ASSIGNMENT

CASE: MAKE EVERY DROP MATTER

Prepared for:

DR. A H M EHSANUL HUDA CHOWDHURY

Guest Faculty Course: M406 Brand Management

Prepared by:

UPOMA DUTTA
Roll: 21 Batch 17

Date of Submission: March 26, 2012 Institute of Business Administration, University of Dhaka

QUESTION 1
Based on the case, briefly summarize the initiatives of Coca Cola. Why is it necessary for a marketer like Coca Cola to take such kind of initiatives?

ANSWER
For several years, The Coca-Cola Company has been undertaking a number of initiatives for the management of water resources. Since water is the key ingredient of all of the beverages manufactured by this company, including its flagship product Coca-Cola, making the most effective and efficient use of this resource has become a subject of immense importance to the company which is striving to be a great corporate citizen. In doing so, the company is not just concerned about its own actions but also those of its thousands of independent bottling partners (such as Coca-Cola Amatil based in Australia). Not surprisingly, planet is one of the five major components of the five major components of the integrated vision of The Coca-Cola Company (the rest being people, partners, portfolio and profit). The case mentions about several initiatives taken by Coca Cola as part of its water management goal. Among them, the most crucial is the Global Water Stewardship Initiative; this is the name given to the program that has been implemented by The Coca-Cola Company in order to formalize its various activities ensuring responsible use of water and to bring all these activities under one umbrella project. From the case, it can be easily inferred that most of the tasks undertaken through the Global Water Stewardship Initiative can be divided into three areas Reducing, Recycling and Replenishing. Each of these areas is described in greater detail below:

Reducing: This refers to the companys tasks to minimize its use of water by achieving an increasing level of water efficiency every year. As Figure 1 shows, the average water use ratio (that is, the number of liters of water used for every liter of finished product) of its bottling plants all over the world has decreased from 3.12 in 2002 to 2.6 in 2005, Figure 1: Increasing Operational Efficiency of Coca-Cola registering an impressive improvement rate of 20 percent. Coca-Cola Amatil is the most efficient plant with a water use ratio of just 1.55. For Coca-Cola, operational efficiency is the result of conducting audits of water use and setting water reduction targets. In addition, using synthetic lubricants (instead of water) on production lines, repairing leaks in production equipment quickly, and harvesting rainwater are some of the other ways of minimizing water use.

Recycling: This refers to the initiatives taken by The Coca-Cola Company to reuse some of the water used in its manufacturing processes. For instance, in 2004, 81 per cent of the plants of The CocaCola Company all over the world had on-site effluent treatment plants for recycling wastewater. By

achieving strict compliance targets for effective wastewater treatment, the company has been able to slash down its water use since 2000 by 1 percent despite a 35 percent increase in production volume.

Replenishing: This refers to Coca-Colas initiatives to return the water that it uses back to the communities in which it is operating. It does this by forging partnerships with various non-for-profit organizations as well as governmental agencies. For instance, in 2005, the company started the Global Community-Watershed Partnership in association with USAID (United States Agency for International Development). This project, which took up around $3.5 million in just its first year, focused on increasing peoples access to safe water and on conserving water. It also partnered with Roundabout Outdoor to sponsor nine inverted windmills (known as Playpumps) in Eastern Cape, a region suffering from acute water scarcity; this has ensured access to fresh water for 200,000 people. In addition, The Coca-Cola Company has launched two projects in Mali and Kenya under the Global Environment and Technology Foundation and the Global Water Challenge (GWC) respectively to promote water supply and sanitation in the community.

