Coca-Cola's Marketing Challenges in Brazil: the Tubainas War

Problem Statement

Even thought Brazil was Coca-Cola’s third largest operation and second largest international market? Average consumption was relatively low, only 144 bottles of 237ml Coca-Cola per person annually, while in Mexico average number of consumed 237ml bottles was 402 and in US this number was equal to 462 bottles per capita. Although related sales in Brazil were low, it was the third Coca-Cola’s market in sales, Company’s market share here were about 50%, for Coca-Cola Company Brazil market was only the 20th in the profitability.

Constraints

Brazil is the developing country with fast growing economy. Thanks to the Brazilian economic stabilization plan which is called “Plano Real”. Because of the success of this plan, the purchasing power of the population was increased and the C class, which is actually a little lower than middle class but still, got the opportunity to buy such products as beverages, sweets and etc. As the C Class consists of about 12.6 mln Brazilians it becomes a large market segment for Coca-Cola Company. The problem is that people of this social class make the purchase decision according to 2 factors – quality and price, if they could find the same quality for the lower price, they choose the cheaper product.

In a competition for the Brazil market Coca-Cola faces the challenge with 2 major opponents. First one is the second big beverages company in the territory, Ambev, which is held about 17% of Brazil beverages market, has relatively low prices and extremely popular among the population with its beverages variety. The second rival and the most dangerous one in this situation for the Coca-Cola Company are the tubainas. Tubainas are about 700 small local companies, which in the majority operate only in their domestic towns. As they are in the majority are not even registered companies, they do not have to pay taxes. For that reason they can offer quality products at an extremely low prices, which is made them very popular among...