What's Ailing Coca-Cola?

Last Updated Aug 20, 2007 9:02 PM EDT

For the past two years Coke has been losing drinkers to low-sugar alternatives. So Coke, responding to consumer demand for healthier drinks, starts bottling Coke Zero, a sugar-free and zero calorie variation of Coca-Cola.

Smart move right? Maybe in the short term, but Coke still faces strategic challenges in order to keep its supremacy among drink makers, says Erich Joachimsthaler, author of "Hidden in Plain Sight: How to Find and Execute Your Company's Next Big Growth Strategy." Here's his post on Coke in Harvard Business Online:

"Coke should invest in understanding what really matters to consumers as they live their daily lives. Then, Coke should focus its innovation efforts not around new products, but around further embedding itself into consumers' lives. The end result may indeed be new product, but it also may be a new business model, delivery mechanism, or just a new brand-building program. Consider how such a focus fueled the growth of Starbucks, which now claims 45 minutes per month from its average customer across 18 visits. That's not simply because of the coffee or even the experience, it's because Starbucks stores and products are everywhere consumers are. With the strength and heritage of its brand, there's no reason Coke can't achieve a similar success."
So far Coke Zero and non-carbonated drinks like Powerade and Minute Maid juices have boosted Coke's revenues. But its sluggish fizzy drink sales indicate that Coke needs to rethink how it sells its sodas.