1、CONFIDENTIALThisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.Discuss
2、iondocumentDecember2000CokeCaseStudyWinninginJapanNJ-262408.756/001117NbgeoHR11RatingRationaleProduct Product and category selection Offers many localized brands,including brands in new categories(75%of sales)Products optimizedfor Japan market Changes formulations for local tests(e.g.,Fanta Golden P
3、ineapple)Capabilities Resources Significant resources and attention dedicated to most profitable market Research and development Effectively develops copies of most popular local brands(e.g.,coffees and teas);has had todevelop new skills in developing non-carbonated beverages Market relations Bottle
4、rs alliances smoothed market entry and continuing operations for Coke in Japan Distribution and saleschannels Relationship with 17 bottlers,owns 930,000 vending machines(over twice the numberof competitors)Marketing Devotes huge resources to advertising campaigns and promoted activities resulting in
5、 storyand brand image Alliances and acquisitions Frequently allies with bottlers,restaurants and marketing agencies(e.g.,supply alliance withMcDonalds,partnership with Denisu)Organization Aspiration and priority Japan region made priority and strongest talent was deployed there(e.g.,current CEO used
6、to head Japan,current chief of marketing used to head marketing for Japan)Talent Tension with local staff(almost 10%of Japan office is foreigners)Decision making andresponsibilities Most profitable market after the U.S.(17%-20%of overall profit);well respected Culture,values and style Reflects many
7、characteristics of local culture but retains key“winning”factors from U.S.culture(e.g.,more aggressive than traditional Japanese cultures)Coordination mechanisms Applies best practices in Japan to businesses and people managementFINGERPRINT COKEHighLowNJ-262408.756/001117NbgeoHR12COKE IN JAPAN Capab
8、ilities Localizes physical assets;bottling and distribution managed through alliances;bottling alliances are typically inclusive 17 bottlers in Japan Creates direct distribution system to stores through bottlers Offers marketing,manufacturing,and investment support to partners,when needed Has supply
9、 alliances with McDonalds Spends huge resources on influencer relationships Partners with local agencies for marketing capabilities(e.g.,Dentsu)Customer pull demand in product push Japan Uses segment marketing to understand customer behaviorOrganization Strong community feel to Coke Holds convention
10、s for bottlers Distributes bottlers magazine Compensation is competitive attracts graduates from top schools Almost 10%of Japan office is foreigners some degree of tension with local staff;still has“ugly American”syndrome;senior Japanese experience glass ceiling Japan seen as strong progression path
11、 CEO used to head JapanProduct Adapts products to local markets Almost 10%of revenue comes from Japan-specific products Brands include Georgia Coffee,Sokenbicha,and Aquarius Bottlers guided Coke into developing localized products“Fast follower”strategy quickly followed lead of smaller local players
12、to enter tea and coffee drinks Coke maintains full control over product content Launches new types of products in Japan(e.g.,canned soup drink)Middle Far EastEuropeNorth AmericaSales$Billions1993199519971999Performance/backgroundLevers for successOtherMarket information Market is very competitive mo
13、re than 7,000 soft drinks are sold in Japan by 500 manufacturers Vending machines account for 50%of soft drink sales Company information Coke is the market leader in Japan Japan is a very profitable market for Coke(potentially the most profitable)Maintains 900,000 vending machines,2x the number of c
14、ompetitors Products Coffee drinks,green tea,black tea,milk/yogurt drink Coke offers 5 brands with 60 flavors;75%of brands are JapaneseCompetitors:Kirin,Ito En,SuntoryCST DCS Eric Friberg*,Todd Guild*,Mark Loch,Hirokazu Yamanachi*14.018.018.919.833322114231533293429221525233814CAGR 9%*Has worked on J
15、apan studiesNJ-262408.756/001117NbgeoHR13CONTENTS Company overview Japan market entry strategy Products Capabilities OrganizationNJ-262408.756/001117NbgeoHR14COKE COMPANY BACKGROUND Founded 1886 in Atlanta,USA Number of global employees:37,400 CEO:Douglas N.Daft(Australian)Most senior manager for Ja
