2012 Sales Forecast Analysis – Coca-Cola

By: Gavin P. Smith with teammates Christy Kollmar, Stephen Land, Fernando Tarafa and Mei-Shu Chang


Coca Cola Doc Pemberton

One hundred, twenty five years ago, Dr. John Pemberton had a simple idea.  Bring the joy of refreshment to people.  Essentially, through that refreshing feeling, people can find joy in life.  That is, and has always been, our product.  It is not syrup, bottles or cans. It is a simple yet vital part of every person’s life – joy.

In 1886, when Dr. Pemberton produced the first syrup and created Coca-Cola, he sold just around nine servings per day at just five cents per serving.  But, as you know, joy is infectious.  By World War II, we were in forty four countries, with over “five billion bottles of Coca-Cola consumed by military service personnel during the war.” (Teaching the World to Sing, 2011).  Today, one hundred and twenty five years later, we are a dominant, multi-national, multi-billion dollar firm that has established a “deep emotional bond between Coca-Cola and its consumers.” (Teaching the World to Sing, 2011)  While we will soon discuss numbers in regards to forecasting our future, there is something beyond the numbers that drives Coca-Cola demand.

In the last one hundred and twenty five years, the taste of our brand has “become more than just a soft drink, and consumers’ deep feelings, memories and loyalties to it came alive.” (Teaching the World to Sing, 2011) Coca-Cola is not just a beverage.  It is “a story of special moments.” (Teaching the World to Sing, 2011) It is the ambassador for the world.  It is “the world’s soft drink.” (Teaching the World to Sing, 2011) It is not just a product, but a bridge between cultures, classes, races and creeds.  Within this lies the intangible variable of Coca-Cola, “a timeless symbol of quality refreshment”, which does not fit into a spreadsheet or a ledger. (Teaching the World to Sing, 2011)

Today, the Coca-Cola Company operates in over 200 countries with nearly 450 brands.  (Teaching the World to Sing, 2011) We have successfully leveraged “a simple formula on a global scale: provide a moment of refreshment for a very small amount of money – a billion times a day.” (Teaching the World to Sing, 2011) Now, we face the future with shifting consumer demands.   Our goal must be to protect this leverage and innovate further to carry Coca-Cola into the next one hundred and twenty five years.

Coca Cola Graphic

Carbonated Soft Drinks in the United States

The carbonated soft drink industry had total sales exceeding 9.4 billion cases in 2009. This number represented a 2.1% decline from total sales in 2008. This decline in 2008 was preceded by a 3% fall in total sales in 2007. This trend of declining sales in the CSD industry has remained constant dating back to 2005. (Carbonated Soft Drinks in the United States, 2010)

The carbonated soft drink industry is comprised of retail sales of cola, diet cola, fruit flavor carbonates, and mixers. The sale of cola in the United States generated revenues of $25.1 billion and represents 40.4% of the overall market. Diet soda sales generated revenues of $15 billion and equated to 24.2% of the CSD revenues. A combination of fruit flavored carbonates and other carbonates are 28.7% of CSD sales and mixers make up the remaining 6.6%. (Carbonated Soft Drinks in the United States, 2010)

The industry is dominated by three companies who account for 81.6% of the total market place. Coca-Cola is the industry leader with 43.3% of the market share. Coca-Cola has a product line consisting of over 3300 products including Diet Coca-Cola, Sprite, and Fanta in over 200 countries. Pepsi is the next largest company with 29.9% of the market share and a product line that includes Diet Pepsi, Mountain Dew, and 7-Up. The third major player in the space is the Dr. Pepper Snapple Group that represents 10.3% of the industry. The Dr. Pepper Snapple Group is the only one of the three companies to gain market share in 2009. This was achieved through increased sales of their Diet Dr. Pepper product line. The overall trend of declining sales in carbonated soft drinks has affected industry leaders Coca-Cola and Pepsi the most as their sales numbers have retreated to 1996 levels. (Soft Drink Sales Fall but Dr. Pepper Gains Share, 2010)

Demand in this industry is primarily driven by taste and brand loyalty. Effective marketing is essential to success in this market as evidenced by the amount of advertising paid for by Coca-Cola and Pepsi. This industry is both capital intensive and the large companies possess economies of scale in distribution and production. These features make it virtually impossible for new competitors to enter the market unless they focus on a small, local market or create a significant innovation. (Nonalcoholic Beverage Industry, 2011)

