Issues associated with independent bottlers
Issues associated with independent bottlers The rapid increase in the size and the complexity of the bottling operations had led to the acquisitions of bottlers by Coca cola. Prior to the acquisitions, coca cola had many more bottlers which affected the ability of the company to coordinate effectively making its distribution system increasingly complex.Beside this mostly the large bottling companies operate according to their own strategies and philosophies, despite of the fact that their mode of operations conflicts seriously with the operation of the entire distribution system which eventually lead to increased cost. Because in case if large bottlers refused to cooperate, while dealing with a major customer because of the terms or to participate in any of the promotional activity with the mass merchandiser or supermarket chain it will ultimately affect the profitability and the strategy of the company leading to significant loss. Furthermore, the independent bottlers have conflicting interest about launching new products and packages making it challenging for companies to handle and convince the bottlers in promoting new product or promotional activity.
Reason for pursuing the strategy of buying bottlers
The increasing competition and growing market and the fast moving tactics rising from the implementation of new strategies required effective and quick execution throughout their distribution networks. The current business environment requires close cooperation and effective communication between the company and the distribution network in order to prosper and to sustain the share in the market. The bottlers operating independently made it difficult for the companies to have a uniform distribution network, increasing the cost of disobliging or opportunistic behavior. A captive distribution therefore is a current solution to the new competitive environment and strategies by acquiring the bottlers the company will be able to develop standardized promotion across the channel. This will also leverage the company by providing a competitive edge over its competitors by allowing it with much more control over its distribution system and help in adapting the change much more quickly.
Conclusion
The Coca Cola’s strategy is effective and one the company should continue to pursue. Capital injection and sale to larger bottlers helps smaller bottlers overcome economic difficulties, aligns their operations to Coca Cola’s standards and contributes to the overall success of Coca Cola. By swiftly buying underperforming bottlers, Coca Cola pre-empts outside bidders, keeping under control the entry of other players into an important part of its value chain. In the competitive race with Pepsi, the strategy gives Coca Cola the advantage and thus leaves fewer potential “target” bottlers for Pepsi to acquire.The purchase and sale of the bottlers have leveraged the company by generating significant revenue margins, addressing issues connected with necessary investments. The strategy ultimately benefits the company by reducing its transactional cost and ensuring that the push side works well, and the right beverages are on the shelves on the right time. The bottling system allows Coca Cola to build a network of anchor bottlers around the world, maintain a strong influence with large stakes and provides the company with an additional revenue stream. The regional bottlers serve as a gate way for the company to enter into local markets. The strengthening of the bottling system allows the company to focus more on its core business and marketing efforts while quickly and efficiently responding to market challenges related to changing tastes, new trends in packaging and new competitive threats from Pepsi. By strategically investing in bottling operations, taking ownership and utilising the resources along with strong leadership, the company will be able to drive long term growth in critical markets by addressing major structural challenges......
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