Coca-Cola is a ubiquitous product all over the world and one of the most popular global brands. As a result, it is important that The Coca-Cola Company continues to maintain its superior brand image. As the case suggests, the company has clearly incorporated its corporate social responsibility, particularly its water management, initiatives into its core branding strategy in order to enhance its brand image. Why must the company capitalize on its CSR initiatives to develop a more positive brand image? To answer this, it is important to realize that Coca-Cola is operating in a mature industry where the competition is fierce and ever increasing. As a result, it is hard for The Coca-Cola Company to differentiate itself from other cola manufacturers solely on the basis of product features and price. For this reason, the company must turn to Corporate Societal Marketing to differentiate itself and strengthen its brand equity. As the case suggests, the company is devoting more and more of its resources to its Global Water Stewardship Initiative. From a marketing/branding perspective, the reasons behind such a strategy are not hard to understand. These reasons include:

Increasing Water Scarcity: Being a global brand, Coca-Cola is operating in regions suffering from acute water shortages, such as Mali, Western Kenya and even some drylands of Australia. The case mentions that 1.3 billion people do not have access to safe drinking water. For this very water scarcity, 2.5 billion people do not have access to proper sanitation. As a result, water scarcity, or rather fresh water scarcity, has become one of the most critical problems affecting the worlds population, especially those in the Bottom of the Pyramid. If Coca-Cola contributes to this problem or if it does not do anything to alleviate the problem, it may face retaliations from not only governmental agencies but also the communities.

Increasing Blame on Companies for Water Problems: In Australia, 89 percent of the water is used by the industry and farming. As a result, it is hard for people not to blame their water scarcity problems on a company like Coca-Cola which uses water as the key ingredient in its beverages. Through Global Water Stewardship Initiative, the company is trying to avoid this blame and make people believe that it is returning to the community and nature as much water as it is using in its beverages and production. Growing Concern for Sustainability of Businesses: The concern for sustainability of businesses is held by not only governmental agencies but also by consumers, who are now more aware of various environmental issues. For this reason, any business that takes up water and leaves less for the community will be perceived in a negative light by the consumers. In order to place itself as a sustainable business in consumers minds, Coca-Cola must use its Global Water Stewardship Initiative to show how its triple-target strategy (of reducing, recycling and replenishing water) contributes to its environmental sustainability.

QUESTION 2
Based on the case, do you think that the initiatives taken by Coca Cola as part of creating positive customer based brand equity will affect the brand knowledge of the target customers to create a positive attitude for Coca Cola? If so, how?

ANSWER
In my opinion, the initiatives of Coca-Coca (collectively known as Global Water Stewardship Initiative) can definitely strengthen the customer-based brand equity of Coca-Cola and thus enhance customers brand knowledge in a positive way. A survey1 among US consumers revealed a high correlation between positive brand image and a companys corporate social responsibility initiatives. For instance, 80 percent of the respondents said that they have a more positive image of a company that supports a cause that they care about. At the same time, 67 percent of the respondents confirmed that that they are more likely to switch to brands that are associated with a good cause. Moreover, 75 percent of the respondents said that they approve of cause programs as a business practice of a company. Given the survey results, it is evident that a strong focus on corporate social responsibility through the Global Water Stewardship Initiative can greatly augment Coca-Colas brand equity.
1

Hoeffler, S. and Keller, K.L. (2002). Building Brand Equity through Corporate Societal Marketing. Journal of Public Policy and Marketing. Retrieved from: http://public.kenanflagler.unc.edu/courses/mba/mba260e/Hoeffler_JPPM.pdf

