The Coca-Cola Company becomes the largest
beverage company in the World. Thanks to its solid strategy and its distinctive
tasting soft drink. Coca-Cola history began in 1886 when the curiosity of an American
pharmacist called Dr. John S. Pemberton led him to create varies of syrup which
were mixed with carbonated. Actually Coca Cola Company refreshes consumers with
numerous sparkling and different brands. Globally, the Coca-Cola Company is renowned
the biggest soft drink provider, having the largest beverage distribution
system within 200 countries with an average of 1.6 billion drink sold per day.
The Coca-Cola Company has achieved a local focus due to its strong supply chain
system which links the Company with approximately 300 bottling partners
The Coca Cola Company operates with 3 bottling
partners: NABC (North Africa Bottling Company), ABC (Atlas Bottling Company)
& SBGS (Société des Boissons Gazeuses de Souss).
North Africa Bottling Company (NABC) generated MMAD 2,5 in 2016 and serves over
90,000 clients. Its mainly mission is oriented to:
moments of recreation and happiness.
value and make a difference.
To continue thriving the business, NABC
Company has adopted a roadmap with its partners called “The 2020 Vision”. This
vision serves as a framework and guides every section of its business. It is an
objective that guarantees sustainable growth of the 6Ps i.e., People, Portfolio, Partners,
Planet, Productivity. Their corporate values are passion,
excellence, responsibility, diversity, and sustainability.
1. Production processes
NABC controls full production processes with
sophisticated equipment and testing programs in order to meet and exceed
consumers’ expectations. NABC commitment to producing, bottling and
distributing high-quality drinks is monitored by ISO 9001 and ISO 22000, as
well as some internal Quality and Food Safety policies such as “the global
standards” of The Coca?Cola Company.
NABC has invested in electronic bottle
inspection equipment on all refillable bottling production lines in order to diagnose
and reject the tiniest irregularity that might exist in beverage industry. Its
production process starts with sugar, juices, flavors and concentrated base. Its
finished products are packaged in PET, Return Glass Bottles RGB, Cans, Bag in Box
During the production process, the water has special
treatment to ensure the microbiological safety and the correct concentration of
naturally dissolved salts, in compliance with specific compositional and
The syrup is mixed in special tanks by
dissolving sugar in the treated water, then filtering the water to remove any miscellaneous.
After this stage, simple syrup is added to the concentrate or the various
basic preparations used for the various drinks, thus becoming “final syrup”.
For Sparkling Drinks, the cooled and treated
water is mixed with the final syrup and the carbon dioxide that gives the
product its characteristic effervescence. Then, the drink becomes ready to be
packaged in perfectly clean containers, hermetically sealed, labeled, coded and
tested in modern automatic plants.
To satisfy its clients, NABC has four plants that
produce and serve nearly 90 000 clients and over 26 distribution centers.
The production includes sparkling and still brands in different packaging: Coca
Cola, Diet Cola, Fanta Orange, Fanta lemon, Hawai Tropical, Poms, Sprite,
Schweppes Citron, Schweppes Tonic, Tops, Maimi Orange, Miami Mangue, Miami
Multivitamins, Miami Peche, Pulpy orange, Pulpy Tropical, Monster, Burn, Ciel
and Bonaqua (Water).
Even if NABC has the capacity and flexibility
to produce in different plants, the production and fulfillment costs remains high
for many reasons. Production has decreased with the economic crisis, also, the selling
price increased, and it was a must to either reduce plants or lines of
production to cut costs and create economies of scale.
2. The Coca-Cola Quality System (TCCQS)
& Operating Requirements (KORE).
Within Coca Cola Company, the quality is in the
heart of its philosophy and mission. According to an interview made with NABC
Quality manager after a visit to Casablanca plant, The “TCCMS” The
Coca Cola Management System, which includes the quality system (TCCQS), should
keep pace with new regulations, quality management
methods, and industry best practices. There is a big awareness of the
importance of food safety either in plant or throughout supply chain and
To face the increase in needs and
expectations of partners, employees, customers and stakeholders, NABC has developed
with its partners a framework and management system model to replace the precedent
model known as The Coca-Cola Management System (TCCMS). The new KORE operating
requirements emphasize the importance of quality and sustainability to satisfy current
and future stakeholder expectations. Indeed, the company North Africa Bottling
Company has developed and created a perfect executive plan to inspire people
within the organization to achieve the main corporate vision for 2020.
Like any new operation management system that
encourages collaboration throughout different levels in the organization, CORE has
provided more flexibility, improved creativity, innovation and learning, and supported
development and productivity within the core processes of the organization. In this
CORE, the responsibility involves that all individuals at operations both in
manufacturing and in supply chain process, promote sustainability and ensure the
best certification achievement.
The Quality commitment focuses on delivering
quality excellence effectively and efficiently in the following focus areas:
Supplier Management: Giving and producing high-quality of finished
Global Standards: consistent and high execution by the company, bottling
company and its suppliers,
Global Governance: assurance that all products and services exceed the
expectations of partners, consumers and stakeholders,
Continuous Improvement across the global system: proactive evaluation of
the whole process to control all factors impacting product, equity, customers
III. Risk Management
to control all processes and achieve operational and strategic objectives, NABC
implements its ERM systems by creating an auditing department connected
directly to the Board of Directors, to the NABC Business Unit CEO, to CFO, and to
the existing audit department manager.
