This is an extremely precarious move that will definitely harm the stock prices of Coca-Cola in one way or another. Why is this acquisition a precarious one?
"Don't forget the original strategy was to separate out Coke from the low-margin, high-capital-cost bottling business, an enterprise that was dragging down Coke's stock price."
Well, as mentioned, the bottling business runs on economies of scale. No doubt the cost price is not high, but you have to remember that the selling price of these bottles are not high either. Ultimately, the profits go to the people who created the drink, the ones with the formulae and the management of the business.
But, it is imperative for Coca Cola to do this.
1. Thave to spur innovation in the industry once again.
The industry is now extremely competitive as the juices are gaining a lot of market share from the soda industry right now.
By acquiring the bottling business, it is for sure instrumental for they can now make many more decisions like making of smaller bottles, changing of the designs of the bottles, means of distribution of the bottles, etc.
It is easier for time to come up with new strategies that tie hand in hand with the bottles now. You have to stand out on the shelves now, branding is already over for Coca-Cola.
They need a revitalisation strategy.
2. They have to stop the rivalry between them and the bottling business once and for all.
2. Coca-Cola has been trying to deviate slightly from its soda drink business and they are trying to gain some market share from the popular juice section.
Today, a lot of the consumers are pretty much trying to be more health conscious. The thought that they are going to gulp down 10 teaspoons worth of sugar just by drinking Coke is definitely worse than a macabre death for some. It is unthinkable!
Imagine how much exercise you have to do in order to burn away that 10 teaspoon of sugar you've just consumed.
But here comes another problem. Due to the smaller scale of production of juices as compared to the brobdingnagian volume of Coke, the production costs for the bottles for the juices will be high. This will further reduce profit for the bottling industry as costs incurred surge once again.
Everytime they made a new decision, the bottling companies of Coca-Cola will question as to why they made such a fatuous decision.
Having a rivalry between the supplier and the manufacturer is definitely a no-no in business. It is pivotal to maintain a healthy and rich relationship among everyone in the chain of business.
So, all in all, we will be seeing new innovations on the bottle along with new drinks on the shelves soon.
Stay tune!
Credits -moreheadstate, -informationarchitect, -marketwatch, -paindainsight
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