III. Slowdown in Russian economy: the viability of Coca-Cola’s strategies.

8. “Russia, being one of the emerging economies has also been hit hard by the global financial crises”. Examine the impact of global economic crisis on the Russian beverage industry.

Russia, being one of the emerging economies has also been hit by global financial crisis. After the economic recession in 1998, it’s economy started establishing slowly. Russia’s microeconomic environment was highly volatile. High inflation and fluctuations in domestic demand increased country risk deterring foreign investment in productive fixed assets. The price liberalization initiated by Yeltsin led to inflation that resulted in frequent price increases (for example, during a six month period in 1992 prices of consumer goods rose on 15 occasions). The rises in prices of fuel and raw materials caused a fall in the overall demand for goods, along with similar trends in the agricultural sector. Rising feed prices caused the reduction of the total number of livestock and the reduction of the production of meat and dairy produce by 25 %. Living standards in Russia plummeted and some 40% of the population fell below the poverty line.

9. Analyze the reasons for the business of Coke in Russia being hit by the global financial crisis.

Russia was struggled by global financial crisis that resulted in low disposable income, which created fear among Russians. As a measure, people started spending their money cautiously. They are optinh for foreign brands. Local governments influenced bankruptcy enforcement. Salaries and appointment clauses in employment contracts of judges often gave local governments direct control over the judges. This could introduce political distortions in the application and enforcement of bankruptcy laws as governments were usually motivated to prevent layoffs from company closures

10. “You still sail a ship the same way even in an economic storm, and the way we sail is to innovate an to get into new segments. This is an emerging market here and a market in which people are still experimenting, so we need to get into all the segments”. Evaluate the strategies adopted by Coke in the wake of economic downturn in Russia. Is the company prudent enough to roll out new strategies / products especially when the consumption is decreasing drastically?

Coke revamped its marketing and distribution activities in Russia. They have strong distribution network in Russia. As a part of its promotional strategies, Coke did not cut down its advertising budget while most of the companies are trimming their spending on ads, to take advantage of the lower ad rates prevailing across the country. Towards the end of the review period, new flavors were launched in almost all soft drinks categories. The most successful of these, however, were soft drinks flavored to resemble alcoholic cocktails, including mojito-flavored soft drinks and other non-cola soft drinks which fully represent the tastes of globally popular alcoholic cocktails. Consumer demand for such new products increased and, as a result, this trend spread to other categories. 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.

11. Discuss the feasibility of Coke betting on the flat economy of Russia. What other strategies do you suggest for Coke to navigate through Russia’s beverage’s market during recessionary time?

Creative excellence has always been at the heart of Coca Cola’s advertising and they have decided that content is now the key to marketing in the 21st century on a social web. In my opinion it’s definitely feasible of Coke betting on the flat of Russia. My opinion is to make more researches and only look in the future and continue to encourage consumers. During recession it would be better not to change prices.

Management Issues of Transition Economy

Coca-Cola in Russia: Expecting Fat Growth in a Flat Economy. © IBSCDC. 2009