COCA-COLA AMATIL: A Bottler Recharging Growth with Energy Drinks

Amatil the bottling partner of the Coca-Cola in southern pacific serving Australia, which is Worlds most
recognized brand name. As a result of its Global Coke System, On the basis of On-The-Ground capability,
their tens of thousands of RED-TRUCKs, Coke dominates beverages worldwide. This was basically set
up to deliver and merchandise Carbonated Soft Drinks.
But the problem was that the CSD category wasnt growing like it used to and consumers were also
gradually replacing their core products with bottled water, juices, teas, energy drinks, etc. The reason was
change in consumers taste and preferences. This thing only came up as challenges that how they can secure
growing share of demand for new market.
The Amatil executives had already been discussed the opportunity and had agreed that the goal was to
become more relevant for new growth areas such as nighttime consumption at licensed bar operations. How
could Amatil serve smaller, more fragmented, less familiar markets, product niches and retail stores without
affecting its highly efficient current model? How to diversify towards competitors who playing on the
grounds of low costs and prices?
Amatil was the Coca-Cola Companys sole bottler serving Australia, New-Zealand, Indonesia, Fiji and
Papua New Guinea. By the 2000s financial results had improved with revenue up more than 8% in 2007
and return on equity rising to more than 20% for 2008. Public reports cited tighter control and more efficient
operations as the primary diverse of the improved financial performance. A major contributor had been
Project Zero, a multi-year drive toward zero quality defects, zero gaps in capability, zero misses in
service, and zero wastage in costs.
Amatils customer base was dominated by two large accounts, Woolworths and Coles, which together
represented about a third of sales. Both retailers were sprawling conglomerates of grocery stores, liquor
stores, hotels, and gas station convenience stores. Each wanted to be served in a consolidated way as a
single customer, rather than through a variety of channels. And half of its total sales went to Mom and Pop
retailers, primarily small independent grocers, convenience stores and varied food and beverage servers
such as pubs, taverns, institutional cafeterias, and diversified into ownership and distribution arrangements
to market imported beers and spirits.
AUSTRALIAN BEVERAGE MARKET
The Coke brand in Australia had only one serious rival in its core CSD beverage lines: Pepsi. In fact, Pepsi
had been a tougher competitor here than in most of Cokes other non-U.S. markets. Notably Pepsi had taken
leadership in the diet soda market and was, as elsewhere, the larger of the two gains as a supplier of noncarbonated beverages. Cadbury-Schweppes was the bottling in charge of Pepsi. By the 2000s nontraditional
nonalcoholic beverages such as isotonic and energy drinks captured the attention of younger drinkers and
had become very popular with the younger consumers. Sales of these products were growing faster than the
nonalcoholic beverage category overall.

Traditional Carbonated Beverage Distributors: Bottlers

Coke and its distribution partners together participated in two distinct businesses:
(1) Packaging, selling and distributing individually packaged consumer products to both off-premise and onpremise consumption retailers and
(2) Selling and distributing fountain solutions to on-premise commercial establishments. In non-U.S.
markets, both forms of distribution were handled by exclusive in-market franchise partners: independent
bottlers such as Amatil. The second step in a two-step CSD manufacturing and distribution model. In this
model manufacturers displaced large elements of final production and packaging onto local market
partners.
Historically, the bottler received concentrated syrup (Cokes secret sauce) and mixed it with carbonated
water to create the final product, which was then delivered directly to individual store locations, not to
centralized retailer warehouses. Hence this type of system was referred to as direct store delivery, or DSD.
Truck drivers wearing several hats, in addition to bringing the product to individual stores; they also used to
merchandize product on the store shelves, by checking that the display matches the retailers preset terms of
agreement, and adjusting product position and prominence. Using driver as a utility infielder had historically
pushed marketing efforts down to the street level in a highly efficient manner.
Other smaller beverage ingredient and product manufacturers also sought access to Cokes large-scale and
highly efficient DSD distribution system. Small producers including makers of new vitamin waters,
enhanced juices, and energy drinks, preferred big DSD systems because they prevented new products from
getting lost in vast central warehouses and store holding areas and not reaching shelves where they could be
sold to consumers and it also could provide sales coverage and merchandising support almost anywhere in
the world. For these reasons, the predominant trend among new energy drink makers was partnering with
Coke or Pepsi and their enormous DSD distribution systems.