Analysis Of Coca Cola Supply And Demand

Abstract

The Coca-Cola Company is the gold standard in the beverage industry and the largest seller of non-alcoholic beverages in the world (The Financial Canadian, 2017). Carbonated beverage sales have been dropping over the past 11 years with 2015 seeing a 4% decrease in total revenue and a 10% decrease in operating profit (The Financial Canadian, 2017). In short, many believed that Coca-Cola was on the decline, but this is not the case.

Supply and Demand Conditions In the more than 130 years of doing business the Coca-Cola has grown into the third most valuable brand in the beverage industry with 2015 value of $78.4 billion (The Financial Canadian, 2017). Coca-Cola products are sold in more than 200 countries with more than 1.9 billion

Being that Coca-Cola is a normal good, if there is an increase in income of the consumer the demand will increase. Taste and preference of the consumer also influences the demand. Consumers wanted healthier options so Coca-Cola provided its own alternatives to hold onto that market share. In the case of Coca-Cola, if their loyal consumers prefer the taste of Coca-Cola even if the price increases over its competitor the demands will remain the same. However, if the consumer has no taste preference or brand loyalty to Coca-Cola and if the price increases the demand decreases. Coca-Cola is a product meant for consumers of all ages, so age of the population does not have much effect on demand of the products. The recommendations for Coca-Cola regarding supply and demand is the product must get into the consumer’s hands how and when they want it and at the right time and price. If the Coca-Cola product is available, but costs more than a competitor’s product, then the consumer may switch to another brand. By continuing to expand into developing markets, acquisitions and following socially demanded products and developing new ones Coca-Cola will see more gains in its

Are there alternatives to Coca-Cola products? In this case, there are several alternatives to Coca-Cola, so the demand is more elastic due to the number of available substitutes such as Pepsi or Dr. Pepper. On the other hand, there are alternatives to diet coke on the market. However, the alternatives for Diet Coke may be cheaper, but lower in quality leaving a strange after taste and without the brand association Coca-Cola so the demand for this particular product would be less elastic.

In order to achieve growth in the United States market Coca-Cola has emphasized sales of smaller cans and bottles effectively addressing the issue of high and unhealthy amounts of sugar concentration (Forbes , 2016). Sales of the newer, smaller cans and bottles currently contribute to 15% of the U.S carbonated soft drink sales volume (Forbes , 2016). Even though the small bottles have the same calories per volume the smaller packaging will obviously have lower calories in total, therefore appeasing health-conscious customers looking for lower cumulative consumption of sugar consumption (Forbes , 2016).Elasticity of demand is the rate at which quantity changes as the price changes. This means that there is a small change in price there could be a large change in quantity