麦肯锡Coke Case Study-Winning in Japan

CONFIDENTIAL,Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinseyitisnotacompleterecordofthediscussion.,Discussiondocument,December2003,CokeCaseStudyWinninginJapan,NJ-262408.756/001117NbgeoHR1,1,FINGERPRINTCOKE,NJ-262408.756/001117NbgeoHR1,2,COKEINJAPAN,CapabilitiesLocalizesphysicalassets;bottlinganddistributionmanagedthroughalliances;bottlingalliancesaretypicallyinclusive17bottlersinJapanCreatesdirectdistributionsystemtostoresthroughbottlersOffersmarketing,manufacturing,andinvestmentsupporttopartners,whenneededHassupplyallianceswithMcDonaldsSpendshugeresourcesoninfluencerrelationshipsPartnerswithlocalagenciesformarketingcapabilities(e.g.,Dentsu)CustomerpulldemandinproductpushJapanUsessegmentmarketingtounderstandcustomerbehaviorOrganizationStrongcommunityfeeltoCokeHoldsconventionsforbottlersDistributesbottlersmagazineCompensationiscompetitiveattractsgraduatesfromtopschoolsAlmost10%ofJapanofficeisforeignerssomedegreeoftensionwithlocalstaff;stillhas“uglyAmerican”syndrome;seniorJapaneseexperienceglassceilingJapanseenasstrongprogressionpathCEOusedtoheadJapanProductAdaptsproductstolocalmarketsAlmost10%ofrevenuecomesfromJapan-specificproductsBrandsincludeGeorgiaCoffee,Sokenbicha,andAquariusBottlersguidedCokeintodevelopinglocalizedproducts“Fastfollower”strategyquicklyfollowedleadofsmallerlocalplayerstoenterteaandcoffeedrinksCokemaintainsfullcontroloverproductcontentLaunchesnewtypesofproductsinJapan(e.g.,cannedsoupdrink),MiddleFarEast,Europe,NorthAmerica,Sales$Billions,1993,1995,1997,1999,Performance/background,Leversforsuccess,Other,MarketinformationMarketisverycompetitivemorethan7,000softdrinksaresoldinJapanby500manufacturersVendingmachinesaccountfor50%ofsoftdrinksales,CompanyinformationCokeisthemarketleaderinJapanJapanisaveryprofitablemarketforCoke(potentiallythemostprofitable)Maintains900,000vendingmachines,2xthenumberofcompetitorsProductsCoffeedrinks,greentea,blacktea,milk/yogurtdrinkCokeoffers5brandswith60flavors;75%ofbrandsareJapaneseCompetitors:Kirin,ItoEn,SuntoryCSTDCSEricFriberg*,ToddGuild*,MarkLoch,HirokazuYamanachi*,14.0,18.0,18.9,19.8,33,32,21,14,23,15,33,29,34,29,22,15,25,23,38,14,CAGR9%,*HasworkedonJapanstudies,NJ-262408.756/001117NbgeoHR1,3,CONTENTS,CompanyoverviewJapanmarketentrystrategyProductsCapabilitiesOrganization,NJ-262408.756/001117NbgeoHR1,4,COKECOMPANYBACKGROUND,Founded1886inAtlanta,USANumberofglobalemployees:37,400CEO:DouglasN.Daft(Australian)MostseniormanagerforJapan:MaryMinic(President,Japan)Keyproducts:carbonatedandsportsdrinks,juices,tea,coffeeMarketcap:$151billion(asofNovember13,2000)Keyindustryfocus:beveragesNo.1softdrinkcompanyglobally50%globalmarketshareOwnstwooftopthreeglobalbrands(No.1Coca-Colaclassic,No.3DietCoke)MarketleaderinsoftdrinksinJapan56%marketshare;competeswith500manufacturessellingover7,000drinksGlobalcompetitors:PepsiCo,CadburySchweppes,NestleCompetitorsinJapan:Kirin,ItoEn,SuntoryOwns