Coca-Cola recently released its H1 2016 financial results, showing a 5.7% increase in global profit but a 4.57% decline in revenue. The Chinese market has become a major factor dragging down Coca-Cola's revenue growth. In fact, not only Coca-Cola, but also many beverage giants including Pepsi have had a tough time in China over the past year or two. Weak consumption is making these once high-flying beverage giants feel the chill even in the hot summer months. Coca-Cola's Revenue Declines, Rival Pepsi Also Struggles According to Coca-Cola's latest financial report, in H1 2016, total revenue was $21.821 billion, down 4.6% year-on-year. The decline was mainly attributed to the Asia-Pacific region, especially China. The Financial Times reported that Coca-Cola's COO said that in Q2 2016, juice sales in China fell by double digits, and Coca-Cola sales also declined. It's not just Coca-Cola; its old rival Pepsi is also struggling in China. In 2011, Tingyi (Master Kong) signed an agreement with Pepsi to take over Pepsi's bottling operations in China, allowing Tingyi to enter the carbonated beverage market. Last year, Tingyi's carbonated beverage sales, mainly Pepsi, fell by 3.9%. In Q1 this year, the decline widened to 6.9%. The decline in cola sales is hard to explain solely by a shift in consumer attitudes toward carbonated drinks, as other beverage categories have actually seen larger declines. In Q1 this year, Tingyi's beverage business revenue was $1.192 billion, down 5.4% year-on-year, with net profit plunging 36.0%. Sales of its tea, juice, and water all declined. Last year, Tingyi's beverage business was already in negative growth: juice fell 19.8%, water fell 15.1%, and tea fell 6.1%, all exceeding the decline in carbonated drinks. Beverage Companies Enter Winter, Sales Decline During Peak Season Besides the beverage giants, domestic beverage listed companies also reported poor performance. Shenzhen Shenbao A, whose main revenue comes from tea drinks, expects a loss of 13 million to 18 million yuan in H1 this year. Weiwei Group's total revenue in Q1 fell over 10%, and net profit plunged nearly 50%. Hainan Yedao expects a loss of 45 million yuan in H1, with declining beverage revenue listed as one of the reasons. These companies' situations are a microcosm of the entire beverage industry entering winter. According to the National Bureau of Statistics, in May 2016, China's soft drink output was 14.41 million tons, down 9.20% year-on-year, a rare negative growth. Over the past three years, beverage output growth has been slowing. The growth rate fell from about 20% in 2013 to 6.2% last year. The chart below, based on official data, shows China's beverage output in recent years: Consumer Goods Hit Collectively, Can Curbing Asset Bubbles Bring Spring to the Real Economy? Excluding weather and seasonal factors, beverage sales can be seen as a microcosm of FMCG; and FMCG sales reflect the real economic situation better than GDP data. According to a report by Bain & Company, in 2015, urban China's FMCG consumption volume declined 0.9% year-on-year, compared to a 0.1% growth in 2014. In terms of consumption value, FMCG growth slowed to 3.5% last year, a five-year low. Bread Finance recently tracked a series of consumer goods listed companies and found that leading companies in milk, beer, instant noodles, catering, and even bras have been under tremendous pressure on sales and profits in the past two years. Coca-Cola's COO said that Coca-Cola will continue to expand its market share in China and prepare for consumption to pick up again; "China's FMCG sector has not shown strong consumption power matching GDP growth." In fact, GDP data often cannot be taken too seriously; creating several land kings and idle funds circulating in the financial system can also boost GDP figures. The recent Politburo meeting stated that the five major tasks of cutting overcapacity, reducing inventory, deleveraging, lowering costs, and strengthening weak links should be fully implemented, with emphasis on curbing asset bubbles and reducing the macro tax burden. Consumer Goods Have Entered Winter, Will the Next Spring Really Come Soon?