In the middle of this decade, consumers began shifting away from carbonated soft drinks and instead purchasing products that are healthier. Tea, bottled water, and other non-carbonated beverages have been gaining market share from the carbonated soft drink producers. This change has contributed to the carbonated soft drink category not growing since 2004. These results are in stark contrast to the 1990s when sales numbers consistently rose 3% annually. (Carbonated Soft Drinks in the United States, 2010)

Factors Explaining Demand for Coca-Cola


After a thorough synthesis of all research results, we chose the following factors to evaluate as potential variables in Coca-Cola’s demand equation for CSD sales in the United States:

Obesity Rates Per Capita

Education and awareness of empty calorie carbonated drinks contributing to obesity rates in both children and adults will decrease the demand for Coca-Cola. Moreover, schools and educational institutions have banned CSD’s in schools making it impossible for students to purchase these beverages.  This will ultimately decrease the demand for CSD’s and stop the habit-forming consumption of these high calorie beverages making it a negative relationship.

Super Bowl Advertisement

The Super Bowl is America’s favorite game of the year with some of the best, most expensive advertisements endorsing mega corporations all aiming to outdo each other for the spotlight. Our initial hypothesis was that there would be a positive relationship between Super Bowl advertisement and the demand for Coca-Cola.  Millions are spent every year on just 30 second TV slots to advertise companies that are willing spend money to compete against others in the industry. We believe that if Coca Cola Company has spent millions of dollars every year on one night of advertising that the reasoning would be an increase in sales of Coca-Cola.

Overall Advertising

Companies advertise to drive notoriety and quality awareness to their products. Our initial hypothesis was that there would be a positive relationship between general advertising and the demand for Coca-Cola.  Coca-Cola is the most well-known, established brand in the world which can only have occurred with specialized, targeted advertising.

Price of Gasoline

Everyone who drives has to pay the price to purchase gasoline. This means if the price of gasoline were to rise, that consumers would opt to stay at home instead of going out to shops, convenience stores, and gas stations.  This steep rise in gas prices would lower the demand for Coca-Cola because less people would be driving around purchasing Coca-Cola out of their favorite corner store. The lesser people shop, the more Coca-Cola’s sales will decline, naturally leading to a decrease in demand making it a negative relationship.

Coca Cola Retro Vending MachineVending Machines Sales

Vending machines make the purchase of Coca-Cola very convenient; where consumers can simply throw in a dollar, grab their Coca-Cola and go.  This convenience in conjunction with consumers having to make a choice from a finite amount of beverage options naturally increases the demand for Coca-Cola. This means that the greater the annual sales of vending machines are in the US, the greater the annual demand for Coca-Cola, making it a positive relationship.

Sales of Spirits

Americans are no strangers to hard liquor, making “Jack and Coca-Cola” one of America’s favorite social mixed drinks. You can’t make a “Jack and Coca-Cola” without one of its main ingredients. Our initial hypothesis was that if the demand for Whiskey goes up, so will the demand for Coca-Cola, making it a positive relationship.

Convenience Store Sales

Convenience stores, corner shops, and gas stations are a great place to enter and be surrounded by a lot of CSD’s and snacks.  We hypothesized that the higher the convenience store sales, the higher the demand for Coca-Cola, making the relationship positive.

Population Growth

There are millions of people living in America all of which are exposed to Coca-Cola products.  We hypothesized that the greater the population grew in size, the greater the demand would be for Coca-Cola products.


When you light a fire you have to put it out.  Our initial hypothesis was that there would be a positive relationship between smoking and the demand for Coca-Cola because when consumers smoke cigarettes/cigars they will also drink Coca-Cola to cool down their throat.  We reverted back to our college days when all our friends were smoking cigarettes and drinking Coca-Cola.  We had to discover if there was really something to what we observed.



After running statistical testing through numerous variables the following became part of Coca-Cola’s demand equation:

Own Price

The fundamental law of demand applies to Coca-Cola’s own price, which makes it one of the most important indicators of sales in the market.  We hypothesized that the relationship between Coca-Cola’s own price and the demand for Coca-Cola would be negative.  This means if Coca-Cola were to set their price too high, that consumers would switch to a substitute product and the demand for Coca-Cola would decrease. This is because our product is elastic with many substitutes in the market, so consumer purchasing will be greatly affected by a higher price.

