Running Head: Coca-Cola in Africa

Coca-Cola in Africa
Florida State College at Jacksonville
Case Study 1
9/6/2015

Coca-Cola is the worlds leading owner and marketer of nonalcoholic beverage

Coca-Cola in Africa

brands. With sales of 24.4 billion cases in over 200 countries worldwide in the last year
alone, Coca-Cola is ubiquitous in both developed and developing countries. However,
maintaining a strong brand name and launching innovative marketing campaigns is only
part of their massive success. Coca-Cola tailors their marketing efforts based on the
countrys maturity. In 2009 from an annual report, the company notes that:
We have disciplined marketing strategies that focus on driving volume in
emerging markets, increasing our brand value in developing markets and
growing profit in our most developed markets. In emerging markets, we are
investing in infrastructure programs that drive volume through increased access
to consumers. In developing markets, where consumer access has largely been
established, our focus is on differentiating our brands. In most developed
markets, we continue to invest in brands and infrastructure programs, but at a
slower rate than revenue growth.
In developed countries, Coca-Cola primarily uses traditional distribution models where
large amounts of product are delivered via trucks or other motorized vehicles to large
retail outlets. In developing countries, road infrastructure, terrain, retail market, cost
implications and customer needs are vastly different and require a more tailored
approach. Coca-Cola has to alter the way they make their product available to consumers
in even the most remote areas of the world. Coca-Colas Micro Distribution Center
(MDC) as a model for the international health and development community. Melinda
emphasizes Coca-Colas strength in leveraging real-time data, thus allowing for project
adjustments and corrections along the way; tapping into the power of local
entrepreneurial talent, who are closer to the ground and can do the seemingly impossible;

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and marketing their products as aspirational.

In Africa, Coca-Cola uses full range of distribution methods depending on the
sub-market requirements. In developed, urban areas, Coca-Cola and their bottling
partners use the traditional model for supplying large retailers through delivery trucks.
Retailers here include grocery stores, hotels, universities, and other large institutions. In
the remaining urban and urban areas, where the large proportion of retail outlets are small
neighborhood restaurants or bars, corner stores, one-person kiosks, Coca-Cola has
adopted a manual delivery approach working with small-scale distributors to deliver
products to small-scale retailers. This approach is called the Micro Distribution Center
(MDC) model. MDCs are independently owned, low-cost businesses created to service
emerging urban retail markets where classic distribution models are not effective or
efficient. The MDC model identifies and engages independent entrepreneurs, who
receive business training and in some situations financing, to become an MDC owner.
Majority of MDC owners are not from the poorest segment of the population, but instead
have a minimum of primary school education and have previously been employed or
were in school before becoming an owner. These owners have been identified to have the
potential to grow a business, employ others, raise productivity, and increase incomes on a
sustained basis. Outlets served are typically low-volume with high service frequency
requirements and limited cash flow, requiring fast turnaround of stock.
Today, there are more than 2,800 MDC businesses, generating more than $550
million in revenues in high-density urban areas throughout East Africa, including
Ethiopia, Kenya, Mozambique, Tanzania, and Uganda. In Ethiopia alone, MDCs account
for 80% of the countrys sales. MDC owners earn a set profit margin for each case sold,

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equivalent to the difference between the cost to the MDC for purchasing a case of
beverages and the retail price to customers. This pre-determined profit margin, in the
range of 3 to 5%, helps maintain a consistent retail price across all MDCs and
incentivizes high quantity, volume-driven sales to derive satisfactory income. In addition
to the profit margin, some Coca-Cola subsidiaries offer monthly bonuses based on the
ability to meet sales targets. MDC owners also receive management training in areas of
basic business skills, warehouse and distribution management, account development,
merchandising, and customer service.
The MDC model has had development impact in three broad areas. First, the
MDC model creates new opportunities for entrepreneurship and employment in the
formal sector. As of the end of 2008, Coca-Cola had created 2,200 MDCs in Africa,
generating over 12,000 jobs. Three-quarters of MDC owners in Ethiopia and one-third in
Tanzania reported that they were first-time business owners who previously held only
part-time jobs, or worked in the informal sector. MDC owners and employees support an
estimated 41,000 dependents. With the income they receive from their MDCs, they are
now able to invest in housing, health, and education for their families, as well as create
job opportunities for relatives from the countryside. Second, the MDC model has created
new economic opportunities for women, both as MDC owners and employees and as
managers and sales staff. Across east Africa, the MDCs have created entrepreneurship
opportunities for close to 300 women. In Ethiopia and Tanzania, samples showed that
women, respectively, owned 19% and 32% of MDCs. In addition, couples own a high
proportion of MDCs jointly, the women manage many of which. Lastly, the MDC model
has helped develop human capital. The training provides to ensure that the business is