Extended Reading: Marketing Strategy Comparison of Coca-Cola and Pepsi

Company Background Coca-Cola Company Profile: In May 1886, Coca-Cola first appeared at Jacob's Pharmacy in Atlanta, Georgia, USA. Coca-Cola is the world's largest beverage company and a leader and pioneer in the soft drink market, selling to over 200 countries and regions through the world's largest distribution system. Pepsi Profile: Pepsi-Cola was born in New York in 1919 and rose rapidly after World War II. By the late 1940s, Pepsi had become a successful professional soft drink enterprise. By 1996, through the related diversification strategy implemented by CEO Wayne Calloway, PepsiCo formed eight major components: Pepsi-Cola North America, Pepsi-Cola International, Frito-Lay, Pepsi-Cola Foods International, Pizza Hut Worldwide, Taco Bell Worldwide, KFC, and Pepsi-Cola Systems Worldwide. Now, its operations extend to 134 countries overseas. I. Target Marketing Strategy Pepsi: In response to Coca-Cola's "everywhere" strategy, Pepsi concentrated its manpower, material resources, and financial resources on several key cities for aggressive three-dimensional advertising campaigns. Moreover, Pepsi's uniqueness lies in selecting key cities that are mature markets with great potential for cola drinks. The main consumer groups for this drink are three: students, white-collar workers, and higher-level freelancers (advertisers, freelance writers, etc.). The consumer groups are most concentrated in the "under 16" and "16-30" age groups. These occupations and age groups are exactly the ones that are young, passionate, and most sensitive to fashion. Coca-Cola: Coca-Cola has always adopted an undifferentiated market coverage strategy, with a relatively broad target market. Since last year, Coca-Cola has focused its advertising on young people, with vibrant, healthy youth images as the main theme. "Always Coca-Cola" has become its latest advertising slogan. This means that Coca-Cola's target market is mainly concentrated on young people. II. Product Strategy Pepsi: Pepsi's product strategy has always been relatively cutting-edge, whether in new product development, combination, branding, or packaging. Its brands such as "Pepsi-Cola," "7UP," "Mirinda," "Mountain Dew," including "Asia," "Beiyang," "Tianfu," and "Gatorade" series, and "Dole" series drinks have become household names in China. The company is constantly developing and innovating, continuously developing and acquiring new brands and creating new flavors. In terms of product line width, Pepsi's product portfolio is much richer than Coca-Cola's. Coca-Cola's business is very simple, only engaged in beverages. Pepsi, besides soft drinks, also ventures into sporting goods, fast food, and food. Coca-Cola: Coca-Cola summarizes its basic strategy into six points, arranged in order:

  1. Accelerate carbonated beverage growth with Coca-Cola as the lead;
  2. Selectively expand our beverage brand portfolio to promote profit growth;
  3. Work with bottling partners to improve the profitability and productivity of the product system;
  4. Treat customers with innovation and consistency to achieve growth in all aspects;
  5. Invest funds in the most promising areas of each market;
  6. Improve efficiency and economic benefits in all aspects. Overall, Coca-Cola's strategy in China is single-business, with a market-specialist product portfolio. Based on the data provided above, some of Coca-Cola's products have a product line width of 3, length of 14, and depth of 4.7. From the analysis above, we can see that Coca-Cola's products have strong correlation and no cross-industry product operations. The result of such a product portfolio is stable sales models, low sales costs, and greatly increased brand credibility. III. Brand and Packaging Strategy (I) Packaging Strategy Pepsi: Pepsi chose blue, with the Chinese-style cursive "Pepsi Cola" in blue on a pure white background. The blue letters stand out vividly against the white, appearing active and enterprising. As is well known, blue is a symbol of sophistication, innovation, and youth. IBM, a leader in high-tech, uses blue as its main color and is called the "Big Blue." Pepsi's color perfectly unifies with its company image and positioning. Coca-Cola: Coca-Cola uses red, with white Spencerian script "Coca-Cola" on a bright red background. The white letters against the red have a leisurely bouncing quality, and the cursive gives a sense of continuity, fluidity, and elegance. The red and white combination is traditional, appearing ancient, elegant, yet vibrant. (II) Brand Strategy Pepsi:
  7. Localization Strategy Localized management and production are current trends for global multinationals. Localization for a specific product or company is a long-term process. Pepsi's localization in China has achieved remarkable results. 70% of Pepsi China's management is now Chinese, with only one not born in mainland China. It is certain that the merger of Pepsi and Quaker will accelerate Pepsi's localization in China. Currently, nearly 10,000 Chinese employees are directly engaged in Pepsi beverage business, and at least five times that number of indirect employees participate in Pepsi-related business through suppliers, wholesalers, and retailers. By introducing capital while promoting advanced market and management experience, implementing localization, participating in the transformation of state-owned beverage enterprises and talent training, Pepsi has helped China's beverage industry develop from a backward state of simple processes and crude production to the world's largest, most competitive, highly specialized, and vibrant beverage market in just 20 years.
