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1、CONFIDENTIALThis report is solely for the use of client personnel.No part of it may be circulated,quoted,or reproduced for distribution outside the client organization without prior written approval from McKinsey&Company.This material was used by McKinsey&Company during an oral presentation;it is no
2、t a complete record of the discussion.Discussion documentDecember 2003Coke Case Study Winning in Japan FINGERPRINT COKEHighLow1NJ-262408.756/001117NbgeoHR1COKE IN JAPAN CapabilitiesLocalizes physical assets;bottling and distribution managed through alliances;bottling alliances are typically inclusiv
3、e 17 bottlers in JapanCreates direct distribution system to stores through bottlersOffers marketing,manufacturing,and investment support to partners,when neededHas supply alliances with McDonaldsSpends huge resources on influencer relationshipsPartners with local agencies for marketing capabilities(
4、e.g.,Dentsu)Customer pull demand in product push Japan Uses segment marketing to understand customer behaviorOrganizationStrong community feel to CokeHolds conventions for bottlersDistributes bottlers magazineCompensation is competitive attracts graduates from top schoolsAlmost 10%of Japan office is
5、 foreigners some degree of tension with local staff;still has“ugly American”syndrome;senior Japanese experience glass ceilingJapan seen as strong progression path CEO used to head JapanProductAdapts products to local marketsAlmost 10%of revenue comes from Japan-specific productsBrands include Georgi
6、a Coffee,Sokenbicha,and AquariusBottlers guided Coke into developing localized products“Fast follower”strategy quickly followed lead of smaller local players to enter tea and coffee drinksCoke maintains full control over product content Launches new types of products in Japan(e.g.,canned soup drink)
7、Middle Far EastEuropeNorth AmericaSales$Billions1993199519971999Performance/backgroundLevers for successOtherMarket informationMarket is very competitive more than 7,000 soft drinks are sold in Japan by 500 manufacturersVending machines account for 50%of soft drink sales Company informationCoke is t
8、he market leader in JapanJapan is a very profitable market for Coke(potentially the most profitable)Maintains 900,000 vending machines,2x the number of competitors ProductsCoffee drinks,green tea,black tea,milk/yogurt drinkCoke offers 5 brands with 60 flavors;75%of brands are JapaneseCompetitors:Kir
9、in,Ito En,SuntoryCST DCSEric Friberg*,Todd Guild*,Mark Loch,Hirokazu Yamanachi*14.018.018.919.833322114231533293429221525233814CAGR 9%*Has worked on Japan studies2NJ-262408.756/001117NbgeoHR1CONTENTS Company overviewJapan market entry strategyProductsCapabilitiesOrganization3NJ-262408.756/001117Nbge
10、oHR1COKE COMPANY BACKGROUND Founded 1886 in Atlanta,USANumber of global employees:37,400CEO:Douglas N.Daft(Australian)Most senior manager for Japan:Mary Minic(President,Japan)Key products:carbonated and sports drinks,juices,tea,coffeeMarket cap:$151 billion(as of November 13,2000)Key industry focus:
11、beveragesNo.1 soft drink company globally50%global market shareOwns two of top three global brands(No.1 Coca-Cola classic,No.3 Diet Coke)Market leader in soft drinks in Japan56%market share;competes with 500 manufactures selling over 7,000 drinksGlobal competitors:PepsiCo,Cadbury Schweppes,NestleCom
12、petitors in Japan:Kirin,Ito En,SuntoryOwns 40%stake in Coca-Cola Enterprises(worlds largest bottler)4NJ-262408.756/001117NbgeoHR1COMPANY EVOLUTION Coke has been an international company since the start of the century,but WWII made it a true multinational.Coke entered the bottling business in the mid
13、-eighties.Recently,the company has seen strong profits from financial reengineering in its bottling segment.1800sInvented in 1886 in Atlanta,USA,as a headache,indigestion,and exhaustion remedyMajor advertising started in 1892;by 1895 Coke was sold in every U.S.state 1900s-1920sCoke sells in Cuba,Jam
14、aica,Bermuda,the Philippines,Puerto Rico,and Europe by 1916First bottling franchise established in 1901Repositions Coke as non-medicinal productCoke bottle invented in 1916Devotes personnel to maintaining good relations with bottlers in 1922Establishes pioneering market research agency 1930s-1960sAd
