Director of The Coca-ColaCompany since 1982. Mr. Allen is the President, Chief Executive Officer, and Director of Allen & Company Incorporated, a privately held investment firm.

Director of The Coca-Cola Company since 2002, he is also Chairman of the Board and Senior Executive of Expedia Group, Inc. Barry Diller has served as Special Advisor to TripAdvisor, Inc.

For instance, Mr. Kent, with a 200% target, got an annual target incentive of $2 million, two times his base salary.

Before we move forward, I’d like to show you why I think Coca-Cola has been so successful over the years, and it has nothing to do with its secret formula.

Coca-Cola in the desert

Although a few people wonder about the Coca-Cola business model (they might give it for granted, just like I did not long ago), my curiosity was sparked in the middle of nowhere.

While traveling toward the Arizona Grand Canyon, I passed through a Dolan Springs town.

Situated in the middle of nowhere, at 3,400 feet of elevation, with less than four thousand people living there (according to Wikipedia estimate in 2010), I saw one thing that got my attention.

In front of a local shop, there was a Coca-Cola automatic distributor. I couldn’t see anyone around but I could get a fresh Coke! 

I understand that Coca-Cola is a company born at the end of the 1800s.

Thus it had quite some time to get people accustomed to its brand and taste, as to become a habit (or a vice) for millions, if not billions of people (unfortunately, I’m one of them).

Yet, it doesn’t matter in which country you are in; Coca-Cola will be there.

What’s the secret of this company besides its formula? I bet that is about its business model and its distribution strategy. That’s why I looked into its financials to dissect its operations.

Coca-Cola operating segments 

Coca-Cola can be divided into a few operating segments across Europe, the Middle East, and Africa:

• Latin America

• North America

• Asia Pacific

• Bottling Investments

• Corporate

Coca-Cola products line

• Beverage concentrates, referred to as “beverage bases,” and syrups, including fountain syrups.
• Finished sparkling soft drinks and other nonalcoholic beverages are referred to as “finished product business” or “finished product operations.”

Finished product operations generate higher net operating revenues but lower gross profit margins than concentrate operations.

How does the Coca-Cola manufacturing process work? unfinished vs. finished products

As explained in the annual report:

In our concentrate operations, we typically generate net operating revenues by selling concentrates and syrups to authorized bottling operations (to which we usually refer to as our “bottlers” or our “bottling partners”). Our bottling partners either combine the concentrates with sweeteners (depending on the product), still water and sparkling water, or combine the syrups with sparkling water to produce finished beverages. The finished beverages are packaged in authorized containers — such as cans and refillable and nonrefillable glass and plastic bottles — bearing our trademarks or trademarks licensed to us and are then sold to retailers directly or, in some cases, through wholesalers or other bottlers. Outside the United States, we also sell concentrates for fountain beverages to our bottling partners who are typically authorized to manufacture fountain syrups, which they sell to fountain retailers such as restaurants and convenience stores which use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers who in turn sell and distribute the fountain syrups to fountain retailers.

In our finished product operations, we typically generate net operating revenues by selling sparkling soft drinks and a variety of other nonalcoholic beverages, including water, enhanced water, and sports drinks; juice, dairy and plant-based beverages; tea and coffee; and energy drinks, to retailers or to distributors, wholesalers and bottling partners who distribute them to retailers. These finished product operations consist primarily of our Company-owned or -controlled bottling, sales and distribution operations which are included in our Bottling Investments operating segment. Also, in the United States, we manufacture fountain syrups and sell them to fountain retailers, such as restaurants and convenience stores who use the fountain syrups to produce beverages for immediate consumption, or to authorized fountain wholesalers or bottling partners who resell the fountain syrups to fountain retailers. We authorize these wholesalers to resell our fountain syrups through nonexclusive appointments that neither restrict us in setting the prices at which we sell fountain syrups to the wholesalers nor restrict the territories in which the wholesalers may resell in the United States. Our finished product business also includes juice and other still beverage production operations in North America. Our fountain syrup sales in the United States and the juice and other still beverage production operations in North America are included in our North America operating segment.

