Coca-Cola M&A Activity: Company Strategic Objectives

Strategic Objectives of Coca-Cola’s M&A Activity

The basis for these overwhelming beverage industry trends lies in the desire for top-line and bottom-line growth. Aimed at meeting this goal, Coca-Cola has developed what it calls a “2020 Vision.” The premise of this vision is to bring together beverage companies and partners in a way that will behave as “an aligned system.”[ "The Coca-Cola Company Provides Roadmap for Achieving 2020 Vision at Analyst and Investor Event." Coca-Cola: The Coca-Cola Company. 16 Nov. 2009. Web. 04 May 2011. http://www.thecoca-colacompany.com/presscenter/nr_20091116_2020_vision.html .] This is most easily understood as vertical integration. Referring back to Figure 1, major companies in the beverage industry fit a standard model for getting products to market. In order to “align” the members of this supply chain, Coca-Cola is acquiring both brands and bottling partners. Typically both the bottling and distribution functions are performed jointly at a franchise partner’s facility. By controlling more functions up and down the company’s business model, Coke will be able to cut costs and reduce the amount of profit lost to intermediaries.

Figure 2 illustrates the role that Coca-Cola Enterprises (CCE) plays in the business model that Coca-Cola uses in getting products to market. Coca-Cola itself is responsible for producing the syrups for its branded sodas. By producing the concentrates in-house, Coke is able to safeguard the secrecy of the recipes it uses. Those syrup concentrates are forwarded to CCE, which uses capital intensive factories to combine the syrups with carbonated and non-carbonated water, depending on the beverage. The finalized drinks get filled into bottles and then bulk packaged for transport to retail outlets where consumers obtain the drinks. CCE’s responsibility is to mix, bottle, and deliver the beverages to the end consumer. The far right portion of the graphic recognizes the various methods by which consumers obtain the beverage. Vending machines, grocery stores, gas stations, and restaurants are just a few of the many places that Coca-Cola beverages are available on a worldwide basis.


Figure 2[ "Our Business at a Glance." Coca-Cola Enterprises. 2007. Web. 29 Apr. 2011. http://www.cokecce.com/brochures/cce_2005/02_atglance.html .]

Traditionally, Coca-Cola has always taken care of the ingredient sourcing and syrup manufacturing processes. This has let the company outsource the capital intensive portion of operations to franchisees. These bottling companies earn a significant portion of the markup that gets added as the product travels from concentrate to the dinner table. Coca-Cola Classic began as a fountain beverage in 1886, and wasn’t first bottled until 1894.[ "About Us: Our Heritage: CCE Timeline: The Evolution of Coca-Cola Bottling and CCE." Coca-Cola Enterprises. Web. 29 Apr. 2011. http://www.cokecce.com/pages/allContent.asp?page_id=88 .] It was in 1899 that two entrepreneurs, Benjamin Thomas and Joseph Whitehead, presented the Coca-Cola leadership with a plan to sell the beverage in bottles all across the country. Seeing limited prospect of successfully selling the product outside of Georgia and neighboring states, Coca-Cola granted the men exclusive rights to sell the bottled beverage across the US for just one dollar.[ Ibid.] From this arrangement, the network of bottling franchisees that Coca-Cola relies on today was born.

More posts from a paper on Coca-Cola M&A Activity (including merger with CCE):

Coca-Cola M&A Activity, CCE Acquisition: Executive Summary
Coca-Cola M&A Activity: Introduction
Coca-Cola M&A Activity: Product Trends
Coca-Cola M&A Activity: Demand and Economic Trends
Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry
Coca-Cola M&A Activity: Beverage Industry Business Model Trends (2)
Coca-Cola M&A Activity: Company Strategic Objectives
Coca-Cola M&A Activity: Company Strategic Objectives (2)
Coca-Cola M&A Activity: Company Portfolio Analysis
Coca-Cola M&A Activity: Company Portfolio Analysis (2)
Coca-Cola M&A Activity: Company Portfolio Analysis (3)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor) (2)
Coca-Cola M&A Activity: Other Beverage Industry M&A Activity
Coca-Cola Acquisition of CCE North America: Deal Structure
Coca-Cola Acquisition of CCE North America: Deal Structure (2)
Coca-Cola Acquisition of CCE North America: Major Legal and Financial Players
Coca-Cola Acquisition of CCE North America: Regulatory and Shareholder Approval of the Transaction
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success (2)
Coca-Cola Acquisition of CCE North America: Conclusion to M&A Deal Analysis
Coca-Cola CCE Merger: Table of Contents and Works Cited List