15、vertising targets minorities starting in 1950sWorld War II catapults Coke into world market,creating first U.S.multinationalFanta innovated by Coke in Germany,driven by ingredient constraints during WWIIOpens 15-20 plants worldwide during 1950sMerges with Minute Maid in 1960Merges with Duncan Foods
16、in 1964Acquires Belmont Springs Water Co.in 1969Expands product line in response to PepsiCo competition in 1960sFanta in U.S.in 1960Sprite,Tab,Fresca introducedDiet versions introduced 1970s-1980sAcquires Aqua-Chem(desalting machines)in 1970Acquires Taylor Wines and other wineries in 1977Introduces
17、Coke in Russia and China in 1970sAcquires Columbia Pictures in 1982 for$750 millionReformulates Coke in 1985;unfavorable customer reaction Divests entertainment business in 1987Focuses on core,profitable business and doubles net income to$1 billion in 1988Enters bottling business in mid 1980s1990sLa
18、unches“Always Coca-Cola”theme in 1993CEO articulates priorities in 1993 creation of stock holder value,brand building long-term focus Top 16 markets account for 80%of volume;the markets comprise 20%of world populationBottling business plays important role in profitability Invention Repositioning and
19、 marketing Expansion,acquisitions,and diversification Diversification and rationalization MarketingSource:International Directory for Company Histories 5NJ-262408.756/001117NbgeoHR1Source:Annual report;Standard&Poors RegistarNameRoleJapan experienceDouglas N.DaftCEO and ChairmanSENIOR MANAGEMENTPres
20、ident and COOJames E.ChestnutEVP,Operations SupportCharles E.FrenetteGary P.FayardSVP and CFOJoseph R.GladdenEVP and General CounselCarl WareEVP,Head of Global Public Affairs and AdministrationSVP,Chief Marketing OfficerStephen C.JonesCoke has a diversified team of senior managers.Used to head Japan
21、Jack L.StahlEVP,President of Greater EuropeUsed to run marketing in Japan6NJ-262408.756/001117NbgeoHR1COKE STOCK PRICE COMPARISON U.S.Coca-Cola Co.Beverages(non-alcoholic)S&P 500 Comp Ltd.Coke dramatically outperformed the market as well as its competition,especially when it started divesting non-co
22、re businesses to focus on its profitable segment.Coca-Cola Co.Beverages index(non-alcoholic)S&P 500 index7NJ-262408.756/001117NbgeoHR1COKE SALES BY REGION$Billions Coke has an estimated 56 percent market share in Japan and has been growing its Japanese contribution to total sales.199319951997199914.
23、018.018.919.8OtherMiddle and Far EastEuropeNorth America CAGR=9%142132332933231514222935382326138NJ-262408.756/001117NbgeoHR1Source:Company web-siteCOKES SALES BY BRAND In 1999,63 percent of Cokes total gallon sales came from products bearing“Coke”trademark.CokeOther9NJ-262408.756/001117NbgeoHR1Coke
24、 has historically made equity investments in selected bottlers with the intention of financial reengineering,but is now moving away from this strategy.The company has realized that“big is not always better”and is trying to get out of anchor bottlers in Brazil and the Philippines.Source:Annual report
25、s;McKinsey analysisHIGHLIGHTS OF COKES BOTTLING BUSINESS Breakdown of worldwide unit case volume produced/distributedBottlers owned and controlled by CokeIndependently owned bottlersBottlers in who Coke has non-controlling ownershipPercentHistorically,Coke invested in undervalued bottlers worldwide,
26、provided financial and managerial support,and improved operating efficiencies which generated increased sales;Coke benefited from growth,improved cash flows and increased owner value;at times,Coke sold these bottlers after turning them around,for sound profits10NJ-262408.756/001117NbgeoHR1SELECTED L
27、OCATIONSCoke is headquartered in Atlanta,Georgia in the U.S.,but has subsidiaries located over a wide geography.NOT EXHAUSTIVE11NJ-262408.756/001117NbgeoHR1CONTENTS Company overviewJapan market entry strategyProductsCapabilitiesOrganization12NJ-262408.756/001117NbgeoHR1STORYLINE In order to enter an
28、d succeed in Japan,Coke realized that it needed to adopt a partnering strategy.Coke allied with 17 locally owned and managed bottlers and leveraged these relationships to set up a direct distribution channel as well as gain manufacturing and marketing capabilitiesIt followed its bottlers advice and