How does the Coca-Cola distribution system work?

Coca-Cola drinks are available to consumers in more than 200 countries through a network of Company-owned or -controlled bottling and distribution operations, independent bottling partners, distributors, wholesalers, and retailers.

This is a massive beverage distribution system able to serve 1.9 billion beverages each day.

What brands does Coca-Cola own?

The Coca-Cola Company owns a portfolio of brands beyond the Coca-Cola drink, which comprises:

• Georgia is a coffee brand sold mainly in Japan.
• Dasani
• Ice  Dew is a water brand sold in China
• Diet Coke/Coca-Cola Light
• Powerade
• Simply a juice and juice drink brand sold in North America
• I LOHAS, a water brand sold primarily in Japan
• Coca-Cola Zero Sugar
• Del Valle is a juice and juice drink brand sold in Latin America
• Glacéau Vitaminwater
• Ayaka a green tea brand sold primarily in Japan
• Fanta
• Schweppes is owned by the Company in certain countries other than the United States
• Gold Peak is a juice and juice drink brand sold in North America
• Sprite
• Aquarius
• FUZE TEA
• Minute Maid is a juice drink brand sold primarily in the Asia Pacific
• Minute Maid Pulpy
• Glacéau Smartwater is vapor-distilled water with added electrolytes that is sold mainly in North America and Great Britain

The secret isn’t in the secret formula but in the bottling partners

The Coca-Cola Company has five large independent bottling partners based on unit case volume that in 2017 were:

• Coca-Cola FEMSA, S.A.B. de C.V. (“Coca-Cola FEMSA”), which has bottling and distribution operations in Mexico, Guatemala, Panama, Colombia, Venezuela, Brazil), Argentina, and the Philippines;
• Coca-Cola European Partners plc (“CCEP”) Andorra, Belgium, France, Germany, Great Britain, Iceland, Luxembourg, Monaco, the Netherlands, Norway, Portugal, Spain, and Sweden
• Coca-Cola HBC AG (“Coca-Cola Hellenic”) Armenia, Austria, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, the Former Yugoslav Republic of Macedonia, Greece, Hungary, Italy, Latvia, Lithuania, Moldova, Montenegro, Nigeria, Northern Ireland, Poland, Republic of Ireland, Romania, the Russian Federation, Serbia, Slovakia, Slovenia, Switzerland and Ukraine;
• Arca Continental, S.A.B. de C.V. northern and western Mexico, northern Argentina, Ecuador, Peru, and the state of Texas and parts of the states of New Mexico, Oklahoma, and Arkansas in the United States
• Swire Beverages Swire Beverages Hong Kong, Taiwan, 11 provinces and the Shanghai Municipality in the eastern and southern areas of mainland China, and territories in 13 states in the western United States.

This distribution system represented 2017 41% of the total unit case volume. This is a key ingredient to Coca-Cola’s overall business strategy.

Coca-Cola distribution plants

With distribution plants all over the world, Coca-Cola is able to make its products available everywhere:

As of 2017, the concentrated operations represented 51% of the production compared to 49% of the finished product operations.

Source: The Coca-Cola Company Annual Report 

Net operating revenues were over $35 billion in 2017, compared to over $41 billion in 2016. Coca-Cola’s distribution channels are another key element of its overall business strategy.

A glance at the Coca-Cola ecosystem

With a massive portfolio of soft drinks with more than four thousand products worldwide, 250 bottling partners, 900 plants, and 27 million retail customers, The Coca-Cola system is probably the most extensive distribution ecosystem on earth.

Do you want to know who owns Google and who owns Apple? 

Birth in Atlanta

The cola beverage which gave rise to The Coca-Cola Company was invented in 1886, so it is perhaps no surprise that the drink and the company itself has a long and storied history.

In this article, we’ll explore some of the twists and turns of this iconic brand and how it grew into the global force it is today.

Addicted to morphine after being wounded in the American Civil war, Atlanta pharmacist John Pemberton developed a substitute for the drug in the form of flavored syrup.

