F&N Beverages Marketing Sdn Bhd @ Coca-Cola

   F&N Beverages Marketing Sdn Bhd is Malaysia’s largest beverage manufacturer and distributor of soft drinks , is today a company worth as much as $3 billion  with  total workforce of 1,650 employees in 22 offices throughout the country. The headquarters of this company  where is located in Shah Alam, Selangor engage in three manufacturing plants nationwide, among which includes a state-of-the-art facility. In Malaysia, the distributor of Coca-Cola products consists Coca-Cola, Sprite and Aquarius natural mineral water otherwise F&NCC's product portfolio comprising F&N Orange,100 PLUS, F&N Fun Flavours and others. So how did this created? In 1886, Coca Cola was invented by Atlanta pharmacist John Pemberton and the soft drink was also first sold to the public at the soda fountain in 1886. In 1936, F&N becoming one of The Coca-Cola Company’s earliest franchisees in Asia. The company build well established 68-year relationship with the agreement with the Coca-Cola company. They also commit to a mandate of one system that is one vision and one goal; to serve Malaysian customers better in a certain ways and advance their share of the RM 2 billion ready- to - drink market.

  F&NCC adapts an oligopoly market structure which is leading in the beverage firm for years. Oligopoly is defined as a condition that exists when there are few number of firms dominating in a large market. By a few number of firms, each firms should be conscious interdependence to aware that its future expectation depend  on the policies and the rivals. F&NCC is included in oligopoly market because they are selling the homogeneous product and differentiated products which is known as same including terms of branding. For example, homogeneous products that can be found in any markets are like Coca cola and Pepsi therefore they can control over price but also would premeditate their action before change the price of their products. Thus, price of goods change is due to kinked demand curve. In term of pricing however, firms in oligopoly are price setters. F&N is able to control the pricing and usually sets the lowest price as compared to their competitors. The company use cut-throat competition to fascinate customer and increase their sales through the advertising.

  In this case of Coca- cola, there are number of alternative goods that available in the market such as Pepsi, Spirit, Limea and etc. However, the main competitor of Coca cola is Pepsi which has been decades since both essentially have similar pricing and the same taste.

Diagram 1: Demand Curve of Coca-cola and Pepsi 

According to the law of demand, the change in price of cola will lead to quantity demand fall. Based on the diagram, supposes the price of Coca-cola rises from P1 to P2 whereas the price of Pepsi still remain unchanged then quantity demand of Cola will decrease from Q1 to Q2 because consumers will close substitutes for the same taste brands as Pepsi at a lower price. Thence, Coca-cola faces downward slopping demand curve but the elasticity is depend on the reaction of rivals to change in output and price. Similarly, the supply of Coca-cola increasing at the same time to cope with the increasing demand.  Demand increase tend to supply increase at the same time. The firm will produce more to fulfill the consumer's desire. So that the supply and demand can be equal. In this way, the allocation of goods is efficient because the amount of cola supplied is exactly the same as the amount of consumer demanded. Thus, the F&N and their consumers are satisfied with the current economic condition. 

   Normally, demand drastically increase cause consumer tastes especially during festival seasons such as Chinese New Year, Merry Christmas, as well as the summer  since Coca-cola became the one of specialty drink for centuries. However, Taste could affected by trend or advertising of seasonal image . During certain celebration seasons, F&N has always relied on advertising to promote their brand and attractive consumers to purchase. 

From the image above, Coca-cola uses their own unique way to sent out the message of happiness in the context of Chinese New Year by advertising every years in different ways. Advertising can increase demand with those buyers cause it helps to stimulate consumer behavior. Thus causing the demand curve shift to the right.

Figure 1: Vintage design

  Figure 2: Holiday Can design

Figure 3: printed on Chinese New Year design

Moreover, special design printed on cans will increase consumer demand for Cola. There are many differ selective designed of cans attract consumers nowadays especially among on teen, kids and collectable lovers . Above the picture of examples show that how  Coca- Cola play roles in different special design on their cans and bottle which is following  the trends in art or the festival image annually. Some consumer buy the product not because of the drinks but is its attractive packaging . 