29、expanded its product offerings to include specialized beverages(e.g.,milk-based drinks,coffee drinks,teas).In addition,Coke introduced new product categories(e.g.,canned soups,Coo,a flavored juice product)and new flavors in existing brands(e.g.,Fanta Golden Pineapple)to increase its market share in
30、trend-oriented JapanThe company was also innovative in its alliance strategy(e.g.,supply alliance with McDonalds),its marketing techniques(e.g.,introduced reclosable PET bottles),and its acquisitions(e.g.,acquisition of Kanebos vending machine operations).Cokes sales channel(930,000 vending machines
31、,over twice as many as its nearest competitor)is a distinct competitive advantage in Japan where vending machines are the most popular sales channelCoke realized that it needed top talent to compete effectively in Japan and sent strong managers like Doug Daft(current CEO)and Stephen Jones(current Ch
32、ief of Marketing),to Japan in leadership roles.Thus,Japan was seen as a progression path to top positions in the companyCoke is currently the market leader in Japans soft drink segment with a 56%market share.Coke owns the number 1 local brand Georgia(coffee drink).However,the company has been a slow
33、 mover in exploiting new opportunities(e.g.water and sports drinks)In the future,Coke faces the challenge of expanding its low market share penetration(20%)in the Japans most rapidly growing segment of specialized beverages 13NJ-262408.756/001117NbgeoHR1CONTENTS Company overviewJapan market entry st
34、rategyProductsCapabilitiesOrganization14NJ-262408.756/001117NbgeoHR1PRODUCT STRATEGY Coke understands the importance of offering products that appeal to the local market,in addition to its existing,classic products.15NJ-262408.756/001117NbgeoHR1COKES JAPANESE PRODUCTS Coke has consistently rolled-ou
35、t new products tailored for the Japanese market.Source:Company website Georgia(coffee drink)Ambasa(non-carbonated lactic soft drink)Real Gold(carbonated herb mix flavored drink)Vegitabeta(fruity drink with multiple nutrients)Ko Cha Ka Den(blended tea Royal Milk,Fine Aroma Straight,Garden Lemon)Saryu
36、saisai(non-sugar Oolong tea)Saryusaisai Sokenbicha(special branded tea)Seiryusabo(Green and Barley teas)Shipla(“functional”,stress flavored drink with mulivitamins)Lactia(lactic,non-carbonated drink;promotes healthy digestion)Calo(“functional”soft drink;helps build healthy bones)Perfect Water(minera
37、l water)16NJ-262408.756/001117NbgeoHR1CONTENTS Company overviewJapan market entry strategyProductsCapabilitiesOrganization17NJ-262408.756/001117NbgeoHR1COKE CAPABILITIES IN JAPAN Coke leverages local alliances to gain capabilities.The company also offers marketing,manufacturing,and investment suppor
38、t to partners when needed.18NJ-262408.756/001117NbgeoHR1Japan is Cokes most profitable market after the U.S.Coke derives about 17-20%of its overall profit from Japan.Source:Wall Street Journal,January 14,1999JapanROWPercentJAPAN CONTRIBUTION TO COKES PROFITS IN 199919NJ-262408.756/001117NbgeoHR1CONT
39、ENTSCompany overviewJapan market entry strategyProductsCapabilitiesOrganization20NJ-262408.756/001117NbgeoHR1StructureDecision-rightsTalentCultureORGANIZATIONAL LEVERS Realignment of organization in January 2000Increases focus on local business unitsRedefines roles and responsibilitiesIncreased auto
40、nomyTransfer of responsibility from corporate to local business unitsCorporate only responsible for overall company policy and strategyPerformance and results driven culture;aggressive approach to finance and marketing Compensation is competitiveJapan is seen as strong progression path and top talen
41、t is sent thereCEO used to head JapanChief of Marketing used to run marketing in JapanLack rotation of top Japanese peopleStill has“ugly American”syndromeSenior Japanese feel out of place,experience glass ceiling and do not get high positions in AtlantaStrong community feel to CokeHolds conventions for bottlersDistributed bottlers magazineSome degree of tension with local staffAlmost 10%of Japan office is foreignersCulture not“appropriate”but effectively translatedWinners allowed to be aggressive21NJ-262408.756/001117NbgeoHR1