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Plekhanov Russian University of Economics

Economics and Management of the Firm

Coca-Cola in Russia: Expecting Fat Growth in a Flat Economy Structured Assignment

SA has a logically sequenced questions based on a specific case study. These questions are meant to enhance the logical and analytical skills of the students. Students are advised to attempt a SA after they have acquired a reasonable conceptual understanding as indicated below:

  • Michael Porter’s “Five Forces Model”.

  • Marketing Your Way Through a Recession – Quelch John, Harvard Business School Working Knowledge, March 2008.

  • Recipe for Success – Jackson John, et al.

  • Assessing Russian Consumers’ Imported Versus Domestic Product Bias – Thelen Shawn, et al.

Instructions

  • Carefully going through the case and additional materials before.

  • Look through all the questions and statements before getting started.

  • Refer the case as often as needed. It is an “open book” assignment.

  • Write your answers in as much details as possible. Do not write cryptic or too brief answers in telegraphic language.

  • Attempt to answer all the questions in all sections.

  • For a few questions, there may neither be “one” answer, or “correct” answer. Therefore, give your analysis and logic wherever required. Develop your answers in an integrated manner drawing from your understanding of the case.

  • Use extra sheets, if needed.

Name of Student Tanchevskaya Elisaveta

Date 22/05/2015

Instructor: Anna A. Dokukina

I. Growth Drivers for Beverage Market in Russia

1. When one thinks about Russia, the beverage that comes to mind is “Vodka”, despite “tea” being a national drink. What is the market for non-alcoholic beverages in Russia, popularly known for its consumption of alcoholic beverages?

Russian market of soft drinks and mineral waters can be divided into two segments: sugary (drinks, cocktails, carbonated water and so on) and sugarless (mineral and drinking water) soft drinks. The prevailing consumer trends in soft drinks during the review period can be characterized by two opposing factors. On one hand, Russian consumers showed an increasing interest in natural products as they remained concerned about their health. On the other hand, due to the economic slowdown and declining purchasing power, increasing numbers of Russian consumers became more price-sensitive and this led into reduce their spending to only the most essential purchases. Healthy beverages, are, however, rather expensive in Russia and only those consumers who have high disposable incomes can afford such soft drinks

2. “This increased the demand for foreign beverage brands, which in turn increased the business opportunities for various foreign players in Russia». Analyze the perception of the customers, and potential of the soft drinks markets in Russia and its growth drivers.

The Russian soft drinks industry continued to record positive development in 2014. Positive growth was influenced by the frequent use of strong price promotions, growing competition, improvements in distribution, numerous new launches product launches and growing consumer interest in soft drinks. The categories which recorded the highest growth rates in volume terms were energy drinks, RTD coffee, RTD tea and sports drinks, mainly because of the low bases from which these categories are rising and the fact that they are still a long way from saturation.

In spite of the fact that Russia faces ongoing economic and political instability, the Russian soft drinks industry is expected to record positive growth over the forecast period. The leading companies in the industry are expected to continue launching new products, supporting these new launches with strong promotional activities. Furthermore, retailers are expected to be active in terms of providing discounts and special offers in order to attract price-sensitive consumers.

3. Using Porter’s “Five Forces Model”, analyze Russia’s soft drink market.

The soft drink market is the largest group in the beverage industry.

1) Threat of new entrants Medium pressure-entry barriers is relatively low for the beverage industry

2) Threat of substitute products Medium to high pressure

3) The Bargaining power for buyers Low pressure (the individual buyers don’t press on Coca Cola; customers holding the greatest potential for longterm profit growth)

4) The Bargaining Power for suppliers Low pressure (The main ingredients for soft drinks include carbonated water, caffeine)

5) Rivalry among existing firms High pressure (The main competitor is Pepsi which also has a wide range of beverage products)

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