An American classic, Coca-Cola (KO 0.68%) has been refreshing customers since 1886. Its blue-chip stock has surged more than 4,100% in the past 50 years. And with over 40% of the soft drink market, the beverage giant generated some $38 billion in sales last year. The company is ranked No. 93 on the prestigious Fortune 500 list and has a market cap in the range of $277 billion.
If all that doesn't convince you that it's a solid investment, here's another fun fact about Coke: Its biggest shareholder is none other than Warren Buffett, who says he'll never sell a single share. Here are five reasons why Coca-Cola has remained the undisputed leader in carbonated beverages for over 100 years.
1. Brand recognition
From 1886 to 1959, a bottle of Coca-Cola cost a nickel -- no more, no less. A lot happened during that 73-year period, including the Great Depression, Prohibition, and two world wars. But one thing Americans could depend on was that nickel bottle of Coke.
This created unparalleled brand recognition for Coca-Cola during this time, which became immensely popular and recognizable across the U.S. And once that popularity was well-established, Coke began increasing its prices. Nowadays, an individual glass bottle of Coke costs well over a dollar. However, keep in mind that with inflation taken into account, a nickel in 1929 would now equate to around $0.86 in today's money.
2. Marketing prowess
From Coke's seductive cocoa pod-inspired bottles to its timeless logo, the company's marketing has been undeniably successful over the years. Although now a multinational mega-corporation, Coca-Cola has kept marketing efforts simple. Friendly slogans like "Enjoy" and "Happiness" continue to drive business in the U.S. and abroad.
Product placement has, no doubt, been a huge advantage for Coca-Cola, and the company prides itself on being an "essential part of any movie experience both off and on the big screen." Coke regularly devotes a substantial portion of its revenue to advertising each year.
Image source: Coca-Cola.
3. International expansion efforts
Although Coca-Cola began exporting to Cuba in 1899, it wasn't until World War II that Coke's international expansion really kicked off. The company's president at the time ordered that all American soldiers overseas should have access to Coca-Cola, and the company began shipping crates to U.S. bases in Europe and the South Pacific.
Having inadvertently introduced its "delicious and refreshing" beverage to the rest of the world, Coca-Cola saw an increase in international demand. Coke soon started distributing its products across the globe, and the company is now established in over 200 countries worldwide.
4. Distancing from competition
Another reason Coca-Cola retains such a large share of the soft drink market is its ability to stay competitive among adversaries like PepsiCo and Keurig Dr. Pepper. Instead of selling a beverage, Coke fancies itself a lifestyle brand that sells "happiness" in a bottle.
While selling an experience versus a product has undoubtedly helped Coca-Cola keep its competitive edge, other efforts include an extensive, continually improving product line and excellent customer service.
5. A highly scalable franchise model
Last but not least, Coca-Cola's ability to franchise with bottlers around the globe has been indispensable to scalability. In 1899, Coke started selling its drink as a syrup which bottlers would mix with soda water.
This marked the beginning of "The Coca-Cola System," a network of partnerships that took the company's distribution to unprecedented levels. As local businesses in across the U.S. purchased the rights to mix and sell Coca-Cola, the company's bottling business became exceedingly localized.
But in the 1980s and 1990s, Coca-Cola's ownership reverted back to a centralized model where a national bottler handled the bulk of production. While this worked at the time, the company has since "refranchised" and once again diversified its bottling efforts as in the early days.
Today, there are nearly 225 bottlers all over the world that mix and bottle Coke's top-secret syrup. With this franchise model, Coca-Cola is not just one entity but a system of companies that can scale quickly and efficiently.
