Coca-Cola_Introduction

INTRODUCTION The Coca-Cola Company is the world’s largest beverage company, refreshing consumers with almost 500 sparkling and still brands. The Company’s brands include Coca Cola, Diet Coke, Fanta, Sprite, Coca-Cola Zero, Vitamin Water, POWERADE, Minute Maid and Georgia Coffee. Globally, Coca-Cola is the giant of the beverage industry worldwide. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy the Company’s beverages at a rate of nearly 1.6 billion servings a day. FAST FACTS: • Sector: FMCG (Consumer Goods) • Industry: Beverage - Soft Drinks • Stock Symbol: KO • Established: 1886 • Head Quarter: Atlanta, Georgia • Ranking: 4 of the world’s top 5 nonalcoholic sparkling beverage brands: Coca-Cola, Diet Coke, Sprite and Fanta • Company Associates: 92,400 worldwide (as of December 31, 2008) • Operational Reach: 200+ countries • Consumer Servings (per day): nearly 1.6 billion • Beverage Variety: More than 3,000 products including diet and regular sparkling beverages, and still beverages such as 100 percent juices, juice drinks, waters, sports and energy drinks, teas and coffees and milk- and soy-based beverages. VISION Aspiration to be the most respected company in the world by: Refreshing the world - every day, all day We are invited into people's daily lives and are trusted to refresh their body, mind and spirit. Being a truly Global Company We are local and we are global, which makes us truly global and allows us to build unique relationships between people. Leading with humble confidence We are determined to make a difference to the world - for our consumers, customers, bottling partners and communities we serve. MISSION To Refresh: The world in body, mind and spirit To Inspire: Moments of optimism through brands and actions To Create: Value and make a difference in everywhere Coca Cola came to Pakistan in 1953 under the insignia of Coca Cola Beverages Pakistan Limited (CCBPL). Coca-Cola Beverages Pakistan Limited (CCBPL) is a joint venture between Coca-Cola International, Fraser and Neeves Singapore and Package Limited. Coca Cola first became available in Pakistan in 1954. Soon after, The Coca Cola Company began acquiring the bottling franchise rights which was eventually completed in 2006. Coca cola in Pakistan has two setups. One is Coca Cola Beverages Pakistan Limited (CCBPL) that deals with the production and distribution of products (owning 49% of the shares) while TCCEC (The Coca Cola Export Corporation) deals with the marketing and branding of products (Owning 51% of the shares). TCCEC is most commonly referred to as Coca Cola Icecek (CCI). In Pakistan, Coca Cola is present in the following 7 territories. In all territories production plants and offices are available except for Islamabad where only Coca Cola office is present. The head office is in Lahore. Coca cola Beverages Pakistan has a very narrow product range. It has the following brands in Pakistan:  Coca Cola  Sprite  Fanta  Fanta Citrus  Minute Maid Splash Apple  Minute Maid Splash Mango  Minute Maid Pulpy Orange  Diet Coca Cola  Sprite Zero  Kinley  Sprite 3G These products are sold in the market in the following different sizes of bottles:  250ml RGB (Regular Glass Bottle)  250 ml NRB (Non Returnable Bottle)  240 ml  300 ml CAN  400 ml  500 ml PET  1 liter RGB  1.25 ml  1.5 liter PET  2.25 liter PET  BIB Coca Cola has a total of 43 SKUs in the Pakistani market as explained by the following chart: CCBPL sells its beverages in unit cases. It has the following unit cases: • 24 regular bottles case • 6 bottle pack for 1.5, 1.25 and 2.25 PET • 12 bottles pack for disposable bottle (500 ml) • 24 cans pack Following diagram gives a pictorial representation of Coca Cola’s SKU’s in the market: DISTRIBUTION NETWORK Before moving ahead with the elaboration of the distribution system of Coca Cola Beverages Pakistan (CCBPL), there are a few basic concepts that we need to know. Let us first take a look at the Trade Channels of CCBPL. Following is a list of the Trade Channels that are used by CCBPL along with the sub Trade Channels of each: Modern Trade • Modern General Store • Super Market Conventional Trade • Traditional General Store • Pan/Cigarette Vendors Modern HoReCas • Fine Restaurants • Fast Food Restaurants • Hotels • Food Courts Traditional HoReCas • Conventional Restaurants • Food Street Outlets • Local Food Stands • Beverage Street Vendors Transportation • Airport • Railways • Bus Stand Specialty Stores • Bakery • Medical Stores • Petroleum Food Marts