The recent announcement of postal finances brought the usual commentary. It might be refreshing to pause and think about the implications of a recent article in BusinessWeek (August 4-10, 2014) which described some of the challenges facing Coca-Cola, an American brand icon, with 2013 sales of over $79 billion. Some of these seem similar to those facing the USPS. It might be useful to think about this comparison, and to take a look at how Coca-Cola is responding.
Increasing Substitution and Declining Volume
Sports drinks, bottled water and other substitutes are replacing carbonated soft drinks, especially with key consumer demographic segments (young people). The company responded by offering a wide variety of options of carbonated drink to its consumer segments, not all of which have been successful (New Coke?).
After a period of stagnant soft drink sales, volume started dropping in 2005. The decline hasn’t stopped yet. According to some reports quoted in the article, Americans are drinking about the same amount of Coca-Cola as they did in 1986. Coca-Cola made $46.8 billion in 2013, down from $48 billion in the previous year. Much of the company’s growth in recent years has come from foreign markets.
Continuing Strength of the Core Business
The availability and increasing popularity of various substitutes has not diminished the core business – regular, classic Coca-Cola. It is still the company’s best-selling product. Long-term market dominance led to a focus on its core business, and the company was slow to diversify.
Pepsi-Cola, the perennial also-ran in the core soft drink business, ventured into other businesses (Frito-Lay), and is not as dependent upon carbonated soda for revenue.
Business Strategy
For a long time, the core strategy was to build sales volume and maintain a strong brand through aggressive advertising and promotion. For almost 70 years) the price of a can remained a nickel. [1] One result was that to make money the company had to sell a lot of Coca Cola. It became ubiquitous, notwithstanding Pepsi and certain other regional competitors. A few decades ago, the company increased its efforts to sell more by introducing larger containers in both its consumer and fast-food channels. Its arrangements with its bottlers were also focused around volume metrics.
It also adopted more sophisticated pricing policies, discounts and promotions. While it may be possible to obtain low-priced Coca-Cola in bulk quantities, the nickel can is long gone (what is it in your area?).
Challenges from Changing Social Preferences
Consumers are much more aware and concerned about food and drink. The federal government has pushed for labeling requirements, and not all the ingredients in carbonated soft drinks are seen as healthy. Consumers are more concerned about sugar consumption and obesity. Beyond that, sustainability issues shadow company operations, including the use of plastic and non-recyclable materials and the environmental impact of the massive Coca-Cola supply chain.
Innovation, Acquisition and Product Expansion


So, What Does This Mean for the Postal Service and the Mailing Industry?
It is chilling that postal policy remains hung up on what amounts to trivialities, and is not allowed to focus on creating and implementing a vision of the future that is more than cost reduction tactics and incremental improvements on the status quo.
By Kent Smith
Kent Smith is Research Director, Ursa Major Associates / Postal Vision 2020. His 38 year career in the Postal Service included Rate Classification Research, Market Research, and Strategic Planning. Ursa Major Associates / Postal Vision 2020 is dedicated to taking a broader, longer-term perspective on the future of the mailing industry ecosystem. The thoughts expressed in this “Point of View” are his own.
The comments on this site are moderated. Each comment will be reviewed to ensure that it contains no crude language, solicitations, personal attacks, or anything that may be regarded as inappropriate is included. In an effort to facilitate an ongoing conversation, comments will be reviewed in a timely manner. The views of that are expressed in this blog are those of the individual bloggers and do not necessarily reflect the views of PostalVision2020. If you have any questions about commenting or are experiencing issues, please contact Bryan Klepacki.
[1] There are some interesting historical references about why the prices remained so low for so long, but it appears that it was a result of a very favorable agreement with the original “vendors/bottlers” that essentially set them up with a potential price advantage over fountain drinks if Coca-Cola were to raise the price. Eventually, these contracts were renegotiated and brought more under company control.
You have done an excellent job in drawing parallels to the USPS and Coca Cola. Both have to deal with market saturation and changing consumer behavior while maintaining a massive infrastructure. Perhaps the Postal Service could diversify and enter markets that are similar to their core product (just as Coca Cola owns Odwalla and Dasani).