  8. Diversified Brand Strategy Currently, PepsiCo International's flagship brands in the Chinese market are Pepsi-Cola, 7UP, Mirinda, and Mountain Dew. In addition, it includes famous local brands such as Asia, Beiyang, and Tianfu. A 2000 survey by the internationally renowned research institution ACNielsen showed that Pepsi has become one of the most popular soft drinks among Chinese youth. In terms of product line width, Pepsi's product portfolio is much richer than Coca-Cola's. Coca-Cola's business is very simple, only engaged in beverages. Pepsi, besides soft drinks, also ventures into sporting goods, fast food, and food. It is particularly noteworthy that in August 2001, Pepsi announced the acquisition of Quaker Oats. The marriage with Quaker gave Pepsi the valuable Gatorade brand and significantly increased Pepsi's share in the non-carbonated beverage market. Although the market size of non-carbonated drinks is not comparable to carbonated drinks, its growth rate is three times that of the latter. Coca-Cola:
  9. Good Brands Are Wealth Brand analysts believe that the world's most valuable brands remain the primary creators of wealth and will continue to lead wealth creation in the future. From this perspective, Coca-Cola's brand management itself is creating wealth. To this day, many Chinese still think that a company opening a new factory or achieving an important technological breakthrough is more important than brand value. In fact, all of the above serves the brand; brand value reflects the comprehensive strength of design, production, process, advertising, and sales. Brand is also the bond of trust between product and customer. Coca-Cola's 100-year history is a history of千方百计 enhancing brand value.
  10. Aligning Brand with Sports According to experts, corporate support for sports has at least the following benefits: for sports activities, especially events, it solves the necessary funding and ensures smooth operation; it increases the influence of sports activities on the public; and it promotes the healthy development of sports. For companies, sponsoring sports events is a highly value-adding operation: it enhances corporate image, expands brand awareness; facilitates product promotion; strengthens affinity and communication with consumers; promotes corporate culture (employee cohesion and pride); and provides opportunities for public relations and entertaining guests. Coca-Cola has a deep connection with the Olympics. Since 1928, Coca-Cola has been a global sponsor of the Olympic Games.
  11. Localizing the Brand It has been proven that any successful marketing experience is regional; the more international marketing is, the more localized it becomes. Today, Coca-Cola has become a global cultural symbol, but while sweeping the world, Coca-Cola has not stubbornly propagated and sold American concepts. Instead, it adopts a divide-and-conquer strategy in different regions, cultural backgrounds, religious groups, and races. For example, Coca-Cola's advertising slogan "Can't beat that feeling" was changed to "I feel cola" in Japan, "Unique sensation" in Italy, and "The feeling of life" in Chile. Advertising messages always reflect local culture.