Others • College/Schools • Hospitals • Military • Cinemas • Parks • Clubs • Caterers/Marriage Halls • Others Apart from that each outlet from the above sub trade channels are characterized as either being:  Diamond  Gold  Silver  Bronze The diamond outlets gives the maximum sales volume while bronze giving the lowest. Hence each outlet is labeled according to the annual sales volume that it generates and hence the availability of products is made accordingly. These things are taken into account when making strategic plans about distribution and hence are carried out in accordance. Now lets move on to how the distribution network actually works: The Coca Cola has numerous bottlers around the world that procures the concentrate and prepares the liquid soft drink under strict supervision. Then this soft drink is distributed around the world through a very efficient distribution system. In some countries the bottlers are also distributors, while in others the distributors are separate from the bottlers. In Pakistan, CCBPL are the bottlers as well as distributors. The following diagram explains the process of distribution at CCBPL: TYPE OF DISTRIBUTION: Coke utilizes Intensive Distribution strategies meaning thereby its beverages are available at as many outlets as possible. The products are distributed to ensure availability at maximum number of outlets no matter if it is the Dhaabas or Marts or Shops etc. Distribution and Logistics department at CCBPL plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customer's requirements. Mr. Hammad Aslam is responsible to manage this department. The various tasks performed by the logistics at CCBPL include National Planning, Demand and Planning, Warehousing and Transport. DISTRIBUTION CHANNELS Coca Cola Company makes two types of distribution: • Direct Distribution • Indirect Distribution DIRECT DISTRIBUTION In direct selling CCBPL supply their products in shops by using their own transports. They have almost 900-950 vehicles to supply their bottles. This mode of distribution is more favourable as it yields more profits. The CCBPL through its DSD (direct store distribution) method distributes the products to all the retail channels as elaborated above. The direct distribution is concerned with the movement of finished goods to reach the point of destination. The distribution department is responsible for the selection of the best mode of transportation while delivering the goods to the place of destination. Mostly trucks are used for transporting the finished products. Primarily for the national key accounts, direct distribution is utilized. INDIRECT DISTRIBUTION Because it is very difficult for Coke to cover all area of Pakistan on their own so they have many distributors to ensure availability of Coca Cola products. The indirect distribution of Coke accounts for 76% of the total distribution. Monthly targets are given to the distributor and hence they act accordingly to achieve them. Distributors hire their own sales force separate from the company’s sales force team. Their remunerations, however, are divided amongst the distributor and CCBPL. Each of the seven territories of Coca Cola has been divided in the following way to carry out distribution. Following is a representation of Lahore territory as distribution and logistics department at CCBPL carries out operations for Lahore region only: As seen from the chart, Territory 1 has direct distribution, Territory 2 has indirect distribution and Territory 3 has a mix of both. In Lahore, warehouses are located at Sargian Bridge and Kotlakhpat. From Kotlakhpat the actual deliveries take place. As seen, Territory/Zone Manager divides the territory and appoints the regional managers. Following are the responsibilities of the personnel involved: REGIONAL SALES MANAGER • Market Following • Strategy Formulation • Training of Sales Team • Achieving the Targets SALES MANAGER • Responsible for Planning & Execution of activity • Develop a complete city and zone wise Route Plan • Maintain activation items inventory and its release to Marketing and Distribution Officers • Logistics arrangements • Set daily, weekly and monthly targets of outlets • Submission of reports to head office on weekly basis • Keep track of and follow up on the Marketing and Distribution (MDO) and Sales and merchandizing officer (SMO • In case of indirect distribution, discusses the company’s targets with the distributor to ensure that both CCBPL and its distributors have the same objectives • Maintains proper documentation like route plan, sales history, stock reports, manage Daily Based Replenishment (DBR), etc. MARKETING AND DISTRIBUTION OFFICERS – MDO • Responsible for on ground Activation • Receive Activation Items from respective Sales Manager on daily requirement basis • Fill outlet based Performa to ensure that outlets are being activated with right activation items SALES AND MERCHANDIZING OFFICER - SMO • Keep the check on deliveries • Visit the markets and checking if the sales targets are being met and whether or not the sales promotions are being provided to the salesmen and the trade promotions to the retailers This is the sample of the form that has to be filled by the MDO along with the census form used by SMO for market visits: SALES FORCE The Sales Team is formed on the basis of Territorial Structure, which means that the team is assigned to different geographical units. Sales Force at the start of every month, are provided with the list of all the shops that have to be visited in one day. Upon the information provided to them, the sales force then deliver the products, make receipts of the transaction made and collect the cash from the retailers. Moreover, it is the sales force that keeps check of the stock remaining in the respective retail outlets and also provide promotional support in terms of merchandizing, marketing intelligence, POS material, etc. Each salesman has to oversee around 100-125 outlets. The frequency of visits to each outlet depends upon the sales of that particular outlet. Normally, a salesman has to visit a single outlet thrice a week i.e. every alternate day. This means that a salesman visits at least 20-30 outlets per day. The salesman has three basic functions to perform: • To find new customers • To retain existing ones • To bring back the discontinued accounts Each salesman has to bring in at least three new accounts every month. These may either be new customers or the reactivation of the discontinued accounts. Sales manager is made responsible for the performance and achievement of operational goals and is assigned to set certain milestones for the salesman so as to give him proper feedback. DISTRIBUTION MONITORING SYSTEMS From the distributors to the market place all processes are done on ISIS software which is for indirect distributors and BASIS for direct distributors. Another system is RED that is Right Execution Daily which monitors outlets and channels. The following diagram explains the use of system: ISIS (Indirect Distribution) BASIS (Direct Distribution) RED (Right Execution Daily) Each Outlet has a code as well as an ISIS and BASIS route code. The DBR is also managed through the use of ISIS and BASIS system incase of indirect and direct distribution respectively. The system works on the information provided by sales men and a record of the stock at the retail outlets is maintained to ensure on-time replenishment of the products at the retail outlets. TRADE AND DISTRIBUTOR MARGINS The type of Sales Channel that the company uses is as follows: CCBPL manufactures the product and distributes it to the retailers. On the other hand, it also provides the products to different distributors and hence the primary sales occur after which the distributor then distributes these products to different retailers at different locations so that secondary sales take place. Following is the list of Trade and Distributors margin for different SKU’s of Coke: TRADE PROMOTION Coca Cola Beverages Pakistan Limited also gives incentives to distributors or retailers. Usually they offer them free samples and free empty bottles because of which these retailers and middle man push Coke’s products in the market. And that’s why Coca Cola is now starting to be seen more in the market. Apart from that, CCBPL has agreements with some special clients “Key Accounts” to carry out the Coke’s products exclusively. E.g: TOTAL Parco’s Bonjour. Thus Coke also invests heavily on these Key Accounts and offer them free samples, marketing activities, merchandizing and some time cash incentives. EVALUATION OF SALES FORCE Evaluation of Sales Force is done usually through the outlets that they are associated with. Following such forms are filled regarding the outlets to know about the performance of salesman in a given period of time and then are compensated accordingly: Point of Purchase (POP) accounts for 45% of the evaluation while Execution Rating and Share of Visible Inventory (SOVI) accounts for 35% and 20% respectively.