Coca-Cola M&A Activity: Demand and Economic Trends

Demand and Economic Trends

The industry-wide trends at the forefront of major beverage companies’ minds include the following:

Carbonated soft drink consumption per capita is falling worldwide.
Industry revenue is predicted to fall 2% per year over the next five years.[ Kaczanowska, Agata. Carbonated Soft Drink Production in the US. Rep. no. 31211a. IBISWorld Industry Report, 2011. Print.]

Consumers are increasingly sensitive to price as a result of the prolonged economic recovery worldwide.

Health-conscious consumers are demanding a rapidly evolving new segment of beverages.

Competition in the industry is high, as the market is saturated with beverage companies.

In addition to the trends identified above, the level of research and development activity in the beverage industry has shrunk in recent years. In keeping with new brand acquisition rather than organic brand creation, Coca-Cola has largely limited its R&D activities to packaging. For example, the company in 2009 began mandating its bottling partners use a new “Plantbottle,” an updated plastic bottle made from less PET resin (petroleum-based) than before and up to 30% plant-based material.[ "Coca-Cola New Plant Bottle." The EnviroMedia Greenwashing Index. 6 Apr. 2010. Web. 30 Apr. 2011. http://www.greenwashingindex.com/ad_single.php?id=7083 .] This development has maintained Coke’s public image as an environmentally conscious company, and the R&D has contributed to the firm’s bottom line as it has licensed the technology to Heinz for use in its ketchup bottles.

Further eco-friendly trends abound, particularly in the production process. At PepsiCo, the maker of Gatorade (resulting from the acquisition of Quaker Oats in 2001, the owner of Gatorade at that time), the sterilization process for new Gatorade bottles has been changed from rinsing in hot water to blowing ionized air. This saves hundreds of thousands of gallons of water per year. The company began saving 12% right away on each production plant’s water bills. Power savings from not heating all that water have pushed down plant utility costs by over 30% total.[ Hall, Eudell. "Pepsi Conserves Water with Gatorade." American Public Media. 19 Nov. 2008. Web. 1 May 2011. http://marketplace.publicradio.org/display/web/2008/11/19/pepsi/ .] PepsiCo also announced a partnership with Waste Management to support placing PET recycling kiosks in public venues to get overall beverage container recycling up in the United States.[ "PepsiCo, Coca-Cola Roll Out Recycling Initiatives." Environmental Leader. 3 June 2010. Web. 01 May 2011. http://www.environmentalleader.com/2010/06/03/pepsico-coca-cola-roll-out-recycling-initiatives/ .] Coca-Cola has adopted a similar undertaking, and with initiatives like this, both companies intend to save money and become more sustainable simultaneously.

As for the ingredients which go into Coca-Cola products, the company mainly relies on the suppliers of those products to bring forth new inventions. Recently, artificial sweetener companies have been developing a mass-marketable form of stevia, a natural plant-based sweetener. These companies have convinced some of the world’s largest beverage makers to begin reformulating their drinks to include this new product. This shift has accompanied the general consumer trend away from consuming sugary drinks. In the case of both Coca-Cola’s cola and non-carbonated product portfolios, the company’s continued sales success is partly the result of sustained high levels of marketing.

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