40%stakeinCoca-ColaEnterprises(worldslargestbottler),NJ-262408.756/001117NbgeoHR1,5,COMPANYEVOLUTION,Cokehasbeenaninternationalcompanysincethestartofthecentury,butWWIImadeitatruemultinational.Cokeenteredthebottlingbusinessinthemid-eighties.Recently,thecompanyhasseenstrongprofitsfromfinancialreengineeringinitsbottlingsegment.,1800sInventedin1886inAtlanta,USA,asaheadache,indigestion,andexhaustionremedyMajoradvertisingstartedin1892;by1895CokewassoldineveryU.S.state,1900s-1920sCokesellsinCuba,Jamaica,Bermuda,thePhilippines,PuertoRico,andEuropeby1916Firstbottlingfranchiseestablishedin1901RepositionsCokeasnon-medicinalproductCokebottleinventedin1916Devotespersonneltomaintaininggoodrelationswithbottlersin1922Establishespioneeringmarketresearchagency,1930s-1960sAdvertisingtargetsminoritiesstartingin1950sWorldWarIIcatapultsCokeintoworldmarket,creatingfirstU.S.multinationalFantainnovatedbyCokeinGermany,drivenbyingredientconstraintsduringWWIIOpens15-20plantsworldwideduring1950sMergeswithMinuteMaidin1960MergeswithDuncanFoodsin1964AcquiresBelmontSpringsWaterCo.in1969ExpandsproductlineinresponsetoPepsiCocompetitionin1960sFantainU.S.in1960Sprite,Tab,FrescaintroducedDietversionsintroduced,1970s-1980sAcquiresAqua-Chem(desaltingmachines)in1970AcquiresTaylorWinesandotherwineriesin1977IntroducesCokeinRussiaandChinain1970sAcquiresColumbiaPicturesin1982for$750millionReformulatesCokein1985;unfavorablecustomerreactionDivestsentertainmentbusinessin1987Focusesoncore,profitablebusinessanddoublesnetincometo$1billionin1988Entersbottlingbusinessinmid1980s,1990sLaunches“AlwaysCoca-Cola”themein1993CEOarticulatesprioritiesin1993creationofstockholdervalue,brandbuildinglong-termfocusTop16marketsaccountfor80%ofvolume;themarketscomprise20%ofworldpopulationBottlingbusinessplaysimportantroleinprofitability,Invention,Repositioningandmarketing,Expansion,acquisitions,anddiversification,Diversificationandrationalization,Marketing,Source:InternationalDirectoryforCompanyHistories,NJ-262408.756/001117NbgeoHR1,6,Source:Annualreport;StandardMcKinseyanalysis,HIGHLIGHTSOFCOKESBOTTLINGBUSINESS,Breakdownofworldwideunitcasevolumeproduced/distributed,BottlersownedandcontrolledbyCoke,Independentlyownedbottlers,BottlersinwhoCokehasnon-controllingownership,Percent,Historically,Cokeinvestedinundervaluedbottlersworldwide,providedfinancialandmanagerialsupport,andimprovedoperatingefficiencieswhichgeneratedincreasedsales;Cokebenefitedfromgrowth,improvedcashflowsandincreasedownervalue;attimes,Cokesoldthesebottlersafterturningthemaround,forsoundprofits,NJ-262408.756/001117NbgeoHR1,11,SELECTEDLOCATIONS,CokeisheadquarteredinAtlanta,GeorgiaintheU.S.,buthassubsidiarieslocatedoverawidegeography.,NJ-262408.756/001117NbgeoHR1,12,CONTENTS,CompanyoverviewJapanmarketentrystrategyProductsCapabilitiesOrganization,NJ-262408.756/001117NbgeoHR1,13,STORYLINE,InordertoenterandsucceedinJapan,Cokerealizedthatitneededtoadoptapartneringstrategy.Cokealliedwith17locallyownedandmanagedbottlersandleveragedtheserelationshipstosetupadirectdistributionchannelaswellasgainmanufacturingandmarketingcapabilitiesItfolloweditsbottlersadviceandexpandeditsproductofferingstoincludespecializedbeverages(e.g.,milk-baseddrinks,coffeedrinks,teas).Inaddition,Cokeintroducednewproductcategories(e.g.,cannedsoups,Coo,aflavoredjuiceproduct)andnewflavorsinexistingbrands(e.g.,FantaGoldenPineapple)toincreaseitsmarketshareintrend-orientedJapanThecompanywasalsoinnovativeinitsalliancestrategy(e.g.,supplyalliancewithMcDonalds),itsmarketingtechniques(e.g.,introducedreclosablePETbottles),anditsacquisitions(e.g.,acquisitionofKanebosvendingmachineoperations).Cokessaleschannel(930,000vendingmachines,overtwiceasmanyasitsnearestcompetitor)isadistinctcompetitiveadvantageinJapanwherevendingmachinesarethemostpopularsaleschannelCokerealizedthatitneededtoptalenttocompeteeffectivelyinJapanandsentstrongmanagerslikeDougDaft(currentCEO)andStephenJones(currentChiefofMarketing),toJapaninleadershiproles.Thus,JapanwasseenasaprogressionpathtotoppositionsinthecompanyCokeiscurrentlythemarketleaderinJapanssoftdrinksegmentwitha56%marketshare.Cokeownsthenumber1localbrandGeorgia(coffeedrink).However,thecompanyhasbeenaslowmoverinexploitingnewopportunities(e.g.waterandsportsdrinks)Inthefuture,Cokefacesthechallengeofexpandingitslowmarketsharepenetration(20%)intheJapansmostrapidlygrowingsegmentofspecializedbeverages,NJ-262408.756/001117NbgeoHR1,14,CONTENTS,CompanyoverviewJapanmarketentrystrategyProductsCapabilitiesOrganization,NJ-262408.756/001117NbgeoHR1,15,PRODUCTSTRATEGY,Cokeunderstandstheimportanceofofferingproductsthatappealtothelocalmarket,inadditiontoitsexisting,classicproducts.,NJ-262408.756/001117NbgeoHR1,16,COKESJAPANESEPRODUCTS,Cokehasconsistentlyrolled-outnewproductstailoredfortheJapanesemarket.,Source:Companywebsite,Georgia(coffeedrink),Ambasa(non-carbonatedlacticsoftdrink)RealGold(carbonatedherbmixflavoreddrink),Vegitabeta(fruitydrinkwithmultiplenutrients),KoChaKaDen(blendedteaRoyalMilk,FineAromaStraight,GardenLemon),Saryusaisai(non-sugarOolongtea),SaryusaisaiSokenbicha(specialbrandedtea)Seiryusabo(GreenandBarleyteas),Shipla(“functional”,stressflavoreddrinkwithmulivitamins)Lactia(lactic,non-carbonateddrink;promoteshealthydigestion),Calo(“functional”softdrink;helpsbuildhealthybones)PerfectWater(mineralwater),NJ-262408.756/001117NbgeoHR1,17,CONTENTS,CompanyoverviewJapanmarketentrystrategyProductsCapabilitiesOrganization,NJ-262408.756/001117NbgeoHR1,18,COKECAPABILITIESINJAPAN,Cokeleverageslocalalliancestogaincapabilities.Thecompanyalsooffersmarketing,manufacturing,andinvestmentsupporttopartnerswhenneeded.,NJ-262408.756/001117NbgeoHR1,19,JapanisCokesmostprofitablemarketaftertheU.S.Cokederivesabout17-20%ofitsoverallprofitfromJapan.,Source:WallStreetJournal,January14,1999,Japan,ROW,Percent,JAPANCONTRIBUTIONTOCOKESPROFITSIN1999,NJ-262408.756/001117NbgeoHR1,20,CONTENTS,Comp