CHAPTER 2 Internal and external analysis

FritoLay: big food has a lot on its plate

I will always remember the first time I tried to buy a packet of crisps – or potato chips, if you prefer – in
a New York supermarket. In vain, I searched for the single-portion packets with which Britons are
familiar: all I could see on the shelves were rows and rows of what appeared to be party-sized bags.
Then suddenly, I noticed the slogan on one of them. “Get your own bag!”, it screamed, and I realized
with amazement and awe that, in the land of plenty, these enormous bags were intended for a party of
one. That was in 1993, and the crisps with the slogan were Frito-Lay’s Ruffles. In those days, you
could not go to Frito-Lay’s website to check the crisps’ calorie content. Today, however, you can, and
you find that they weigh in at 160 calories to the ounce. On that basis, an 8 oz. get-your-own bag
would contain 1,280 calories, more than half the average male’s total energy needs for a day – and
that is before you count the fizzy drinks or beer required to wash the crisps down.

I was thinking of that incident this week as news leaked of Unilever’s planned cuts in its sales targets,
announced on Thursday. As food companies go, Unilever is better than most: a lot of its products are
reasonably nutritious and some, such as its cholesterol-busting spreads, can improve people’s health.
But even Unilever has been caught up in the sudden panic over obesity. Four years ago, its
simultaneous acquisition of SlimFast Foods, the slimming company, and Ben & Jerry’s Homemade,
the fattening company, looked like a clever each-way bet. However, as people have become fatter and
more desperate for a miracle remedy, Atkins has replaced SlimFast as the diet of choice, while Ben &
Jerry’s high-fat, premium ice-creams have begun to look gross. […]

Photo: Keith Homan/123RF

Still, things could be worse. It is a curious fact of life that in the food and drink industry, fat, salt and
sugar have been the building blocks of success for most of the world’s big brand owners. Coca-Cola,
PepsiCo, McDonald’s, Burger King, Cadbury Schweppes, Mars, Hershey – all are founded on
products now blamed for causing obesity; and most of the rest – Kraft Foods, Nestlé, HJ Heinz,
Kellogg, General Mills, Campbell Soup – make an unhealthily large contribution to the output of fatty,
salty or sugary foods that are accused of contributing to the problem. […] Obviously, fattening food is
not tobacco: consumed in reasonable quantities, it can be a harmless treat. But given our sudden
awareness of the growing human and social costs of obesity, I suspect manufacturers of the most
obviously unhealthy foods and drinks are now where the tobacco industry was roughly 40 years ago,
when studies on both sides of the Atlantic finally established the link between cigarettes and cancer.
Those studies did not, of course, lead to a ban on cigarette sales, but they did mark the beginning of
the tobacco industry’s demonization. Public health campaigns began warning people of the dangers of
smoking, increasing restrictions were placed on manufacturer’s ability to advertise, tough new labelling
laws were introduced and anti-smoking
 organizations sprang up to lobby for tobacco controls. Smoking went into decline and eventually, of
course, the litigation began. […] Just as the tobacco industry responded to the health scares by
introducing ‘light’ versions of its top brands, for example, the food industry is producing low-fat, low-
sugar or low-salt versions of nearly all its best-known brands. In this context, it is worth noting that
light cigarettes are now discredited and Philip Morris is in the process of appealing against a $10.1
billion judgement that it deceived Illinois smokers into believing the cigarettes were safer than
regular ones. Food companies seem to be leaving themselves open to similar claims, for example
by offering reduced- fat or low-fat products that contain nearly as many calories as the regular
version.

For food companies, the good news is that, even after 40 years of tobacco’s demonization, people
still smoke and the tobacco industry is still making profits. On that basis, I confidently predict that
even the food industry’s most fattening companies can look forward to a secure future, though they
may have to forget about growth, and certainly about being much loved.

Source: Richard Tomkins, ‘Big food has a lot on its plate’, FT.com, Financial Times, February 12th, 2003.
Principles of Marketing, Kotler, Wong, Saunders and Armstrong, 4th European edition, p. 86. Pearson
Education. Case shortened and adjusted by Joris Leeman, July 21th, 2009

Case questions

1. Have a look at the website of www.thecoca-colacompany.com and

www.philipmorrisusa.com. Create a brief company overview of each company, outlining:
vision/mission, business definition and objectives, sales by product line and by geographic
market.
Coca Cola
Vision/mission:
Refresh the world. Make a difference.

Our vision is to craft the brands and choice of drinks that people love, to refresh them in body & spirit.
And done in ways that create a more sustainable business and better shared future that makes a
difference in people’s lives, communities and our planet.