  12. Diversifying the Brand Coca-Cola further updates its business structure and model, expands its brand and product range, forms alliances with suitable strategic partners, explores new market opportunities, and enters high-growth markets. Seizing emerging markets is also one of Coca-Cola's diversified brand development strategies. IV. Pricing Strategy Pepsi: First, determine pricing objectives. For Pepsi, the goal is to increase or maintain market share, as only then can it remain prosperous. Second, analyze demand and determine price elasticity. Calculate costs. Initially, Pepsi was a small company like a roadside stall, not large in scale, but to boost sales, it sold at low prices. Now Pepsi is an international multinational second only to Coca-Cola, with scale more than doubled, so it can also sell its products at relatively low prices. Regarding setting market prices, first is the low-price strategy mentioned above. After some revisions, it now uses a competition-oriented pricing strategy. Mainly adopting competition-oriented pricing methods, Pepsi's product pricing is generally parallel to Coca-Cola's, slightly higher in some regions, slightly lower in others, basically maintaining small fluctuations to maintain its status as a world-class beverage. Pepsi never engages in vicious price competition. In setting retail prices, Pepsi rarely reduces prices because price cuts can raise quality concerns among consumers and cause profit decline. Coca-Cola: Coca-Cola also flexibly uses pricing strategies to better achieve its business objectives. Looking at Coca-Cola's development and marketing history, it has achieved a transition from an initial low-price strategy to a competition-oriented pricing strategy. Pricing is based on the product's market positioning, target market, and the price tolerance of target market consumers. Its pricing strategy is mainly differentiated pricing, specifically adopting different pricing methods for different consumers. Its specific manifestations are: (I) Differentiated Pricing (1) Segment pricing based on different regions and tastes (2) Segment pricing based on consumer spending levels (3) Segment pricing based on product characteristics (4) Segment pricing based on purchase quantity (II) Value Pricing (III) Odd-Even Pricing (IV) Discount Pricing V. Channel Strategy Pepsi: The existence of intermediaries greatly reduces the number of transactions and saves a lot of costs. As competition intensifies, brand competition has integrated into channel competition, channel conflicts are increasingly prominent, and conflict management is imperative. Generally, two or three-level channels are adopted, meaning multiple levels allow for enhanced competition in the intermediate links. (1) Traditional food retail channels. (2) Supermarket channels. (3) Discount store channels. (4) Grocery store channels. (5) Department store channels. (6) Shopping and service channels. (7) Restaurant and hotel channels. (8) Fast food channels. (9) Street vendor channels. (10) Industrial, mining, and enterprise channels. (11) Office institution channels. (12) Military camp channels. (13) College and university channels. (14) Primary and secondary school channels. (15) In-service education channels. (16) Sports and fitness channels. (17) Entertainment venue channels. (18) Transportation window channels. (19) Hotel and restaurant channels. (20) Tourist attraction channels. (21) Third-party consumption channels. (22) Other channels. Coca-Cola: Same channels Pepsi's Handling of Channel Member Relationships Pepsi mainly handles the following member relationships in channel management:
  13. Distributors In handling relationships with distributors, Pepsi mainly adopts the following measures: (1) Make necessary concessions. (2) Provide quality products. (3) Provide purchase discounts and bonus support. (4) Actively carry out promotional activities. (5) Provide financial assistance. (6) Give distributors due returns.
  14. Cooperative Wholesale Systems
  15. Key Accounts (1) In handling relationships with key accounts, Pepsi mainly relies on its strong brand competitiveness and various preferential treatments to maintain cooperation. (2) Pepsi has signed long-term cooperation agreements with each key account, and both parties carry out phased cooperation according to the specific requirements of the agreement.
  16. Modern Channels Modern channels are relative to traditional channels, referring to large chain supermarkets and specialty stores.
