CASE STUDY
COCA COLA: Tapping Into the Power of Local Entrepreneurial Talent.
Introduction
Coca-Cola is the world’s leading owner and marketer of nonalcoholic
beverage brands. With sales of 24.4 billion cases in over 200 countries
worldwide in the last year alone, Coca-Cola is ubiquitous in both
developed and developing countries. However, maintaining a strong
brand name and launching innovative marketing campaigns is only
part of their massive success.
Coca-Cola tailors their marketing efforts based on the country’s
maturity. They have disciplined marketing strategies that focus on
driving volume in emerging market, increasing our brand value in
developing markets and growing profit in our most developed
markets.
 In emerging markets, company is investing in infrastructure
programs that drive volume through increased access to
consumers.
 In developing markets, where consumer access has largely
been established, the focus is on differentiating the brand.
 In developed markets, it continues to invest in brands and
infrastructure programs, but at a slower rate than revenue
growth.
The Strategy
In developed countries, Coca-Cola primarily uses traditional
distribution models where large amounts of product are delivered via
trucks or other motorized vehicles to large retail outlets. In
developing countries, road infrastructure, terrain, retail market, cost
implications and customer needs are vastly different and require a
more tailored approach.
This case study focuses on identifying the mechanisms that allow
Coca-Cola to make their product available to consumers in even the
most remote areas of the world, through innovative distribution
system. The case study emphasizes on tapping into the power of local
entrepreneurial talent, who are closer to the ground and can do the
seemingly impossible; and marketing their products as aspirational.
Micro Distribution Center (MDC)
In Africa, Coca-Cola uses full range of distribution methods
depending on the sub-market requirements. In developed, urban areas,
Coca-Cola and their bottling partners use the traditional model for
supplying large retailers through delivery trucks. Retailers here
include grocery stores, hotels, universities, and other large institutions.
In the remaining urban and peri-urban areas, where the large
proportion of retail outlets are small neighborhood restaurants or bars,
corner stores, one-person kiosks, Coca-Cola has adopted a manual
delivery approach working with small-scale distributors to deliver
products to small-scale retailers. This approach is called the Micro
Distribution Center (MDC) model.
MDCs are independently owned, low-cost businesses created to
service emerging urban retail markets where classic distribution
models are not effective or efficient. The MDC model identifies and
engages independent entrepreneurs, who receive business training and
in some situations financing, to become an MDC owner. The majority
of MDC owners are not from the poorest segment of the population,
but instead have a minimum of primary school education and have
previously been employed or business, employ others, raise
productivity, and increase incomes on a sustained basis.
Characteristics of the MDC include:
 Central point of warehousing of product, with a manageable
coverage area and defined customer base (typically about
150 retail outlets)
 Distribution of product is mostly manual (e.g. bicycle,
pushcart) to keep costs to a minimum
 Outlets served are typically low-volume with high service
frequency requirements and limited cash flow, requiring fast
turnaround of stock.
Today, there are more than 2,800 MDC businesses, generating more
than $550 million in revenues in high density urban areas throughout
East Africa, including Ethiopia, Kenya, Mozambique, Tanzania, and
Uganda. In Ethiopia alone, MDCs account for 80% of the country’s
sales.
MDC owners earn a set profit margin for each case sold, equivalent to
the difference between the cost to the MDC for purchasing a case of
beverages and the retail price to customers. This pre-determined profit
margin, in the range of 3 to 5%, helps maintain a consistent retail
price across all MDCs and incentivizes high quantity, volume-driven
sales to derive satisfactory income. In addition to the profit margin,
some Coca-Cola subsidiaries offer monthly bonuses based on the
ability to meet sales targets.
Training and Skill Development
MDC owners also receive management training in areas of basic
business skills, warehouse and distribution management, account
development, merchandising and customer service.
In short, the Micro Distribution Center is a win-win solution for both
Coca-Cola and MDC owners, and is a critical element to the
company’s ability to distribute product in emerging markets.
QUESTIONS:
1. What is the role of an Entrepreneur in the implementation of
MDC?
2. Discuss the impact of such programs in developing Social
Entrepreneurship?
3. Would you propose a MDC model for rural areas, for other
FMCG companies to create Entrepreneurs? Give
appropriate reasons (YES/NO)