16、pan:Mary Minic(President,Japan)Key products:carbonated and sports drinks,juices,tea,coffee Market cap:$151 billion(as of November 13,2000)Key industry focus:beverages No.1 soft drink company globally 50%global market share Owns two of top three global brands(No.1 Coca-Cola classic,No.3 Diet Coke)Mar
17、ket leader in soft drinks in Japan 56%market share;competes with 500 manufactures selling over 7,000 drinks Global competitors:PepsiCo,Cadbury Schweppes,Nestle Competitors in Japan:Kirin,Ito En,Suntory Owns 40%stake in Coca-Cola Enterprises(worlds largest bottler)NJ-262408.756/001117NbgeoHR15COMPANY
18、 EVOLUTION Coke has been an international company since the start of the century,but WWII made it a true multinational.Coke entered the bottling business in the mid-eighties.Recently,the company has seen strong profits from financial reengineering in its bottling segment.1800s Invented in 1886 in At
19、lanta,USA,as a headache,indigestion,and exhaustion remedy Major advertising started in 1892;by 1895 Coke was sold in every U.S.state 1900s-1920s Coke sells in Cuba,Jamaica,Bermuda,the Philippines,Puerto Rico,and Europe by 1916 First bottling franchise established in 1901 Repositions Coke as non-medi
20、cinal product Coke bottle invented in 1916 Devotes personnel to maintaining good relations with bottlers in 1922 Establishes pioneering market research agency 1930s-1960s Advertising targets minorities starting in 1950s World War II catapults Coke into world market,creating first U.S.multinational F
21、anta innovated by Coke in Germany,driven by ingredient constraints during WWII Opens 15-20 plants worldwide during 1950s Merges with Minute Maid in 1960 Merges with Duncan Foods in 1964 Acquires Belmont Springs Water Co.in 1969 Expands product line in response to PepsiCo competition in 1960s Fanta i
22、n U.S.in 1960 Sprite,Tab,Fresca introduced Diet versions introduced 1970s-1980s Acquires Aqua-Chem(desalting machines)in 1970 Acquires Taylor Wines and other wineries in 1977 Introduces Coke in Russia and China in 1970s Acquires Columbia Pictures in 1982 for$750 million Reformulates Coke in 1985;unf
23、avorable customer reaction Divests entertainment business in 1987 Focuses on core,profitable business and doubles net income to$1 billion in 1988 Enters bottling business in mid 1980s1990s Launches“Always Coca-Cola”theme in 1993 CEO articulates priorities in 1993 creation of stock holder value,brand
24、 building long-term focus Top 16 markets account for 80%of volume;the markets comprise 20%of world population Bottling business plays important role in profitability Invention Repositioning and marketing Expansion,acquisitions,and diversification Diversification and rationalization MarketingSource:I
25、nternational Directory for Company Histories NJ-262408.756/001117NbgeoHR16Source:Annual report;Standard&Poors RegistarNameRoleJapan experienceDouglas N.Daft CEO and ChairmanSENIOR MANAGEMENT President and COOJames E.Chestnut EVP,Operations SupportCharles E.FrenetteGary P.Fayard SVP and CFOJoseph R.G
26、ladden EVP and General CounselCarl Ware EVP,Head of Global Public Affairs and Administration SVP,Chief Marketing OfficerStephen C.JonesCoke has a diversified team of senior managers.Used to head JapanJack L.Stahl EVP,President of Greater EuropeUsed to run marketing in JapanNJ-262408.756/001117NbgeoH
27、R17COKE STOCK PRICE COMPARISON U.S.01,0002,0003,0004,0005,00019801981198219831984198519861987198819891990199119921993199419951996199719981999Oct-00Coca-Cola Co.Beverages(non-alcoholic)S&P 500 Comp Ltd.Coke dramatically outperformed the market as well as its competition,especially when it started div
28、esting non-core businesses to focus on its profitable segment.Coca-Cola Co.Beverages index(non-alcoholic)S&P 500 indexNJ-262408.756/001117NbgeoHR18COKE SALES BY REGION$Billions Coke has an estimated 56 percent market share in Japan and has been growing its Japanese contribution to total sales.199319
29、951997199914.018.018.919.8OtherMiddle and Far EastEuropeNorth America CAGR=9%14213233293323151422293538232613NJ-262408.756/001117NbgeoHR19Source:Company web-siteCOKES SALES BY BRAND In 1999,63 percent of Cokes total gallon sales came from products bearing“Coke”trademark.63%37%CokeOtherNJ-262408.756/
30、001117NbgeoHR110Coke has historically made equity investments in selected bottlers with the intention of financial reengineering,but is now moving away from this strategy.The company has realized that“big is not always better”and is trying to get out of anchor bottlers in Brazil and the Philippines.