  17. Immediate Consumption Channels Immediate consumption channels include catering, internet cafes, entertainment venues, etc. Immediate consumption channels are the most important channel for Pepsi to promote its products. Pepsi invests certain fees to promote its products, thereby turning a certain sales point into a Pepsi-exclusive sales point. Coca-Cola's Channel Management
  18. Channel Deep Cultivation Direct sales orientation, taking small and abandoning large
  19. Replenishment Salesmen obtain orders point by point daily. To firmly consolidate the occupied territory, Coca-Cola never allows other products to enter its shelves or cabinets due to supply shortages.
  20. Cultivating Models Establish membership stores and set up model customers
  21. Daily Customer Visits Customers who have already sold the company's products, and those who have not yet but have potential to sell, all need visits. Customer visits are a daily, routine, and main task for salesmen. VI. Promotion Strategy Pepsi:
  22. Celebrity Endorsement and Music Marketing The spread and marketing of music benefit from the singing of audiences and viewers. Pepsi's music marketing success depends on its understanding of music's communication charm. This is an interactive two-way communication that does not require passive acceptance by the audience. Beautiful song melodies and resonant lyrics are the ultimate language for communicating with consumers. With such advertising messages, the brand concept naturally becomes deeply rooted in people's hearts.
  23. Supporting Public Welfare and Giving Back to Society Since entering China, Pepsi has been committed to establishing a good public relations system with the "Pepsi-Cola Fund" as the entry point, enthusiastically supporting and sponsoring sports events and other public welfare undertakings. For example, in December 2001, Pepsi (China) Investment Co., Ltd. donated to the China Women's Development Foundation to establish a special fund - the "Pepsi-Cola Fund." Taking from consumers, giving back to society, and engaging in public welfare have won Pepsi a good reputation and laid a solid social foundation for its success in China.
  24. Unpredictable, Precise, and Effective Promotional Tactics Sales promotion can be divided into three levels:
  1. Consumer promotions.
  2. Dealer promotions.
  3. Salesperson promotions. Coca-Cola:
  1. Advertising Advertising is an important part of Coca-Cola's marketing strategy. According to surveys, 82.2% of consumers' awareness of Coca-Cola is obtained through advertising. Coca-Cola increases product awareness and public purchase desire through advertising. Advertising also plays a very important role in establishing and strengthening a good image of the product and brand. (I) Localization of Advertising Creativity For example, in China, it is mainly reflected in two aspects:
  2. In the creative expression of advertising, elements representing Chinese culture are fully explored and utilized.
  3. In the creative expression of advertising, the "celebrity endorsement" method is fully used to communicate with target consumer groups. (II) Wonderful Interaction between Mass Media and Online Media Through the interaction between mass media and the internet, Coca-Cola maintains the continuity and consistency of online and offline advertising, thereby highlighting the effectiveness of media integration.
  4. Sponsorship Sponsorship is a form of public relations. Coca-Cola strengthens its brand image, enhances brand reputation, and creates a drinking atmosphere by sponsoring sports, education, and cultural activities, thereby promoting product sales. It is mainly manifested in the following aspects: 1) Sponsoring sports activities, 2) Sponsoring social welfare activities
  5. Promotional Activities Coca-Cola believes that promotion is a special activity that provides customers and consumers with additional reasons to buy our products. Usually, it has the function of short-term sales and profit target increases. The main functions of promotion are: increasing short-term sales, supporting new products or new packaging; strengthening brand image, stimulating consumer understanding and need for products; increasing store traffic and sales and bringing major benefits to customers. Coca-Cola attaches great importance to the use of promotional activities to improve product market share and industry penetration. Promotion is different from advertising; advertising provides consumers with reasons to buy, while promotion provides purchase incentives. In Coca-Cola, promotion can be divided into three levels: (I) Promotions for distributors (II) Promotions for salespeople (III) Promotions for consumers
  6. Cooperative Store Signs First, cooperative store signs can effectively enhance and consolidate customer relationships. Second, cooperative store signs have characteristics such as wide distribution and long duration. Third, cooperative store signs have a reminder effect on consumers' purchases. -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operation management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]