Bottled Water

Bottled water is a healthy alternative or substitute for a high calorie/high sugar CSD.  Especially when the US public is inundated with information on obesity and health & dental concerns related to consuming soda beverages.  Our hypothesis was that an increase in the demand for water would dramatically decrease the demand for Coca-Cola making the relationship negative.


Coffee has become the caffeinated accoutrement to America’s morning.  Over half of the population starts off their day stimulated by coffee.  We hypothesized that an increase of coffee sales would lead to a decrease for the demand of Coca-Cola due to it being a substitute beverage, making the relationship negative.  Coffee has also changed dramatically over the course of the last ten years.  Coffee is now a lifestyle and not just a way to begin your morning.

Unemployment Rates

Unemployment rates are increasing due to the nature of our current market, leaving a segment of the country without an excess of disposable income.  We hypothesized that a rise in unemployment rates would decrease the demand for Coca-Cola.  In Keynes’ Theory of Consumption, he developed the ‘marginal propensity to consume’.  An individual’s propensity to consume is “significantly influenced by unforeseen changes in the money value of an individual’s wealth.” (Keynes, 1936) The more income you have, the more predisposed you are to use it in the consumption of goods.  The inverse, then, is also assumed true.  A reduction in the amount of an individual’s income leads to a reduction in individual wealth, leading to a lower propensity to consume.  When Americans are low on disposable income, they are less likely to purchase Coca-Cola products because the money has to go to other necessary products or items.


Our Hypothesis (using selected variables)

  1. Increased consumption of both water (in gallons) and coffee (kg per capita) would decrease the sales of CSD (per capita)
  2. Higher Unemployment rate translates to reduced disposable income and therefore items that are not necessary (i.e. soft drinks) will see a decline in consumption.

Our Regression Model For Estimating Sales



Accuracy measures for the model


P value







Makes Sense




Makes Sense




Makes Sense




Makes Sense




The statistical forecasting method we used was Moving Averages. We used the model generated points and applied statistical forecast to estimate sales for years 2011 and 2012.


CSD Forecast

CSD Forecast[2]






















To have a sense of how accurate our model is, we used a statistical forecast to estimate the values of the inputs and then applied them to our equation.


Price Forecast





















Water Forecast





















Coffee Forecast





















Unemployment Forecast




















Estimated sales of CSD


Estimate CSD (Per Capita)

Estimate CSD

Forecast CSD










Coca Cola Sales Forecast Graph

Strategy & Recommendations

We found out that all of our selected variables had a negative coefficient. This finding suggests that these factors have an inverse relationship with Coca-Cola sales. Among all the variables, price had the most significant influence on Coca-Cola demand. Also, because price is the variable that Coca-Cola could control directly, we suggest that Coca-Cola be aware of their price as the first priority strategy to increase their sales; the lower the price the higher the sales.

Coca Cola Momentum

On the other hand, coffee, a substitute for natural caffeine, and bottled water, a substitute for healthy ready-to-go beverages, are the second influential factors for Coca-Cola to maintain their competitiveness. We think that Coca-Cola’s current investment on both coffee and bottled water industry is on the correct track while more and more consumers take health into account. The investment will not only secure their market share but also establish Coca-Cola as an indispensable position in daily requirement because of the more and more limited water resource.

As to increasing the demand of CSD, we suggest that we more aggressively connect to the younger generation through social media channels like Twitter and Facebook.   Through this venue we will increase revenue by targeting the younger segment early, create a habit, and establish loyalty to the Coca-Cola brand.

Also, based on the significance of unemployment rate to Coca-Cola’s demand, we should continue to pursue our corporate social responsibility by assisting with the creation of as many job opportunities as possible for the domestic job market. As long as people have jobs, they will not stop drinking Coca-Cola.  In addition, job creating could also show that Coca-Cola is socially responsible for this country and further refine the brand value.


With a better understanding of Coca-Cola through this project, we realize that the most valued asset of Coca-Cola is its brand. Whenever people think about Coca-Cola, they come up with happiness and joy. Coca-Cola is not just a beverage product but a lifestyle. We suggest Coca-Cola continue to grow and expand, placing more emphasis on building a better life for the country and to grow with its people.  Based on this growth, Coca-Cola will have an irreplaceable leading position in the future.