31、Source:Annual reports;McKinsey analysisHIGHLIGHTS OF COKES BOTTLING BUSINESS 581527Breakdown of worldwide unit case volume produced/distributedBottlers owned and controlled by CokeIndependently owned bottlersBottlers in who Coke has non-controlling ownershipPercentHistorically,Coke invested in under
32、valued bottlers worldwide,provided financial and managerial support,and improved operating efficiencies which generated increased sales;Coke benefited from growth,improved cash flows and increased owner value;at times,Coke sold these bottlers after turning them around,for sound profitsNJ-262408.756/
33、001117NbgeoHR111SELECTED LOCATIONSCoke is headquartered in Atlanta,Georgia in the U.S.,but has subsidiaries located over a wide geography.NOT EXHAUSTIVENJ-262408.756/001117NbgeoHR112CONTENTS Company overview Japan market entry strategy Products Capabilities OrganizationNJ-262408.756/001117NbgeoHR113
34、STORYLINE In order to enter and succeed in Japan,Coke realized that it needed to adopt a partnering strategy.Coke allied with 17 locally owned and managed bottlers and leveraged these relationships to set up a direct distribution channel as well as gain manufacturing and marketing capabilities It fo
35、llowed its bottlers advice and expanded its product offerings to include specialized beverages(e.g.,milk-based drinks,coffee drinks,teas).In addition,Coke introduced new product categories(e.g.,canned soups,Coo,a flavored juice product)and new flavors in existing brands(e.g.,Fanta Golden Pineapple)t
36、o increase its market share in trend-oriented Japan The company was also innovative in its alliance strategy(e.g.,supply alliance with McDonalds),its marketing techniques(e.g.,introduced reclosable PET bottles),and its acquisitions(e.g.,acquisition of Kanebos vending machine operations).Cokes sales
37、channel(930,000 vending machines,over twice as many as its nearest competitor)is a distinct competitive advantage in Japan where vending machines are the most popular sales channel Coke realized that it needed top talent to compete effectively in Japan and sent strong managers like Doug Daft(current
38、 CEO)and Stephen Jones(current Chief of Marketing),to Japan in leadership roles.Thus,Japan was seen as a progression path to top positions in the company Coke is currently the market leader in Japans soft drink segment with a 56%market share.Coke owns the number 1 local brand Georgia(coffee drink).H
39、owever,the company has been a slow mover in exploiting new opportunities(e.g.water and sports drinks)In the future,Coke faces the challenge of expanding its low market share penetration(20%)in the Japans most rapidly growing segment of specialized beverages NJ-262408.756/001117NbgeoHR114CONTENTS Com
40、pany overview Japan market entry strategy Products Capabilities OrganizationNJ-262408.756/001117NbgeoHR115PRODUCT STRATEGY Coke understands the importance of offering products that appeal to the local market,in addition to its existing,classic products.Tailors productsto local tastes Creates new pro
41、ducts that appeal to local customers following lead of smaller local players Milk-based drinks(e.g.,Ambasa)Coffee drinks(e.g.,Georgia)Tea drinks(e.g.,Saryusaisai)Offers product variety which is important to win in Japan Only 25%of sales in Japan come from Coke brand,rest from Japan-specific products
42、 Product range in Japan includes over 25 brands and 60 flavorsDevelops newcategories Launches new product categories for Japan Introduced canned soups However,does not compete in many new categories in trend-oriented Japan Did not move fast enough to capitalize on huge opportunity in water and sport
43、s drinksAlters product flavorsto local tastes Offers existing brands in flavors with local appeal “Fanta”brand is offered as“Fanta Golden Pineapple”in JapanIncorporates localbottlers advice Heeds local bottlers advice on categories to compete in Initially,wanted to sell only Coke brands(high profit
44、margin)but Japanese bottlersadvised introducing local,specialized productsNJ-262408.756/001117NbgeoHR116COKES JAPANESE PRODUCTS Coke has consistently rolled-out new products tailored for the Japanese market.Source:Company website Georgia(coffee drink)Ambasa(non-carbonated lactic soft drink)Real Gold
45、(carbonated herb mix flavored drink)Vegitabeta(fruity drink with multiple nutrients)Ko Cha Ka Den(blended tea Royal Milk,Fine Aroma Straight,Garden Lemon)Saryusaisai(non-sugar Oolong tea)Saryusaisai Sokenbicha(special branded tea)Seiryusabo(Green and Barley teas)Shipla(“functional”,stress flavored d
46、rink with mulivitamins)Lactia(lactic,non-carbonated drink;promotes healthy digestion)Calo(“functional”soft drink;helps build healthy bones)Perfect Water(mineral water)NJ-262408.756/001117NbgeoHR117CONTENTS Company overview Japan market entry strategy Products Capabilities OrganizationNJ-262408.756/0
47、01117NbgeoHR118COKE CAPABILITIES IN JAPAN Coke leverages local alliances to gain capabilities.The company also offers marketing,manufacturing,and investment support to partners when needed.Marketing Leverages local agencies for marketing capabilities Alliance with Dentsu Aggressively advertises its
48、brands Sponsored 1997 Winter Olympics in Japan Creates innovative packaging to boost sales First to launch beverages in convenient,reclosable PET bottles in Japan Loses market share due to slow responsiveness to market conditions Does not react quickly enough to capitalize on new product opportuniti
49、es(e.g.,water and sports drinks)Distribution Identifies and utilizes optimal sales channel Vending machines account for over 50%of all Japanese soft drink sales;Coke maintains 930,000 vending machines inJapan,over two times its nearest competitor Leverages acquisitions to expand distribution capabil
50、ities Acquired Kanebo Foods vending machine operations in 1996,including 26,000 machines and 250 employees Leverages local bottlers to set up highly functional direct distribution system Alliances with 17 bottlers in Japan 5%equity interest in Coca-Cola West Japan,largest Japanese bottlerR&D Current
