Even thought Brazil was Coca-Cola’s third largest operation and second largest international market? Average consumption was relatively low, only 144 bottles of 237ml Coca-Cola per person annually, while in Mexico average number of consumed 237ml bottles was 402 and in US this number was equal to 462 bottles per capita. Although related sales in Brazil were low, it was the third Coca-Cola’s market in sales, Company’s market share here were about 50%, for Coca-Cola Company Brazil market was only the 20th in the profitability.
Brazil is the developing country with fast growing economy. Thanks to the Brazilian economic stabilization plan which is called “Plano ...view middle of the document...
Tubainas hold about 32-33% of the market, and their development is continuing with the extraordinary speed. The unfair competition from tubainas harm Coca-Cola, because Coca-Cola Company as an international entity must follow the lows of the countries and must pay taxes, which are high in Brazil – 40% on the beverages. That is why Coca-Cola Company face the difficulties. As do lower the prices their profitability goes down.
The point is what actually Coca-Cola Company needs. Big market share or profitability. Because, as long as they start to increase their market share, their profitability goes down. But there are several solutions for this problem.
First of all, if company actually needs more profit than market share, than it is better to stay at the premium class product in Brazil mostly, and produce the amount for the mass market. But in this way they should not decrease the prices. They will lose part of the market share. But their profitability will grow or at least stay the same, at least because they will not spend money for the “tabainas war”. The plus – more profit? And no additional spending on the campaigns against competitors. The major disadvantage – Coca-Cola will lose the part of its market share, and in the long-run there is the risk that it will lose the huge amount of market.
Second option is to do nothing. To keep the situation as it is. To protect their existing market share and their profitability. The minus of such option – no development or move forward. But this option has pluses as well. As in the first option they will not spend additional money on...