The Coca Cola Company is a leading non-alcoholic beverage brand. It is operating in more than 200 countries with owned and independent bottling partners, retailers, wholesalers and distributers. This leading beverage brand has more or less 500 licensed brands of soft and energy drinks, bottled water dairy and sports drinks. The company has a loyal customer base and sells 1.9 billion severing on daily basis.
Despite all the success Coca Cola has a declined revenue in 2018 which shows the negative impact of dynamic external environment in those markets where it is operating. This pestle analysis of Coca Cola explains how various political, economic, socio-cultural, technological, legal and environmental factors that affect it in the current global market.
Table of Contents
P for Political Factors
Coca Cola is a brand that is highly dependent on governmental policies about sugar and caffeine consumption. And with lawmakers becoming stricter about such factors due to health condition deterioration of the general factors, Coca Cola is forced to alter the chemical components in their drinks in certain areas. In countries where governments have not yet taken a stance on such issues are also prone to change. You can also read Coca Cola Swot Analysis in detail.
The rise of taxes on sugar production in the UK, which is one of its main markets, is also an imminent threat to Coca Cola. The company is highly dependent on the regulation of taxes in the various countries it has its factories based in.
E for Economic Factors
The consumption of water in huge quantities is a factor that affects Coca Cola in various ways. The company is forced to spend a huge amount of its budget on solving water crisis issues and ensuring that their water demands are met. The global economic crisis has also affected the company harshly since to many countries Coca Cola is still seen as a luxury item, and in times of crisis such items are bound to lose sales.
The rising cost of raw materials is a reason for alarm. Coca Cola uses some very basic ingredients to produce its products, and these ingredients are always rising in prices. The company can be seen shifting its production base to various countries where the raw material costs are lower.
S for Socio-Cultural Factors
The biggest social factor that affects Coca Cola is the mentality change in its consumers. The millennial and Gen-X consumers are readily shifting to energy drinks instead of carbonated drinks due to the health concerns that the latter brings. Diseases such as obesity are associated with the long-term consumption of Coca Cola and these factors are being brought to light in recent times. The mindset of the general population has turned towards healthy living, and in such a state Coca Cola is not a beneficial product.
One of the ways in which the brand has reintroduced itself is through products such as ‘Coke Zero’ and other low-calorie products. Since the current generation is quite health specific, these aerated drinks have been accepted by them. However, looking at matters globally, soda and aerated drinks have faced a staunch decrease in sales across the world.
There are also cultural issues that are associated with Coca Cola. The brand has been considered quite destructive towards environments and livelihoods in many third world countries and is thus not accepted by people. Many Middle Eastern countries still continue to disallow the launching of the brand due to it being an American product. Coca Cola still pursues developing markets to be its primary zone of expansion.
T for Technological Factors
Social media-based advertising has turned out to be a boon for the brand. It has one of the highest follower bases throughout the various social media platforms, and it uses these platforms quite actively to campaign for its products. Coca Cola currently has 108 million followers on Facebook, 3.34 million followers on Twitter, and such high numbers in other platforms as well. So, these platforms serve as the primary method for the brand to reach its target market.
Technological advancements such as AI bases analytics and big data operations have also served the brand in deciding markets trends and service chain management processes. Coca Cola actively uses the latest technological innovations to help increase its target market and production base. Other technological processes that are being used by Coca Cola are various smart farming methods and water harvesting processes. These are crucial for the company to maintain its low price of raw materials and also to ensure that it does not lead to water crisis as a result of its high-water demand.
E for Environmental Factors
Coca Cola is considered to be the biggest consumer of freshwater in the world. And for this reason alone, the company has faced a massive amount of backlash from environmental groups. In countries such as India, Coca Cola is being held accountable for completely draining off groundwater in large areas. Coca Cola needs to immediately take steps to put in water management operation or it can be banned in these countries.
Some of these steps have been taken by the brand. It has promised a mission to reduce its carbon footprint to near zero in the coming years and is also being looked at as a model corporation by many. Water smart farming methods such as RAIN and CARE are also applied by Coca Cola that tries to use as little water-based resources as possible and harvest the maximum amount of water possible.
The development of humid climate across the world as a part of the climate change has proven to be beneficial for the company. It can now successfully increase its operation capacity in countries where it was not possible before. However, low resource efficiency still continues to be a problem for Coca Cola.
L for Legal Factors
Legal compliance to the local laws of the countries where it operates is the primary legal hassle that Coca Cola has to face. Various countries have different laws when it comes to caffeine standards and sugar consumption. The brand needs to ensure that it meets all such regulations wherever its products are sold. Coca Cola has faced trouble in the past for added caffeine quantities in its products in various countries and have had to pay lawsuits.
Another legal issue that shows possible problems is their labor practices. The company has been known to treat its employees in unfair manners and also pay wages that are less than the standard in their operating country. As a result, Coca Cola has faced protests from various labour unions. Its corporate ethics are of primary concerns to the company right now.