One of the most well-known brands in the world, Coca-Cola has been a favorite among customers for more than a century. But have you ever questioned how Coca-Cola keeps itself profitable in the face of fierce competition in the beverage sector? The business strategy and cost structure of the corporation hold the key.
Selling, general, and administrative expenditures (SG&A) and cost of goods sold (COGS) make up the two primary parts of Coca-Cola’s cost structure. Raw material, packaging, and production costs are included in COGS, whereas marketing, advertising, and other running costs are included in SG&A. However, Coca-Cola’s marketing and advertising costs, which represent more than 10% of the business’s revenue, are the most significant cost element. What exactly is a Coca-Cola franchise?
In accordance with a license agreement, independent bottlers are permitted to produce, market, and distribute Coca-Cola products through Coca-Cola’s franchise business model. The franchise system is a crucial component of Coca-Cola’s business strategy since it enables the corporation to grow its market share while incurring less capital outlay to construct and run bottling facilities. Coca-Cola is able to concentrate on its core capabilities, such as marketing and product innovation, by franchising its production and distribution operations.
Independent businesses known as Coca-Cola bottlers operate under a license from the beverage giant. Coca-Cola products are manufactured, packaged, and distributed in particular geographic areas by the bottlers. The concentrate, which is the proprietary recipe that gives Coca-Cola its distinctive flavor, is supplied by Coca-Cola to the bottlers. The product is packaged in bottles or cans by the bottlers, who then distribute it to shops and vending machines after combining the concentrate with water and sweeteners. How Do I Launch a Manufacturing Cold Drink Company?
1. Carry out market research to ascertain consumer preferences, market demand, and rivalry.
3. Obtain Funding: Assess the financial resources needed to launch and run your company and look into financing solutions.
5. Purchase Raw Materials and Necessary Equipment: Invest in the raw materials and equipment required for production.
In conclusion, because concentrate has lower production and distribution expenses than cola in bottles, generating concentrate is more profitable. The franchise structure used by Coca-Cola enables the corporation to grow internationally while incurring the fewest financial outlays necessary to set up and run bottling facilities. A cold drink business needs planning, money, permits, and equipment acquisition in addition to research and planning.