Solving a fizzy problem
Bottling one of the world's most popular refreshments is not as easy as one might think. Analysts from Roland Berger Strategy Consultants helped solve this difficult problem in Portugal.
Coca-Cola is one of the most powerful brands in the world. The soft-drink giant's companies in each country are responsible for the product and its packaging, development and marketing, as well as selling product concentrate to so-called "bottlers" at a fixed rate.
The bottler takes the largest market risk in terms of revenue, and both share marketing costs. In Portugal there is only one bottler, Refrige, owned by a consortium of Spanish bottlers. Business growth in Portugal over the past few years has not been as high as the company had hoped. Mainly the intermediary and low-margin channels were growing, while others failed to meet their targets.
In addition, relations between the Coca-Cola Company (TCCC) and its bottlers in Portugal were more difficult than in most other countries. An excessive focus on volume had eroded bottlers' bottom line. Also, consistently missed sales targets had led to the cancellation of several marketing and sales initiatives. "Coca-Cola is a troubled company," wrote Business Week magazine in its December 2004 issue.
In the past, the business partners had not worked well together, according to an assessment by Roland Berger analysts. "Over the past decade, Coca-Cola has often made its profit at the expense of bottlers, pushing aggressive price increases on the concentrate. They focused mainly on volume. But key bottlers like Refrige are trying to fight back to stabilize concentrate prices and to increase their net revenues," says Patrick Müller-Sarmiento, Project Manager at Roland Berger Strategy Consultants.
Coca-Cola is one of the most powerful brands in the world. The soft-drink giant's companies in each country are responsible for the product and its packaging, development and marketing, as well as selling product concentrate to so-called "bottlers" at a fixed rate.
The bottler takes the largest market risk in terms of revenue, and both share marketing costs. In Portugal there is only one bottler, Refrige, owned by a consortium of Spanish bottlers. Business growth in Portugal over the past few years has not been as high as the company had hoped. Mainly the intermediary and low-margin channels were growing, while others failed to meet their targets.
In addition, relations between the Coca-Cola Company (TCCC) and its bottlers in Portugal were more difficult than in most other countries. An excessive focus on volume had eroded bottlers' bottom line. Also, consistently missed sales targets had led to the cancellation of several marketing and sales initiatives. "Coca-Cola is a troubled company," wrote Business Week magazine in its December 2004 issue.
In the past, the business partners had not worked well together, according to an assessment by Roland Berger analysts. "Over the past decade, Coca-Cola has often made its profit at the expense of bottlers, pushing aggressive price increases on the concentrate. They focused mainly on volume. But key bottlers like Refrige are trying to fight back to stabilize concentrate prices and to increase their net revenues," says Patrick Müller-Sarmiento, Project Manager at Roland Berger Strategy Consultants.
Look what else we've got...
The consultancy's project team defined a strategy to enable both value and volume growth. They developed plans to optimize the routes to market, strengthen the portfolio and improve organizational performance. "The core of the defined strategy is to gain control of the hotel, restaurant and coffee shop channel. This is where the market profit lies," Project Manager João Sousa explains. Selling brands directly via snack bars, hotels, cinemas and restaurants and other outlets allows for the whole margin to be kept within the Coca-Cola/bottler system. Andreas Bauer, a Partner in the strategy consultancy summarizes the approach: "We focused on system value for both Coca-Cola and the bottler, which was an important success factor."
Another milestone in the transformation process was the implementation of a partnership agreement with a top retailing group in Portugal. It consisted of formulating a joint business plan that focused on the total margin pool, and projects on category management and supply chain optimization, including a reduction of out-of-stock rates. In then end, the analysts agreed that the most challenging part of this project was managing the different stakeholder interests. Doing so successfully was critical: without having aligned management, the business could not have improved.
If you have questions or comments, please feel free to contact us:
Another milestone in the transformation process was the implementation of a partnership agreement with a top retailing group in Portugal. It consisted of formulating a joint business plan that focused on the total margin pool, and projects on category management and supply chain optimization, including a reduction of out-of-stock rates. In then end, the analysts agreed that the most challenging part of this project was managing the different stakeholder interests. Doing so successfully was critical: without having aligned management, the business could not have improved.
If you have questions or comments, please feel free to contact us:
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