The syrup, which contained coca leaf extract and caffeine, was marketed as a patent medicine that could cure anything from nerve disorders to addiction, headaches, upset stomach, and impotence.

When some states passed prohibition legislation in the late 1800s, Pemberton also capitalized on support for the temperance movement by claiming that the drink was a healthy alternative to alcohol.

He took his concoction down the street to Jacobs’ Pharmacy where it was first sold from a soda fountain for the princely sum of 5 cents a glass.

Origins of the Coca-Cola name

The person credited for naming the soda is Frank M. Robinson, Pemberton’s partner and bookkeeper who believed that “the two Cs would look well in advertising.” 

The first ever advertisement for Coca-Cola then appeared in The Atlanta Journal with oilcloth banners also draped over shop awnings. Coupons advertising free drinks were also advertised, which was considered an innovative marketing tactic at the time. 

During the first year, sales of the drink averaged 9 servings per day.

Pemberton’s death and sale of the company

By 1888, three different versions of Coca-Cola sold by three different companies were on the market.

Soon thereafter, Pemberton became ill and was nearly bankrupt since the drink cost more to make than he was earning in revenue. 

He then entered into a partnership with four Atlanta businessmen to sell parts of the business.

Codified by a verbal agreement, Pemberton stated that the Coca-Cola trademark would belong to his son Charley, but the other manufacturers could use his formula.

The Coca-Cola Company was incorporated in March 1888 with Charley Pemberton a major shareholder due to his ownership of the “Coca-Cola” name.

Pemberton then succumbed to stomach cancer five months later, but before his death, he acted as a consignor for Charley who sold a 33% interest in the recipe for Coca-Cola to pharmacist Asa Griggs Candler. 

Securing control 

After Pemberton died, Candler started selling a similar drink to Coca-Cola. But since Charley Pemberton owned the rights to the name, Candler was forced to use brand names such as “Koke” and “Yum Yum” which were not popular with consumers.

While stories differ on what happened next, most believe that Candler moved swiftly to obtain greater control over the company.

One story states that Candler arrived at Pemberton’s funeral to buy the trademark from Charley’s mother for $300 cash, while another is that he tried to force two of the businessmen in Pemberton’s original partnership out of the business. 

However, when Charley Pemberton died of a suspected drug overdose in 1894, Candler attained sole control over the company more or less by default. 

Expansion

By 1895, Coca-Cola was enjoyed across the United States with expansion into Cuba in 1899 and Europe in 1901.

Around this time, Candler sold the bottling rights to three businessmen from Tennessee who had some of the earliest technology that could bottle drinks at scale.

Candler sold the rights for just $1 and would later regret not asking for more. But with the first botting facility established in Chattanooga in 1899, he nevertheless set the company on a path to world domination in the beverage industry.

Key takeaways

• The cola beverage which gave rise to The Coca-Cola Company was invented in 1886, so it is perhaps no surprise that the drink and company itself has a long and storied history.
• Addicted to morphine after being wounded in the American Civil war, Atlanta pharmacist John Pemberton developed a substitute for the drug in the form of a flavored syrup that contained caffeine and coca leaf extract.
• After a series of protracted and complex deals over the rights to the Coca-Cola trademark and recipe, Asa Griggs Candler gained control over the company after Charley Pemberton’s death in 1894. His decision to sell the bottling rights to a concern in Tennessee enabled the company to distribute bottled drinks at scale.

The Coca-Cola Expansion System Broken Down

Coca-Cola follows a business strategy (implemented since 2006) where it invests initially in bottling partners’ operations through its operating arm – the Bottling Investment Group.

As they take off, Coca-Cola divests its equity stakes and establishes a franchising model as a long-term growth and distribution strategy.

Breaking down Coca-Cola Mission and Vision 

Coca-Cola’s Purpose is to “refresh the world. make a difference.” Its vision and mission are to “craft the brands and choice of drinks people love, to refresh them in body & spirit.

And done in ways that create a more sustainable business and better-shared future that makes a difference in people’s lives, communities, and our planet.”

Coca-Cola SWOT Analysis

Coca-Cola is the market leader in the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo.

However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.

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