As soon as the Risk Management
System will be completely implemented, integrated Risk Rating criteria will be
developed covering all risks and associated controls of the company as detailed
in Appendix 1:
1. Risk identification
Risk identification is the first step that
leads to risk assessment process. It is mandatory to start with identifying all
risks by using many techniques like SWOT, check lists, interviewing, observing, brainstorming,
After interviewing most executive comity
members and checking some audit and financial reports, I identified a list of
risks in Appendix 2 including the six most important risks because of their
severity and likelihood.
of the market:
Most production is sold in few months during
the peak season which corresponds to summer time, but a very slow activity in winter
and autumn confirming that beverage is truly a seasonal market in countries
such as Morocco
Even if the S process is implemented and takes into
consideration the capacity trends and shelf life, some raw materials supply are
unpredictable like fuel, CO2, Sugar, and caps supply, which represent a real issue
on high season especially in July and August just because of suppliers’
To negotiate more advantages and get more concession,
employees are affiliated to unions and can go on strike. Sometimes employees put
pressure on management and end up with many operating losses.
NABC has high competition with its peers like Pepsi and
Ice Cola. Competitors are offering single serve product under a lower price (examples
of can 25cl and PET 1L)
This risk includes all incidents that cause material
damages in finished products that might happen during transportation inter-site,
inter-agencies, and between agencies and clients. These damages occur for reasons
Crush during loading or unloading operations,
Breakage during transportation in transit,
Partial or total theft while in transit,
Total loss following a fire or an explosion
Unpredictable stop on line impacted the
production cost and can decrease Operating Income before depreciation and
amortization OIBDA in case the product does not exist in stock.
2. Risk assessment
Risk assessment is an integral part of the Enterprise
risk Management process. In other words, the types of risk vary in terms of severity,
frequency and impact. Risk assessment gives management good understanding of actions
to take and risk-response to adopt.
of the market:
The contribution margin in winter and autumn does not
cover the average of fixed cost. Accordingly to Rating Categories (appendix 1),
this risk is classified (High frequency/High Severity).
Lack of raw materials, one week in the month
of August impacts the volume and OIBDA respectively for KUCs 2 500 and Keur
3816. According to Rating Categories (Appendix 1), this risk is classified as (Low
Using numbers from income statement, two weeks of strike
cost approximately Keur 1252 or 3,6% of OIBDA. According to Rating Categories (Appendix
1), this risk is classified as (Low frequency/Moderate Severity).
Competition in beverages is fierce. To
maintain its market share and increased profits, NABC gives more specials to
its customers and consumers. Also, it supports production with many marketing
plans to achieve its strategic objectives.
According to Rating Categories (Appendix 1), this risk is
raked as (High frequency/High Severity).
Using internal data from SAP, There were about 200 accidents
including those which happened in plants and agencies. Admitting average
capacity per truck to 2000 unit cases and NSR of 3.03 per unit cases, the
impact on OIBDA is Keur 1214 or 3,5% of OIBDA. Accordingly to Rating Categories
(Appendix 1), this risk is classified as (High frequency/Moderate
In 2016 the net impact of sales was K.Ucs 1000 generating
OIBDA for Keur 1.527 or 4.4% (Contribution margin per case x 1000). According
to Rating Categories (Appendix 1), this risk is classified as (High frequency/Moderate
3. Risk Response and Mitigation
Some risks identified can be controlled, eliminated
or reduced. However, most risks are very difficult to mitigate particularly those
with high-impact and low-probability. Therefore, the risk mitigation strategy to
apply needs to have long-term implication from management.
of the market:
To control this variability, the production plan
is adapted according to market needs. In other words, the production is
increased in summer “high season”, and drop in other seasons. Inventory is optimized
and held to the minimum taking into consideration that beverages are perishable
and should be stocked on covered warehouse. Also, controllable fixed costs
should be reduced by managing payroll and other operating expenses.
Separation is the best option that creates more competition
between suppliers. The company has transformed this risk to an opportunity. This
means that the company makes savings on purchase and at the same time increases
quality of raw material.
The cause analysis of major incidents
demonstrates that the lack of motivation within the company kills productivity
and creates many social conflicts between employees and management. That is why
an equitable remuneration system based on annual evaluation is required to
satisfy shareholders’ objectives and employees’ needs.
Diversification is one of the options that the company can
adopt to maintain volume and profitability. This means that Coca cola should
develop additional channels to export finished products to other countries. A second
option is that Coca cola has an ability to use the economy of scale advantage because
of its big market share (approximately 80%) to reduce the price or to make more
specials. The negative impact by the drop in price can be automatically adjusted
by the increase in volume.
product damages: (Low frequency/High Severity)
The best way to cover this risk is to contract
additional insurance plans. This financial option provides adequate coverage
when transporting goods and limit uncertain losses to fixed costs.
The company has two choices to increase lines
utilization and improve yields. First, to upgrade obsolete equipment, and
second, to replace old lines. This business case should confirm if ROI is reasonable