Impact of Coca-Cola Value Chain

Research by Ema Montfajon, Filippo Trifone, Greta Zocchi, Jula Gekle and Maya Ben Abdelkader | Bachelor Students from ESCP Business School | Edited by Komoneed

Coca-Cola Value Chain

Coca-Cola’s chain plays a crucial role in the business as it is accountable for the production and distribution of more than 2b units per year, along with sourcing, planning, manufacturing, sustainability, and much more.

Here is how its value chain is arranged:

1. Infrastructure: Coca-Cola as a company presents a segmented operational structure according to the geographical area considered: in particular, the European division is overseen by Nikos Koumettis, who provides direction and support to the regional operations. Overall, the company features a top-down hierarchy where the decisional power lies in the hands of the board of directors and the chief executive’s
2. Human Resources Management: Coca-Cola’s force is “being valued, well, rewarded, developed, and connected”. Safety plays a central role in the business to the point that health and security weeks are held annually to spread knowledge and strengthen apprehension among the 33,200 European employees, along with conducting awareness campaigns -especially in Germany, where the CCEP’s internal Customer Service & Supply Chain Excellence Award was won
3. Technology Development: Speed is crucial for a big and long-running company like Coca-Cola: collaborations with partners, connectivity and scalability are allowing the company to outcompete slow businesses in nowadays moving environments. Coca-Cola Germany is currently on the wave of technological innovation by deploying Salesforce, a digital platform powering continuous large-scale connections between the company and its customers. Efficiency is the drive
4. Procurement: To produce its products, TCCC uses water, sweeteners, sugar, beverage concentrate, along with glass, aluminium, PET resin or carton packaging -plus energy- for the overall manufacturing process, which greatly affects the company’s footprint. To this end, to contribute to “a world without waste”, Coca-Cola Germany is introducing a new reusable bottle with a reusable packaging in the German market to reach by 2025 the goal of having 50% of recycled material in every single use bottle
5. Logistics -Outbound and Inbound: Coca-Cola European Partners Germany -CCEP DE- is one of the main bottlers and distributors of beverages for the company, following a pace of 3.5b litres every year. After the syrup is sold to the bottling and canning operators -16 in Germany, they distribute the finished product to wholesalers -35 in Germany- and retailers by transporting them exclusively on e-trucks
6. Operations: The idea behind Coca-Cola’s operations is to produce locally to sell globally: this inevitably leads to the reliance on franchising, thus allowing to produce the beverage more rapidly and to sell it and be known worldwide. In addition, the franchise model allows TCCC to avoid additional costs associated with manufacturing, distribution, and storage
7. Marketing and Sales: What differentiates Coca-Cola and makes it successful is its reliance on one strong compelling message over time. Everyone knows their slogan “Taste the feeling”, which is consistently communicated to the audience by deploying multiple media channels. There is an incredibly significant brand recognition when it comes to Coca-Cola: the sound, the images, the sensations, the colours. In terms of sales, in 2021 CCEP registered the highest volume in sales compared to other German soft drink manufacturers, racing almost 3.49b litres
8. Customer Service: CCEP is characterized by multiple different communication channels to support its customer in the best way possible. Moreover, the geographical division of the contacts leads to greater efficiency and time-savings operations, while the department division for the contacts helps with addressing the problem more rapidly and precisely.

Environmental Issues

These are the environmental issues that Coca-Cola company must solve to become more sustainable:

1. Carbon footprint: According to Coca-Cola’s 2020 sustainability report the carbon footprint was about 4.8M metric tons of CO2, these are related to the whole value chain, including manufacturing of the product, transportation of raw material, and refrigeration equipment
2. Water stewardship: Water stewardship is the management of water as a resource of the world where we live. For beverages companies this is one of the main issues, because it is one of the main ingredients in all the carbonated drinks. There is a huge use of water during the production process, and large quantities of water are wasted because it gets contaminated by the factories
3. Packaging and recycling: The recycling rate for beverages remains low, despites the effort to promote recycling. In addition, the packaging, which is usually made of plastic or aluminium, is difficult to be recycled after it gets contaminated with other food or other materials
4. Social inequalities: Social inequalities are still considered as an important problem in most of the industries, and in the one of soft carbonated drinks. Workers are often exploited with low salaries and working rights not respected. In addition, the need of water for this industry uses the water of poor communities across the world becoming and causing large problems for the communities’ water supply

Environmental Initiatives

For years now, Coca-Cola has been focusing on sustainability, particularly in areas where the impact can be measurable and purposeful. In fact, numerous initiatives have been launched.

As one of the most influential and successful beverage brands, it is crucial for Coca-Cola to contribute to a sustainable future. These initiatives are in fact helping Coca-Cola to support  healthy communities and invest in our environment to create a positive impact globally (Jones and Comfort, 2018). These are the most remarkable initiatives:

1. Reduce carbon footprint: The company has reduced the carbon footprint by 25% in 2020 and has reduced the greenhouse gas emissions across all the value chain. By achieving this reduction of 20M metric tons of carbon dioxide emissions is the equivalent of 3.8M less cars on the road for a year
2. Energy saves: Coca-Cola introduced equipment bottlers and plants managers with high-return energy-saving technologies, contributing significantly to achieve climate targets, and to reduce the carbon footprint. In addition, this involved 81 renewable energy projects in 25 countries
3. Packaging and Recycling: Coca-Cola nowadays has reached their target of recovering and recycling 75% of cans and bottles in 2020
4. Social issues: Respecting workplace and human rights is essential for Coca-Cola culture. The objective is to have these rights respected in all the layers of the supply and distribution chain. To pursue this Coca-Cola facilitated 40 human rights training programmes
5. Coca-Cola Foundation: 1% of the annual operating income is invested in donations, and to support sustainable initiatives. $7M was donated to the Replenish Africa Initiative, which improves sustainable access to safe water, $950, 000 to support wetland restoration in the Danube Basin in Europe and $200, 000 to support The Nature Conservancy in nine freshwater replenishment projects throughout North America
6. Support for women’s economic empowerment: For Coca-Cola unleashing the potential of women entrepreneurs is essential to help families and communities, and to do so the program has been established in 52 countries across the world
7. Focus on sustainable agriculture embraces economic, social, and environmental issues: Coca-Cola set the goal of sustainable sourcing key agricultural products such as corn, beet sugar, cane sugar, corn, soya, palm oil, and pulp

Despite what has been highlighted so far in terms of green initiatives, Coca-Cola is still ranked as the world’s top plastic polluter for the fifth year in a row. This is undoubtedly a relevant point of controversy, especially if we consider the fact that the company was chosen to be one of the official sponsors for the XXVII Conference on Climate Change of the United Nations held in November 2022.

Moreover, we believe that there should be more significant interventions by governments, so that companies like Coca-Cola, instead of greenwashing their images, will be obliged to invest more in reuse/alternative product delivery systems, thus avoiding the problem in the first place. From a source point of view, on the other hand, the abundance of information available nowadays on the company and its operations, can easily lend itself to speculation and even falsehood.

It is likely that Coca-Cola won’t be able to meet its sustainable goals by 2025: yes, the company is planning to reduce its wastes, but how can this be so if they dump into nature way more than they will ever be able to recycle?

Sources Link

Picture

• Edward Eyer on Pexels