Coca-Cola in Africa

successful benefits the MDC owners and staff members who receive it even after they
leave the Coca-Cola system, helping them qualify for higher-skilled jobs and more
lucrative business opportunities.
Case Study Questions
1. Why is Coca-Cola so interested in Africa, which is typically regarded as the base of the
global economic pyramid?
Coca-Cola needs to seek new opportunities for earnings growth due to the fact that many
of its markets outside of Africa are mature, saturated, declining or experiencing increased
competition. Africas income, infrastructure, and to some extent governments are
improving. Its population generally gets too few calories and the population is young.

2. What unique resources and capabilities does Coca-Cola have that will help it compete
well in Africa?
Its global brand is already popular on the continent. It has significant resources to deploy
and has built a base involving distribution capabilities and a direct workforce of 65,000
and indirectly a million people.

3. What are the drawbacks of making such large-scale commitments to Africa?

In spite of improvements, poverty, government corruption and inefficiency, and
infrastructure are negatives. Also, the war and strife create uncertainty.

4. Do stakeholders in the United States and Africa who criticize Coca-Cola have a
reasonable case against it?
Africa has certain risks and limitations that it would be likely to encounter in the U.S.
Health is a mixed issue in which (unlike many other markets) people actually need extra
calories but critics might argue that they should get them through other means. Also,
there is the concern about water usage and the impact of refrigeration. Not all students

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will necessarily agree with the criticisms or feel that they significant enough to oppose
Coca-Colas focus on Africa.

Coca-Cola VRIO Chart Expanding in Africa

Coca-Cola

Valuable

Rareness

Imitability

Organization

YES

YES

NO

YES

This VRIO chart shows Coca-Cola and the expansion in to Africa. I found that it will be
very valuable to the Coca-Cola Company. Also if the do expand into the hard to get to
areas of Africa it would be very Rare and they will most likely be the only soda company
in the areas. As for the Imitability, I feel that a company like Pepsi could copy Coca-Cola
and try to move into said areas. However, I feel that Coca-Cola will be the first and with
the MDCs they will be ahead of any other company trying to copy them. With
Coca-Colas continued growth all around the world I feel that it is safe to say Coca-Cola
can and will make the expansion in Africa very profitable not only for the company but
the country as well and Coca-Cola is very capable of doing so.

Coca-Cola in Africa

Works Cited
Business, M. S. (2005, March). moore. Retrieved September 3, 2015,
from www.moore.sc.edu:
http://moore.sc.edu/UserFiles/moore/Documents/Division%20of
%20Research/sareport2.pdf
Company, T. C.-C. (2014, August 5). coca-cola company. Retrieved
September 3, 2015, from www.coca-colacompany.com: http://www.cocacolacompany.com/press-center/press-releases/coca-cola-invests-anadditional-us-5-billion-for-long-term-sustainable-growth-in-africa
Maritz, J. (2010, August 3). how we made it in Africa. Retrieved
September 3, 2015, from www.howwemadeitinafrica.com:
http://www.howwemadeitinafrica.com/doing-business-in-africa-the-coca-colaway/2433/
Stanford, D. (2010, October 28). bloomberg. Retrieved September 3,
2015, from www.bloomberg.com:
http://www.bloomberg.com/bw/magazine/content/10_45/b4202054144294.ht
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