Business definition and objectives

Coca Cola is a global business that operates on a local scale, in every community where they do
business. They are able to create global reach with a local focus because of the strength of the
Coca-Cola supply chain, which comprises their company and their bottling partners worldwide.

Their system operates through multiple local channels. The primary way that their products reach the
marketplace starts with Coca-Cola, which manufactures and sells concentrates, beverage bases and
syrups to bottling operations. Additionally, they own the brands and are responsible for consumer
brand marketing initiatives. Their bottler partners manufacture, package, merchandise and distribute
final branded beverages to their customers and vending partners, which then sell our products to
consumers.

All bottling partners work closely with customers and selling partners to execute localized strategies
developed in partnership with their company.

Sales by product line

- Beverage concentrates and syrups
- Finished beverages
Geographic market
Africa, ASEAN & South Pacifiic, Eurasia & Middle East, Europe, Greater China & Mongolia, India &
Southwest Asia, Japan & South Korea, Latin America, North America.

Philip Morrisusa
Vision/mission:
Responsibly lead the transition of adult smokers to a smoke-free future.
- lead the industry in operating responsibly and preventing underage use of adult products.
- deliver a portfolio of innovative, FDA- authorized smoke-free products and equitably transition adult
smokers to them.
- maximise the profitability of their combustible products while appropriately balancing investments in
Malboro with funding growth of their smoke-free portfolio.
- invest in their manufacturing employees and facilities to enable them to be the manufacturers of
choice for all Altria’s current and future portfolio of tobacco products.
- seize leadership in the external environment through communications, engagement and science-
based policy and regulation solutions
- build employee capabilities to accelerate progress towards their vision and future evolve the way
they work and behave.
- help position Cronos as a leader in a highly responsible, regulated and legalized U.S. cannabis
market.
- maximise the contribution of Altria’s investments to their long-term value.

Business definition and objectives

Sales by product line

Cigarette Tobacco & Flavour ingredients, Cigarette non-tobacco ingredients.

Geographic market

2. Generate an internal analysis of the Coca-Cola Company by showing its organisation

structure and 7S model.

Organisational structure
I could not find the current organization structure on the website.
7S model
1. Shared values
- Leadership: the courage to shape a better future
- Collaboration: leverage collective genius
- Integrity: be real
- Accountability: if it is to be, it’s up to me
- Passion: committed in heart and mind
- Diversity: as inclusive as our brands
- Quality: What we do, we do well
2. Strategy
“As we continue our journey as a total beverage company, disciplined portfolio growth plays
an integral role in that journey. This disciplined portfolio growth is reinforced through a
constant focus on innovation, revenue growth management and improved execution – all
supported by integrated brand-building. We believe executing and improving upon these
initiatives forms the foundation to deliver strong results both today, and in the years ahead.”
3. Structure
Coca-Cola follows the decentralization within centralized model of organizing itself. While the
global headquarters retains its overall decision making, the corporation is divided into
regions and geographical territories in which it operates.

4. Staff
225 independent bottling partners employ more than 700.000 people.
5. Style
The culture is mission driven focused on refreshing mind, inspiring, optimism, one and only
making a difference from other companies. The company had stories which share real life
examples and inspired consumers as well as employees.
6. Skills
A significant part of Coca-Cola’s success is its emphasis on brand over product. They don’t
sell a soft drink in a bottle, they sell happiness in a bottle.

3. Do you think Coca-Cola is capable of internationalisation? If yes, why? What category

influences the way Coca-Cola can set up its internationalisation efforts?

Yes, Market development as a strategy

4. What are the major external trends impacting brand label manufacturers of crispy food?
Social: health (people must get healthier due to increasing obesity)

Convenience, taste, health and wellness, product innovations.

https://www.wm-strategy.com/news/snack-food-industry-trends-and-size

Health at convenience, functionality, sustainability, plant-based snacking, covid-19

https://www.foodbev.com/news/top-five-factors-impacting-the-snacking-industry-in-2020/

5. Create a trend analysis and draw a trend direction line together with a conclusion for the
crispy food business.
Health and inflation
Society is changing since they are more focused on healthier food and smaller portions.
Because of the inflation, food is getting more expensive and people can reduce their costs by buying
smaller portions.
high
 low high
low

Health: the society must get healthier and want to get healthier, therefore, the crispy food
business

6. What are the major external trends impacting brand label manufacturers of cigarettes?

Demographic: aging population, higher education

Economic: economic growth
Social: health
Ecological: product recycling

Incraesed disposable income

Increased population size
Growing public spending on health
Economic stagnation
https://www.smokefreeworld.org/wp-content/uploads/2021/12/Global%20Trends%20in
%20Nicotine%20Report%20December%202021.pdf

7. Create a trend analysis and draw a trend direction line together with a conclusion for the
cigarettes business.