Diagram 2: Elastic demand curve

   Elasticity means the small change in price will result in big change in quantity demand. Coca- Cola was under elastic demand product because. There are some factor that will influence the elasticity of demand such as the closeness substitute and the proportion of income spent on the goods. Besides, Coca-Cola has become one of the most beverage brand and it serves moments of pleasure to 1.6 billion people each day said by Muhtar Kent who is the chief executive of Coca-Cola Co. As you known that Coca-cola became as a normal goods nowadays. The product has positive YED. As income went up the demand of cola will rises and vice-versa but when income falls, the demand for the good will decrease. For example, when people's salary rises, they able to afford to purchase more Coke so lead demand increase. Even though the consumer's income rises, they still continue purchasing Coke instead of finding other substitution  due to the brand loyalty. This is because the company has an effective channel to connect with the consumer and the product has high brand equity. F&N is an industry where the firms products are close substitutes for one another.  So, that is have a high and positive cross elasticity of demand when the good are substitute of each other. For substitutes, a rise in the price on the goods will increase demand for the alternative good because opportunity cost of buying the good became very high.  For instance, if there is an increase of price in Coke, some consumer would like to switch over to other aerated drinks .

   Over 130 years, F&N has become a household name in Malaysia. It started to engage regional expansion for long run of production. In long run, all factors of production are variable and firm can make decision about the scale. Consequently, the cost of production will affected by the decisions. There are economic of scale for F&N , because the company able to afford a national advertising and promotion budget, partly in terms of cost benefit of buying large quantities of inputs. In addition to be more efficient than the competition, F&N would also look for the benefit from economies of scale. F&N company with various inputs that could result in economies of scale by huge firms when producing  goods due to the specialization and the division of  labor. In F&N company, the large workforce work divided up so workers can do more easy and repetitive jobs in their expertly experience. Thus, there is a high degree of efficiency. Today, F&N benefits not merely from the economies of scale however also from the economies of scope because the company has produced various of beverages such as different soft drinks, sport drinks iced teas and etc. The firm can produce cheaper in wider range of products  rather than specialize in handful products, it called as economic of scope. F&N competes with many other sodas such as Sprite or Pepsi. Besides , F&N company also produce non-cola soda drinks. For examples, Soya beans and  ice lemon tea. Even if the sales of Coke fall as consumer not demand it  but the F&N company still profit and thrive by selling its other products in the market.

    F&N is the one of the successful firms in oligopoly market in the Malaysia.  F&N Dairies MD Tan Hock Beng  said that he expects to double its dairy exports to 40 per cent from its total output by 2018 (Tan Hock Beng,2013). Besides, the company is confident of achieving the target with its RM370 million new facility in Pulau Indah. In addition, through the strongly advertising for many years, F&N  keep expanding their market to obtain the competitive advantages in the long run. Although F&N has a lots of rivals but he company is also the top of beverage market until now in Malaysia.

Referencing List:
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Btimes.com.my (2013) F&N    Dairies banking on   new plant  to lift  exports. Available from: http://www.btimes.com.my/Current_News/BTIMES/articles/sutan/Article/ [Accessed 19 October 2013].

Ukessays.com (2013) Why Specialization Can Lead To Economies Of Scale Economics Essay. Available from: http://www.ukessays.com/essays/economics/why-specialization-can-lead-to-economies-of-scale-economics-essay.php [Accessed 19 October 2013].

Fraserandneave.com (2013) F&N AND COCA COLA COMPANY . Available from: http://www.fraserandneave.com/library/pdf/newsroom/2005/Quarter%201/FNCC.pdf [Accessed 20 October 2013].

Scribd.com (2013) How Businesses Grow - A Coca-Cola Case Study. Available from: http://www.scribd.com/doc/44287825/How-Businesses-Grow-A-Coca-Cola-Case-Study [Accessed 20 October 2013].

Jobstreet.com.my (2013) F&N Coca Cola (M) Sdn Bhd. Available from: http://www.jobstreet.com.my/jobs/2009/12/f/10/955737.htm?fr=c [Accessed 22 October 2013].