has become the one of the top social issues in America. Parents realized that teenagers should be away from sugary drinks as far as possible. At the same time, "schools are removing sugary drinks from vending machines at a faster pace" (Strom, 2012).
Although there is yet to be massive change in consumer spending habits, this is the beginning of trend that must be affecting the future profitability of the company. PepsiCo, the first competitor of Coca Cola, has used a blend of sweeteners to deliver half calories of standard Pepsi to follow the changing consumer needs. Coca Cola should be aware that consumer needs is the direction of each beverage company. Meanwhile, Coco Cola should stay at a leading position. Thus the company must more closely follow the consumer needs than other competitors.
3.2 Saturated market for sugary drinks
Coca Cola Company is the company that first entered of sugary drinks industry. Coca Cola has been focusing on market of sugary drinks for a long time. Due to tremendous success of Coca Cola, a lot of beverage companies decided to enter sugary drinks market one after another. Due to statistics, the total number of beverage companies has doubled from 1991 to 2001. The competitive pressure is higher than before.
At the beginning, sugary drinks were luxury goods. But now consumers have higher purchasing power and more choices, the price war is unavoidable. Declining soft drinks prices will lead to loss of profits, meanwhile profitability can only be increased through greater efficiency in the supply chain or through more-effective product promotions, which usually require considerable expenditures. There is a good reason to be concerned with the current situation.
Traditional advertisement is the main promotional strategy for all the beverage companies. However, sugary drinks are dominant products in beverage industry. In essence, Coca Cola pays more attention to promoting sugary drinks. The figure obviously shows that the advertising costs of Coca Cola are higher than all other companies combined.
But the pie chart shows that the gaps between Coca Cola and competitors are not proportionate with the difference in advertisement spending. Coca Cola has invested astronomical sum of money into the sugary drinks market but the increasing of market share is not substantial. In other words, the effectiveness of sugary drinks' promotional strategy is not as decent as expected. The competitors have impacted the role of Coca Cola in sugary drinks market.
3.3 New regulation and bans & high taxation of sugary drinks impact company profit
With the public's discontent and questioning over sweetened drinks, Walt Disney Co. and government of New York City have enacted the ban on the sales and advertisement of junk food and beverage to tackle obesity problem (Chmielewski, 2012; Grynbaum, 2012).
These new regulations introduce a minimum compliance standard in terms of the highest permissible sugar content. Meanwhile, because sugary drinks have been identified as unhealthy products, soft drinks companies are easy targets for governments to raise taxation from. For instant, at the beginning of 2012, France imposed a soda tax. But I should point out that France is not the only country to impose such a tax. In 2011, Hungary legislated high taxes upon items with high fat, salt and sugar contents (Analysis for Coca Cola, 2012). Until now, a large number of developed counties government have implemented new taxation policy of sugary drinks. They think that taxation policy of sugary drink is an effective way that solves obesity issue. It is not unlikely that US government would impose a similar tax in the future as well.
Due to Coca Cola's current product structure, most of products belong to the category sugary drinks. The high taxation of unhealthy drinks would be heavy burden for Coca Cola. By reducing the sugar content of existing products, the company will follow the government new regulation and bans. In this way, Coca Cola can also avoid the high taxation of unhealthy products. Therefore the profit of company will be increased.
3.4 Corporate image
Nowadays children obesity has become more and more serious in America. But sugary drinks are still heavily promoted to young people on television and radio.
Although the percentages of non-sugary drinks' advertisements have been increased, it still cannot be compared with sugary drinks and energy drinks. The gap is still very obvious. "Coca Coal and other soft drink companies have increase targeting of young people in products advertisement" (LoGiurato, 2011). For Coca Cola, this statistics will directly lead to public questioning and discontent. It will damage the company image. It is time to change advertising strategy. The current advertising strategy is oriented towards good taste. But healthy advertisement can and will let the consumers believe that our products are indeed healthy and incapable of leading to obesity and other diseases.
Coca Cola is the largest company in sugary beverage market. The changes of Coca Cola, the market leader in the beverage industry, will lead to the new promotional direction for all companies to follow. After that government will endorse the new business strategy of Coca Cola. Therefore this is a rare opportunity for Coca Cola to keep the dominant role in beverage market. This change will lead to Coca Cola stay away from the negative news. Meanwhile it will help Coca Cola to increase the brand influence.
Coca Cola should deeply understand the significance of consumer needs and cannot keep focusing the saturated market. Promoting non-sugar drinks is a sustainable way to keep the dominant role in beverage industry. A company with good corporate image can not only get higher consumer loyalty, but also gain the support from government. In conclusion, these aspects will build the core competitiveness of Coca Cola.
4.1 New marketing share
The company cannot immediately shift marketing share to non-sugary drinks. Firstly, Coca Cola can choose some of states in America that are regarded as experimental markets to carry out pilot tests. To decrease selling of sugary drinks and increase selling of non-sugary drinks, after that staffs of Coca Cola market department should randomly sample sales status of these states and make a detailed report. If the conclusion is acceptable, later Coca Cola can promote this strategy to all states of America.
4.2 Proper sugar content of existing product
With reducing the sugar content of existing products, Coca Cola should create a survey about tasting of "new products" in order to find a proper sugar content that never impact taste of current products and never go against governmental regulation.
4.3 Supportive policy from government
After following the new government regulation, Coca Cola should closely co-operate with government as far as possible to attain relevant government-approved health certification. At the same time, preferential tax policy that aims to promote non-sugary drinks and low-sugar drinks should be applied. Although changing the business strategy, Coca Cola should receive support from government as far as possible.
4.4 Promotional strategy
Coca Cola should create new advertisements to highlight natural and nutritious features of our products and vigorously promote non-sugar products and low-sugar content drinks through new promotional campaigns. Meanwhile, the company should focus on children obesity issue and actively support programmes about fighting against children obesity.
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