...Analysis of forces affecting Cola Industry Concentrate Producers Bargaining power of suppliers was very low for concentrate producers while the threat of substitute products is very high. The main inputs for Coke and Pepsi products were sugar (sweetener) and packaging. Both had very low bargaining power due to the large number of suppliers in the industry. Concentrate producers (CPs) negotiated directly with sweetener and packaging suppliers. This was done to ensure that prices were low, delivery was faster and the supply was reliable. There were many different suppliers of sugar in the open market. This meant that Coke and Pepsi could purchase sugar from suppliers who were offering sugar at lower prices. When sugar prices were high, however, like it was in the 1980s, the companies easily switched to corn syrup. Because the companies could choose between purchasing sugar and corn syrup, suppliers of nutritive sweeteners did not have much bargaining power. The fact that more suppliers were entering also made it difficult for suppliers to gain bargaining power. One example was Holland Sweetener, which became a supplier after NutraSweet came off patent in 1992. This reduced Searle’s bargaining power and lowered the price of aspartame. Coke and Pepsi are one of the largest customers of the metal can industry. Suppliers did not have bargaining power for two reasons: first, Coke and Pepsi had good relationships with a number of suppliers. This meant that they could...
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...Cola Wars Continue: Coke and Pepsi in the Twenty-First CenturyI. Case issue: Implications of strategic rivalry on cola industrys structure and performance (See Exhibits 1 & 2 for analysis) A. Implications on structure of cola industry 1. Bottlers have been consolidated by concentrate producers (CP), placing smaller CPs at the mercy of Pepsi and Coca-Colas distribution systems (See Exhibit 3) a. Making it tougher for smaller CPs like Cott Corporation to compete and leaving them open to the threat of acquisition b. Exposing Coca-Cola and Pepsi to the risk of anti-trust legal or regulatory action with bottlers’ exclusive territories and policies that forbid carrying competing cola products 2. Bottlers profitability is in danger with slim margins and declining growth (See Exhibit 4) a. CP should come to bottler’s aide with financial assistance, concentrate price breaks or increased marketing to preserve industry structure b. Bottlers will have to upgrade their technology to handle expanded product lines (See Exhibit 2) c. Bottlers should consider diversifying into snack food distribution through alliances or CP acquisitions like Pepsi’s Frito-Lay division B. Implications on performance of cola industry 1. CSDs made up a substantial share of 2000 US Liquid Consumption (See Exhibit 4), but this doesn’t make them immune to risk a. Declining stock prices show a corrected over-valuation of companies (See Exhibit 4) b. Declining growth rates for carbonated soft drinks and increasing...
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...Cola Wars Case Study DMBA 630 Marketing and Strategy Management in the Global Markeplace Introduction Carbonated Soft Drinks (CSD) have been around for over a century and now accounts for a $60 Billion market with the average American consuming about 53 gallons a year. Coca-Cola was invented in 1886 by John Pemberton as a “potion for mental and physical disorders.” Asa Candler acquired the formula and began marketing it as Coca-Cola. The first bottling franchise was accorded in 1899 for a sum of one dollar. Pepsi-Cola was invented in 1893 by Caleb Bradham a pharmacist from North Carolina. Pepsi also franchised its bottling operations. Pepsi struggled over the years going bankrupt twice within a decade, first in 1923 and again in 1931. Pepsi competed aggressively against coke offering almost twice the amount of Pepsi for the same price in the 1930s. Coca –Cola or Coke on the other hand was the market leader through the early 20th century with numerous imitators popping up trying to clone Coke. Coke fought back in the courts to aggressively deter imitators and counterfeiters. During the 1920s and 1930s, Coke was marketed to multiple market segments making it available to anyone desiring the brand. Eventually Coke sued Pepsi for trademark infringement in 1938 and lost. Pepsi gained market share and became a titan competitor in the market for CSDs beating out all other brands except Coke. Thus began the “Cola Wars” in 1950 with Pepsi’s aggressive “beat Coke”...
