Coca Cola marketing challenges in Brazil
Brazilian soft drink market was large and with good perspectives of growth. In that country, soft drinks were sold in different types of containersmade of glass, PET, and aluminum, and with different capacities from 200 ml to 2.5 liters. In Brazil, there were more than 3,500 soft drinks brands. They were produced in more than 700 plants, according to ABIR, The Brazilian Association of Soft Drink and Non-Alcoholic Beverages Manufacturers. This organization represented producers of bottled water, soft drinks, juices, teas, and sport drinks. Sales of nonalcoholic drinks in Brazil showed sufficient growth for over two decades. In 1986, the size of the Brazilian soft drinks market was almost 4.9 billion liters. In 1994, it already reached 6.44 billion liters. In 2003, consumption of nonalcoholic drink reached 11.6 billion liters.
Soft drink consumption per capita in Brazil was 82.8 liters in 1998 and increased up to 95.3 liters in 2003. Per capita consumption was expected to reach 104.9 liters by year 2008. Cola was the most popular flavor in Brazil, followed by guaraná (23.9%) and orange (11.4%). Although the sales of nonalcoholic drinks in Brazil grew in 1990s, market analysts stated that the volume of nonalcoholic drinks sales was still quite small in comparison to its market potential. Nevertheless, it was easy to develop the Brazilian soft drink market by simply improving and expanding distribution. In Brazil, there still were a lot of small communities throughout the country. In those communities, distribution was problematic. Thus, not many consumer products, including soft drinks, reached those markets. In most countries, soft drinks were distributed mostly in supermarkets. However, they accounted only 25% of soft drinks sales in Brazil. In addition, soft drink vending machines were not popular in Brazil before year 2004. The market was represented by the global brands like Coca-Cola and Pepsi, as well as small local cheap brands called Tuba Nas.
SWOT for Coca-Cola in Brazil
The brand is famous and respected all over the world. Coca-Cola is among the worlds the most innovative companies. Thus, the company and its products are likely to be liked by customers. They can be sure in good taste and high quality that is controlled by the central office.
Coca-Cola offers a variety of drinks in Brazil. Thus, consumers have a wide choice of different tastes. It helps to attract more consumers with different preferences.
The average income in Brazil is growing. Thus, there are many potential customers as the price for Coca-Cola products are relatively high.
As the price of Coca-Cola drinks are high in comparison with local brands, consumers with lower income prefer them.
In Brazil, trade in supermarkets is developed only in large cities. Rural areas are often hard to reach. Thus, Coca-Cola cannot always reach its potential customers.
There are many competitors in Brazil. Ambev and Pepsi are strong international competitors, and there are many local small competitors as well.
Average income in Brazil is growing with the constant economic development. The expectations of experts also show that the market for soft drinks will grow in the nearest future. Thus, Coca-Cola has a good opportunity to grow in Brazilian market, to get higher sales and revenues.
Among the competitors, there are many Tuba Nas. Their prices are low and the quality is lower than for Coca-Cola. Thus, it can be expected that, with the growth of economy and average income of consumers they will afford and prefer Coca-Cola over small local brands.
Coca-Cola may fail in competing with numerous Tuba Nas that offer low prices and a wide variety of tastes.
Amber and Pepsi are serious competitors, and Coca-Cola may fail in competing with them. They are famous global companies with famous brands that are trusted by customers.
Coca-Cola implemented several strategies to succeed in Brazilian market. They had both advantages and disadvantages. In 1999, market share of Coca-Cola in Brazil declined, and the company had to do something with its prices. The first strategy was in cutting prices for soft drinks from R$1.80 to R$1.25 in order to compete more efficiently with local Tuba Nas that offered lower prices. In addition, distribution channels faced some changes, for instance, franchisee operations were bought back. This strategy led to the growth of market share, and it is an advantage. However, the main disadvantage was in decreased profitability.
The second strategy was aimed to increase the number of soft drinks brands offered in Brazilian market. One of the most successful brands was guaraná that increased its share from 3.6% in 1995 to 28.1% in 2000. In 2001, Coca-Cola expanded the production of its product Guaraná Kuat. The company renovated production facilities and planted additional 200 hectares of fruit guaraná . Then, other expansion strategies followed. In general, the strategy was positive for Coca-Cola. It also helped to compete better with Ambev and its guaraná brands, such as Antartica. Kuat accounted for 11% of the guaraná market in Brazil, compared to 28% of Antartica. Coca-Cola also expanded its brand Fanta by introducing some new flavors, such as citrus and strawberry. As a result, market share of Fanta grew.
The third strategy of Coca-Cola was buying competitive brands. This strategy was aimed to prevent quick growth and expansion of local Tuba Nas. Several brands were bought; nevertheless, the strategy was a failure. Old owners still entered the market with new brands, and new companies did the same. Finally, the fourth important strategy of Coca-Cola was in creating closer ties with Brazilian consumers and improving its image. In general, the strategy was beneficial. Coca-Cola sponsored and participated in different local, regional, and national events and celebrations, for instance, Festival Parintins and Carnaval.
Coke can be recommended to focus on several strategies to succeed in Brazilian market of soft drinks in the nearest future. The first strategy should be focused on price. Although the Brazilian economy, as well as average consumer income is growing, Brazilians still have lower income than consumers in developed countries. Thus, they are likely to prefer local brands that offer lower prices in comparison with Coca-Cola. In order to compete with them efficiently, Coca-Cola should lower prices, if it is possible. Lower prices are likely to lead to higher sales volume and higher revenues. If prices are lower, consumers are likely to prefer Coke over local brands because it is a famous brand with high quality that is trusted all over the world.
The second strategy Coca-Cola should take is focusing on tastes and the choice of drinks. It is wise to study what tastes are the popular, in addition to guaraná, in Brazil, and offer similar tastes to those that are offered by Tuba Nas. If consumers have a choice, they may prefer Coca-Cola products over local ones because of their famous brand and high quality.
The third strategy to take is focusing on consumers. It is wise to increase consumer awareness and consumer loyalty to Coca-Cola. To do that, the company may continue the strategy of sponsorship and participating in Brazilian events and celebrations. It may focus, for example, on national and local football events because this game is very popular in Brazil.
One more strategy to take is focusing on consumers in small towns and rural areas. Transportation is bad there, and logistics is problematic. However, those areas are large and have many potential consumers. Thus, Coca-Cola can develop some special strategies of not focusing only on supermarkets but popularizing and selling its products in such areas via selected distribution systems, such as small local shops.
B brands are working in different market spheres, especially in emerging markets. The situations may be different for different countries and markets. However, global brands that face competition with b brands can be given some general recommendations for competition. First, it is necessary to focus on some legal aspects and violations. In emerging economies, companies that sell b brands are often involved in corruption and violation of law, for example, they do not pay taxes. Global companies often refuse from dealing with such situations; nevertheless, they should complain about such situations, and they will have a chance that the company will be punished, and the market will become fairer. Second, global brands should focus on high quality. B brands usually offer low prices but low quality and the same time. Thus, global brands in the advertising and promotion campaigns should focus on high quality, and persuade consumers to buy their products and pay higher price for higher quality. Third, global brands should regularly monitor the market and prices of competing b brands. If the difference in prices is too large, consumers are likely to prefer b brands. In such cases, global brands should try to lower prices, if it is possible, in order to have more customers.