Background of the company

Coca-Cola, or Coke, is a carbonated soft drink manufactured by The Coca-Cola Company. Originally
marketed as a temperance drink and intended as a patent medicine, it was invented in the late 19th
century by John Stith Pemberton and was bought out by businessman Asa Griggs Candler, whose
marketing tactics led Coca-Cola to its dominance of the world soft-drink market throughout the 20th
century.[1] The drink's name refers to two of its original ingredients: coca leaves, and kola nuts (a source
of caffeine). The current formula of Coca-Cola remains a trade secret; however, a variety of reported
recipes and experimental recreations have been published. The Coca-Cola Company produces
concentrate, which is then sold to licensed Coca-Cola bottlers throughout the world. The bottlers, who
hold exclusive territory contracts with the company, produce the finished product in cans and bottles
from the concentrate, in combination with filtered water and sweeteners. The Coca-Cola Company also
sells concentrate for soda fountains of major restaurants and foodservice distributors.

Supply chain flow chart of Coca-Cola

Supply chain graphic

The generic supply chain graphic of the beverage industry is generally the same as any other industry
with manufacturers, distributors, retailers and end consumers playing their respective roles. We will
further delve into Coca-Cola’s customized and somewhat complex supply chain model in the proceeding
diagrams.
Supply chain management

The Coca-Cola Company follows a unique supply chain management system where the company only
produces syrup concentrate which is then sold to various bottlers throughout the world who hold an
exclusive territory. The Coca-Cola Company owns its anchor bottler in North America by the name of
Coca-Cola Refreshments. Other Coca-Cola bottlers, who hold territorially exclusive contracts with the
company, produce the finished product in cans and bottles from the concentrate in combination with
filtered water and sweeteners. The bottlers then sell, distribute and merchandise the resulting Coca-
Cola product to retail stores, vending machines, restaurants and food service distributors.

Upstream activities

Upstream activities are limited to the manufacturing of the concentrate only. The actual formula Coca-
Cola uses to manufacture the syrup is a very tightly held trade secret so there is little information
regarding the exact ingredients and thus little information on the costs of their supplies. The original
copy of the formula is held in SunTrust Bank’s main vault in Atlanta. The company’s 2009 income
statement revealed that the cost of goods sold was in excess of $10M and the operating margin was
around 25%. Sugar (sucrose or high-fructose corn syrup depending on country of origin) may be the
largest known ingredient used in the manufacturing of the syrup and the company uses several systems
to track the daily variation in the global price of this ingredient. Some of the systems that the company
uses will be discussed later in the report. In addition to sugar, some of the other ingredients used in the
manufacturing of the syrup are Carbonated water, sucrose, high-fructose corn syrup, caffeine,
phosphoric acid v. Caramel and Natural flavorings. Coca-Cola has different supplier partnerships to
procure these ingredients and these partnerships are out of the scope of this project.

Downstream Activities

The downstream activities of The Coca-Cola Company focuses on the franchised distribution system
where The Coca-Cola Company only produces syrup concentrate which is then sold to various bottlers
throughout the world who hold an exclusive territory. Apart from owning its anchor bottler in North
America (Coca-Cola Refreshments), it has minority shares in some of its largest franchises, like Coca-Cola
Enterprises, Coca-Cola Amatil, Coca-Cola Hellenic Bottling Company (CCHBC) and Coca-Cola FEMSA, but
fully independent bottlers produce almost half of the volume sold in the world. Independent bottlers are
allowed to sweeten the drink according to local tastes. The Coca-Cola Company develops products,
produces related marketing and advertising programs, and sells syrup concentrate to independent
bottlers.

Operations

In this section, we will describe the bottling operations used by different bottlers in manufacturing and
then distributing the Coca-Cola brand in their respective markets. The Coca-Cola Company establishes
the basic guidelines of operations for all of its bottling partners and suppliers so most of the operations
are standardized and there is a certain degree of centralization to most of their strategic decisions.

Each bottling partner services the assigned geographical area through a head office which controls most
of the operations and it serves as the hub for different entities in the supply chain. The bottler’s head
office is working in close collaboration with a regional office which is under the direct supervision of The
Coca-Cola Export Corporation. The bottler’s head office links the production plant with different
distribution and sales centers and multiple trade zones together to form a complete supply chain. The
bottling production plant has its own supply chain which mainly consists of two types of items.

 General Items
 Key Ticket Items
 Sugar
 Empty bottles (Procured on contractual basis from different vendors)
 Crowns
 Caps
 Crates.

The production information including forecasting measures, the capacity management, multiple vendor
management and other sales figures are kept at the production plant as well as the head office. Coca-
Cola Company uses proprietary software known as BASES and some specific modules of SAP to manage
all their operations in the world. This software performs the functions of the entire ERP for the company
and its worldwide operations.

Distribution:

The distribution centers are responsible for storing and managing the inventory comprising of different
SKU and dispatching them off to the market to different retailers. The distribution and sales centers
have multiple predefined zones and sub divisions of areas to capture all the retailers and contact points
in the market. Generally this distribution and sales centers have the following departments.

 Sales and Dispatch.

 Customer Service and Query Management.
 Logistics Dept. or Fleet Management.
 Storage or Warehousing.
 IT Dept.

Each distribution center is responsible for the implementing the “push strategy” in the supply chain.
Each zone in the distribution channel has a zone head who is responsible for the performance of his
zone and to increase the per capita consumption of his zone. Each zone is further divided into different
routes and each route has different territories assigned to each vehicle. In addition to the Coca-Cola
beverage, the bottlers also provide other complementary merchandise as an incentive to key accounts
like free chillers and coolers for beverages, pop materials and relaxed credit lines.