It is important to note that Coca-Colas initiatives can be classified as internal and external. For instance, its water use reduction targets through operational efficiency in its production plants is an internal (that is, within the company) initiative. On the other hand, its partnerships with various non-government organizations and governmental agencies to promote access to fresh water and raise awareness on proper sanitation is an external (that is, outside the company) initiative. The external initiatives are more visible to those outside the company including the customers. However, if these external initiatives are not supplemented by internal initiatives, the company can never fully transform its image into a great corporate citizen. Hence, by focusing on both internal and external initiatives, The Coca-Cola Company has gained a stronger foothold into strengthening its customer-based brand equity. To increase credibility of its efforts, The Coca-Cola Company has chosen a cause that is integrated to its core product and operations water. After all, water is the major ingredient of its beverages. If The Coca-Cola Company had not supported the cause, it is likely that the company would have been blamed for the water crisis in the regions it is operating, including Australia where 89 percent of the water is used by the industry and farming. For Coca-Cola, the negative consequences of the blame would have been more serious. A customer in, say, the United States would not want to drink a glass of Coke at the expense of an eight-year old boy not having access to a glass of safe drinking water. Aggravating the water crisis, instead of alleviating it, would have resulted in much harm to the brand image of Coca-Cola. For instance, in the late 2010, BP, the third-largest oil company in the world, was found to be responsible for the Deepwater Horizon oil spill deemed as the worst oil spill in the history of the United States. After the company failed to properly handle this serious disaster, the value of the companys brand declined by several billions of dollars which eventually led to the exclusion of BP from the annual list of the Top 100 brands of Interbrand, a leading marketing consultancy2. A lower brand value may eventually lead to increased difficulty for BP to enter new markets and bid for new contracts. By ardently championing water stewardship all over the world, Coca-Cola can achieve the following results, all of which will be highly effective in enhancing its brand knowledge among its target customers:

Increased Brand Awareness: Many would argue that the companys flagship product Coca-Cola (or Coke) being a ubiquitous product would not require a higher level of brand awareness. However, it is important to recall that Coke is not the only product in the portfolio of the company. For instance, Coca-Cola Amatil is the principal bottler of the company in Australia, and even though Coca-Cola Amatil boasts 60 percent of the market share in carbonated beverages, the market share is lower across other product categories. Given this scenario, Coca-Cola Amatil can certainly achieve a higher market share in those product categories through higher brand awareness. Such higher

Sweney, M. (2010). BP Falls out of Index of Top 100 Brands after Deepwater Horizon Oil Spill. The Guardian. Retrieved from: http://www.guardian.co.uk/media/2010/sep/16/apple-iphone-interbrand

brand awareness can be achieved through its Global Water Stewardship Initiative (as part of its Corporate Societal Marketing program).

Favorable Brand Image: By championing water stewardship, The Coca-Cola Company can also differentiate itself from those cola manufacturers that have not yet taken drastic steps to maximize their operational efficiency and minimize their use of water. For instance, when the company goes out of its way to build Playpump windmills and provide schoolchildren with access to fresh drinking water, customers are going to perceive it as sincere to the needs of the community and the environment. At the same time, customers are going to perceive it as caring and genuine. All these perceived brand personality traits are going to add value to the brand of Coca-Cola and enhance its brand image. Greater Brand Credibility: Coca-Cola will be perceived as more credible or rather, more dependable when customers find it promoting adequate sanitation and hygiene through its Water for Schools project among poor schoolchildren in Western Kenya. Such brand credibility can eventually translate into increased sales for the company. For instance, when Always and Tampax two P&G brands of feminine hygiene products worked with Save the Children to build separate restrooms for girls in schools in Ethiopia, Nepal and South Africa, customers in the United States rewarded P&G with higher sales3. Greater Brand Engagement: When Coca-Cola provides water resource protection training people to local people in Australia or when it provides safe drinking water to the poor people in Mali, it indirectly urges customers all over the world to support the company in order to support its noble causes. Coca-Cola, which has established itself as a global brand, has been supporting the communities even in the most disadvantages areas (such as Western Kenya and Mali); this is one way through which it can gain greater approval from the people in those regions as well as those in developed countries. A company as big as The Coca-Cola Company can play an effective role albeit a small one for helping the communities in need; and if it does so, it can reap great rewards from its actions. For instance, British Airways in association with UNICEF has been collecting over 1 million every year for the past fifteen years through its Change for Good campaign that encourages travelers to donate their spare change; the money is later donated to UNICEF to support vulnerable children all over the world. By pledging its support to this noble cause, British Airways has been able to reduce its customer churn rate and build a pool of loyal customers4.

Carothers, K. (2011). Supporting Women, Nurturing Profits. Retrieved from: http://www.workingmother.com/blogs/thought-leaders/supporting-women-nurturing-profits 4 British Airways: Celebrating 15 Years of Change for Good. Retrieved from: http://www.britishairways.com/travel/15-years/public/en_gb