Coca-Cola: Current Strategic Alliances – Major Strengths

Coca-Cola utilizes a variety of alliance types. The company partners with some of its largest customers to achieve heightened brand presence and sell more product, as in the case with Live Nation. Alliances like this develop convergent interests amongst the parties involved. Both companies want product promotion and consumption. As previously mentioned, Coca-Cola prefers to acquire brands and ally with bottlers to package and distribute those brands. Within the framework outlined in “When to Ally and When to Acquire,” it’s evident that Coke is focused on sequential synergies. The company makes its Coke syrup, for example, and after completing its task, passes the product on for bottling by partners, or for consumption. This approach fits with the company’s strategy and enhances its operational effectiveness. Other benefits of various alliance types follow:

Partnerships with Bottlers and Distributors
• Lowers the costs of entering markets.
• Reduces the need for capital.
• Streamlines the company’s portfolio or operational activities.

Acquisition of Brands and Products
• Fills gaps in Coca-Cola’s brand portfolio.
• Reduces competition in the beverage industry.
• Prevents competitors (i.e. Pepsi Co.) from gaining the same market space.
• Grows total company revenue.

The strategy that Coke employs in forming alliances or acquiring other companies generally works well. While Coca-Cola generally partners with bottlers, it sometimes takes a minority equity interest in them. In some uncommon instances, Coke buys an entire bottler’s operations. The equity interest in its bottlers is a sign of encouragement, an indication that Coca-Cola wants its partners to succeed. The company structures alliance and franchising deals to have reasonably favorable terms, and Coca-Cola’s confidence in its partnerships is evident from the minority equity investments. The joint success of Coca-Cola and its partners explains why some of the company’s oldest bottling partners, namely Coca-Cola Enterprises and Coca-Cola Hellenic Bottling, are still around today and operate thriving businesses. Coca-Cola focuses on its core operation, making syrups, and lets other handle the intense logistical challenge of bottling and distributing its products.

Coke’s relationship with bottlers is similar to our in-class study of Toyota Motor Corporation’s supplier network. Coca-Cola generally has arm’s-length transactions with its bottlers, and by producing all syrups itself, the company actively guards its internal knowledge, namely its secret soda recipes. Regardless, the company treats its partners well. Mostly this involves fair contract terms and knowledge-sharing. Recently, for example, Coca-Cola researchers invented a new product called the “Plant Bottle.” This is a more eco-friendly version of the PET bottle, using less plastic, and therefore, less crude oil to produce. Coke shared this technology with all its bottling partners and requested they implement the new design. In this way, Coke is helping its partners to become more efficient and environmentally friendly. This example brings up another type of Coca-Cola’s partnerships: licensing. The bio-technology used in the Plant Bottle was recently licensed to Heinz for use in that company’s ketchup bottles. Thus, Coca-Cola is sharing knowledge with its partners while also licensing it to external parties to make the company more profitable. The merits of the Coca-Cola Company’s partnership portfolio are numerous and evident.

Other posts on Coca-Cola's brand and strategy:

Coca-Cola: Company Strategic Alliance Objectives with Suppliers
Coca-Cola: Company Strategic Alliance Objectives with Bottlers
Coca-Cola: Company Strategic Alliance Objectives with Brands
Coca-Cola: Life-Cycle Model of Evolving Strategic Alliance Strategy Early Days
Coca-Cola: Current Strategic Alliances – Major Strengths
Coca-Cola: Life-Cycle Model of Evolving Strategic Alliance Strategy
Coca-Cola: Current Strategic Alliances – Major Weaknesses
Coca Cola: Future Strategic Alliance Objectives and Strategy Overview Recommendations
Works Cited Page for Coca-Cola Analysis of Alliances Portfolio

Dyer, Jeffrey H., Prashant Kale, and Harbir Singh. "When to Ally & When to Acquire." Harvard Business Review July-August (2004): 108-15. Print.