Appendix I

Minitab Regression Output:

Regression Analysis: CSD versus P, Water, Coffee, Unemp


The regression equation is

CSD = 37.8 – 6.46 P – 0.000447 Water – 0.414 Coffee – 0.229 Unemp


Predictor         Coef        SE Coef                 T      P    VIF

Constant        37.828       1.676           22.57  0.000

P                 -6.4555      0.5545         -11.64  0.000  6.272

Water       -0.00044686  0.00007447   -6.00  0.000  6.585

Coffee          -0.4137      0.2000          -2.07  0.051  1.321

Unemp        -0.22909     0.06813         -3.36  0.003  1.569


S = 0.379505   R-Sq = 95.1%   R-Sq(adj) = 94.1%

Analysis of Variance

Source          DF      SS      MS       F      P

Regression       4  58.368  14.592  101.32  0.000

Residual Error  21   3.024   0.144

Total           25  61.393



Works Cited For Variables

Baumer, K. (2011, February 3). Business Insider. Retrieved from www.businessinsider.com: http://articles.businessinsider.com/2011-02-03/sports/30029867_1_second-ad-super-bowl-ticket-prices-cbs-news

Behavioral Risk Factor Surveillance System Survey Data. (2010). Retrieved from Center for Disease Control and Prevention: http://www.cdc.gov/brfss/technical_infodata/surveydata/all_years/states_data.htm

Bureau of Economic Analysis. (2011, November 22). Retrieved from Current Dollar and Real GDP: http://www.bea.gov/national/index.htm#gdp

Bureau of Economic Analysis . (2011, November 23). Retrieved from Food and Beverage Stores: http://www.bea.gov/iTable/iTable.cfm?ReqID=12&step=1&acrdn=2

Bureau of Economic Analysis . (2011, November 23). Retrieved from Vending Machine Operators:


International Coffee Organization. (2008). Retrieved from http://earthtrends.wri.org/text/energy-resources/variable-294.html

Rodwan, J. G. (2010, May). Bottled Water 2009. Retrieved from Challenging Circumsatnces Persist: Future Growth

Anticipated: http://www.bottledwater.org/files/2009BWstats.pdf

Rowdan, J. G. (2003). Beverage Marketing Corporation. Retrieved from www.bottledwater.or: http://www.bottledwater.org/public/2002%20Market%20Report%20Findings%20as%20reported%20in%20April%202003.pdf

U.S. Energy Information Administration Monthly Energy Review (2011, November). Retrieved from

Image, Video and Graphic Sources

Coca-Cola. (2011, December 12). Retrieved from The Coca-Cola Company: www.coca-cola.com

YouTube. (2011, December 12). Retrieved from The Coca-Cola Company YouTube Channel: http://www.youtube.com/user/cocacola

*Note: All other presentation/report graphics sourced through the internet and are available in the public domain.

Works Cited For Report

Carbonated Soft Drinks in the United States. (2010, November 4). Retrieved from Data Monitor: http://360.datamonitor.com/Product?pid=85C81663-19EA-46B0-8823-4DAFB7198F99

Soft Drink Sales Fall but Dr. Pepper Gains Share. (2010, March 24). Retrieved from CNBC: http://www.cnbc.com/id/36016032/Soft_Drink_Sales_Fall_but_Dr_Pepper_Gains_Share

Nonalcoholic Beverage Industry. (2011, November 11). Retrieved from First Research: http://williamandmary.firstresearch-learn.com/industry.aspx?chapter=0&pid=164

Teaching the World to Sing. (2011). Retrieved from www.coca-cola.com: http://www.thecoca-colacompany.com/heritage/chronicle_birth_refreshing_idea.html

Bangalore, A. (2011, September 12). Twin Problems: Employment and Consumer Spending. Retrieved from http://www.fxstreet.com/fundamental/analysis-reports/daily-global-commentary/2011/09/12/

Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. London: McMillan.

[1] R2 = 95.1%   & R2(adj) = 94.1%

[2] Calculated as CSD per capita times estimated population.

2011 Estimated population: 312,757,974

2012 Estimated population: 315,728,135