CONFIDENTIAL,This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey it is not a complete record of the discussion.,Discussion document,December 2000,Coke Case Study Winning in Japan,NJ-262408.756/001117NbgeoHR1,1,FINGERPRINT COKE,NJ-262408.756/001117NbgeoHR1,2,COKE IN JAPAN,Capabilities Localizes physical assets; bottling and distribution managed through alliances; bottling alliances are typically inclusive 17 bottlers in Japan Creates direct distribution system to stores through bottlers Offers marketing, manufacturing, and investment support to partners, when needed Has supply alliances with McDonalds Spends huge resources on influencer relationships Partners with local agencies for marketing capabilities (e.g., Dentsu) Customer pull demand in product push Japan Uses segment marketing to understand customer behavior Organization Strong community feel to Coke Holds conventions for bottlers Distributes bottlers magazine Compensation is competitive attracts graduates from top schools Almost 10% of Japan office is foreigners some degree of tension with local staff; still has “ugly American” syndrome; senior Japanese experience glass ceiling Japan seen as strong progression path CEO used to head Japan Product Adapts products to local markets Almost 10% of revenue comes from Japan-specific products Brands include Georgia Coffee, Sokenbicha, and Aquarius Bottlers guided Coke into developing localized products “Fast follower” strategy quickly followed lead of smaller local players to enter tea and coffee drinks Coke maintains full control over product content Launches new types of products in Japan (e.g., canned soup drink),Middle Far East,Europe,North America,Sales $ Billions,1993,1995,1997,1999,Performance/background,Levers for success,Other,Market information Market is very competitive more than 7,000 soft drinks are sold in Japan by 500 manufacturers Vending machines account for 50% of soft drink sales,Company information Coke is the market leader in Japan Japan is a very profitable market for Coke (potentially the most profitable) Maintains 900,000 vending machines, 2x the number of competitors Products Coffee drinks, green tea, black tea, milk/yogurt drink Coke offers 5 brands with 60 flavors; 75% of brands are Japanese Competitors: Kirin, Ito En, Suntory CST DCS Eric Friberg*, Todd Guild*, Mark Loch, Hirokazu Yamanachi*,14.0,18.0,18.9,19.8,33,32,21,14,23,15,33,29,34,29,22,15,25,23,38,14,CAGR 9%,* Has worked on Japan studies,NJ-262408.756/001117NbgeoHR1,3,CONTENTS,Company overview Japan market entry strategy Products Capabilities Organization,NJ-262408.756/001117NbgeoHR1,4,COKE COMPANY BACKGROUND,Founded 1886 in Atlanta, USA Number of global employees: 37, 400 CEO: Douglas N. Daft (Australian) Most senior manager for Japan: Mary Minic (President, Japan) Key products: carbonated and sports drinks, juices, tea, coffee Market cap: $151 billion (as of November 13, 2000) Key industry focus: beverages No. 1 soft drink company globally 50% global market share Owns two of top three global brands (No. 1 Coca-Cola classic, No. 3 Diet Coke) Market leader in soft drinks in Japan 56% market share; competes with 500 manufactures selling over 7,000 drinks Global competitors: PepsiCo, Cadbury Schweppes, Nestle Competitors in Japan: Kirin, Ito En, Suntory Owns 40% stake in Coca-Cola Enterprises (worlds largest bottler),NJ-262408.756/001117NbgeoHR1,5,COMPANY EVOLUTION,Coke has been an international company since the start of the century, but WWII made it a true multinational. Coke entered the bottling business in the mid-eighties. Recently, the company has seen strong profits from financial reengineering in its bottling segment.,1800s Invented in 1886 in Atlanta, USA, as a headache, indigestion, and exhaustion remedy Major advertising started in 1892; by 1895 Coke was sold in every U.S. state,1900s-1920s Coke sells in Cuba, Jamaica, Bermuda, the Philippines, Puerto Rico, and Europe by 1916 First bottling franchise established in 1901 Repositions Coke as non-medicinal product Coke bottle invented in 1916 Devotes personnel to maintaining good relations with bottlers in 1922 Establishes pioneering market research agency,1930s-1960s Advertising targets minorities starting in 1950s World War II catapults Coke into world market, creating first U.S. multinational Fanta innovated by Coke in Germany, driven by ingredient constraints during WWII Opens 15-20 plants worldwide during 1950s Merges with Minute Maid in 1960 Merges with Duncan Foods in 1964 Acquires Belmont Springs Water Co. in 1969 Expands product line in response to PepsiCo competition in 1960s Fanta in U.S. in 1960 Sprite, Tab, Fresca introduced Diet versions introduced,1970s-1980s Acquires Aqua-Chem (desalting machines) in 1970 Acquires Taylor Wines and other wineries in 1977 Introduces Coke in Russia a