As product managers the one thing that we’d all like is to manage a product that everyone already knows. In fact, if the product was a part of the popular culture that would be even better. However, if you were selected to be a product manager for the soft drink maker Coke, you might want to pause for just a moment. As people globally start to become more health conscious, sales of Coke products are slowing down. Would this really be a product that you’d want to be managing?
The Decline Of Coke
Ok, so let’s face it – no matter how you look at it, the Coke brand is very big and very powerful. Coke recently had to announce that their growth was going to fall short of their target of 3% – 4%. Last year Coke made a lot of money, US$46B, but their profit fell 14% to only US$7.1B over the previous year. One of the big problems that Coke is currently facing is that people are simply drinking less of their product. In the past two years sales have declined by 15% in the U.S., Coke’s biggest market. Their global growth over the last two years has been a measly 1%.Sure sounds like it’s time to update someone’s product development definition!
Coke, the company, is dependent on sales of sodas. Roughly 70% of their revenues comes from this line of products. Their portfolio of sodas does not just include Coke, taken together the portfolio is estimated to be worth $20B. One of the big problems that Coke has run into is that one of their largest markets, the baby boomer generation, is turning away from their product. This segment of the market is seeking products are healthier, taster, and are more unique. They are starting to shun mass marketed products like Coke.
The market that they serve is changing and Coke seems to understand this. They have tried in the past to diversity their product offerings. They purchased EnergyBrands who make the Glaceau Vitaminwater product for $4.1B in 2007. However, soon after that purchase growth in this area slowed and everyone thought that the purchase price was too expensive. Coke has also made investments in Monster Energy and the coffee machine maker Keurig.
Coke’s Plans For The Future
Coke has a goal for the future: they want to return to the high single digit growth level (can you say 9%?). The product managers at Coke are under a lot of pressure to find ways to make this happen. Some creative ideas are being explored. One such idea is a new soda fountain machine. This machine, called FreeStyle, has the ability to allow consumers to mix and match 100 different flavors of soda. Now that’s something to add to your product manager resume.
The secret to Coke’s long term growth may not lie in its products. Instead, it may reside in how those products are created and distributed. This is why Coke spent US$12B to purchase most of their North American bottling and distribution operations. The purpose of this purchase was to allow the product managers to work with the rest of the company and find ways to get Coke’s profits moving by finding ways to improve their manufacturing and distribution operations.
One other area that the product managers are looking into is advertising. Coke already spends a great deal on advertising: $3.3B in 2013. However, the product managers are considering increasing this by US$1B in order to once again capture the attention of their target customers. Coke’s advertising has always been powerful and effective; however, will it do enough to boost sales this time?
What All Of This Means For You
Becoming a product manager at Coke sure seems like it would be a dream job. That is until you take the time to think about what Coke is going through right now: the world has stopped drinking their primary source of revenue. Yes, this would be a good job, but it would come with it’s own set of unique challenges that might not have been spelled out in your product manager job description.
Coke is struggling because baby boomers are changing their eating habits. Their product managers are searching for new ways to keep their business growing. Their techniques so far have included creating a new type of soda fountain, purchasing the means to manufacture and distribute their product, and producing more advertising for their products.
Managing a large and established product like Coke is a significant challenge. Coke products come with their own unique sets of issues that need to be dealt with. The benefit of working for Coke is that the firm has a great deal of money. If their product managers make the right decisions, then they’ll be able to reverse the current situation and once again make the Coke products a success in the future.
Question For You: What do you think the first thing that Coke product managers should do to turn things around for Coke?
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What We’ll Be Talking About Next Time
There are a lot of companies that a product manager can work for and it sure feels like I’ve worked for many of them. During my career so far, I’ve worked for four very large international firms and four startups. I can tell you that when I’ve been working for a startup, money has always been tight. However, as a product manager, I still needed to let customers know about my product and why they needed it. Product promotion on a budget is a skill that every product manager needs to have!