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...COLA WARS : COKE AND PEPSI IN THE 21ST CENTURY” INTRODUCTION "Cola Wars Continue: Coke and Pepsi in the 21st Century” explains the economics of the soft drink industry and its relation with profits, taking into account all stages of the value chain of the soft drink industry. By focusing on the war between Coca-Cola and PepsiCo as market leaders in this industry – with a 90% market share in carbonated beverages – the study analyses the different stages of the value chain (concentrate producers, bottlers, retail channels, suppliers) and the impact of the modern times and globalisation on competition and interaction in the industry. Throughout this analysis, I will assess how the strategic interaction between the two players allowed the creation of a “healthy" competition, where both companies need each other in order to remain competitive. Afterwards, I will go on to analyse the way that pricing and output decisions have affected the industry’s profits. Finally, I will discuss how Coca-Cola and PepsiCo could sustain their leadership in a market increasingly dominated by non-carbonated drinks. WHY IS THE SOFT DRINK INDUSTRY SO PROFITABLE? The soft drink industry refers to all drinks which do not contain alcohol. However, the original definition referred to carbonated and non-carbonated drinks made from concentrate. In this case discussion, I will take into consideration the US market, where the three major players – PepsiCo, Coca-Cola and Cadbury Schweppes – represent...
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...the case have been used to teach various subjects, including industry analysis, competitive dynamics, and vertical integration. While this case tries to incorporate some of the essential elements about the history of competitive dynamics and the historical patterns of vertical integration the primary teaching purpose of this case is to discuss the economics of the U.S. soft drink industry. Concentrate producers (CPs) sold syrup and concentrate to franchised of company owned bottlers, and made gross margins of 83% and a pretax profit margin of 30%. The best-know CPs were Coke and Pepsi. Historically, Coke and Pepsi were also major bottlers, but in the mid-to late 1990s, both had divested their bottling operations while maintaining significant equity ownership and indirect control of bottling networks. CPs invested heavily in advertising and marketing. One of the key issues for students to understand is why most of the profits in this industry are earned upstream in the concentrate business. The bottling business was much less profitable than concentrate, particularly in the mid- 1990s. Bottling profits improved somewhat in recent years, in part because the concentrate manufacturers could no longer squeeze the bottlers without disrupting their own distribution. Bottlers invested in bottling and caning lines, trucks, and warehouses and earned gross margins 40% and pretax profit of 9%. Coke and Pepsi bottlers delivered their products directly to the store which was part of their...
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...1. Why is the soft drink industry so profitable? An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly...
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...1. Why is the soft drink industry so profitable? An industry analysis through Porter’s Five Forces reveals that market forces are favorable for profitability. Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution. Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers and buyers. Entry into the industry would involve developing operations in either or both disciplines. Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive economic profits. Rivalry: Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market in 1994. Adding in the next tier of soft drink companies, the top six controlled 89% of the market. In fact, one could characterize the soft drink market as an oligopoly, or even a duopoly...
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...1. Why historically, has the soft drink industry been so profitable? An industry analysis through Five Forces Model reveals that the market forces are favorable for the profitability: a. Bargaining Power of Suppliers: Since the primary inputs for CSD industry are sugar, sweeteners, color and packaging (bottles and cans), the suppliers of these raw materials have less bargaining power against the concentrate producers (CPs) and bottlers. i. Sugar: Sugar can be obtained from various sources on an open market and if price of sugar increases, the cola companies can easily switch to low price artificial sweeteners or high-fructose corn syrup. Though aspartame, used in diet beverages, gained the bargaining power for time-being while it was under patent protection ii. Cans: With abundant supply of inexpensive aluminum in early 1990s, several can companies competed for the contracts. These can suppliers had the little bargaining power in controlling the prices. Concentrate Producers (CPs) further negotiated on behalf of bottlers, reducing the number of suppliers. By 2009, only Ball, Rexam, Crown Cork & Steal were major can suppliers. iii. Plastic Bottles: Again there were more plastic bottle suppliers than the contracts, so direct negotiation by CPs reduced their bargaining power. b. Bargaining Power of Buyers: The distribution of CSDs took place through five principal channels: Supermarkets (29.1%), fountain outlets (23.1%), vending machines (12.5%), mass merchandisers (16.7%)...
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...Coca-Cola vs. Pepsi-Cola Introduction The soft drink industry has been a profitable one in spite of the “cola wars” between the two largest players. Several factors contribute to this profitability, and these factors also help to show why the profitability of the concentrate production side of the industry has been so much greater than the bottling side. Over the years the concentrate producers have experimented with different levels of vertical integration, and although it has not necessarily been clear which have been more successful historically, some decision criteria can be developed to help determine if and when complete vertical integration is necessary. Profitability in the soft drink industry As analysis using Porter’s five forces shows why the soft drink industry has been so profitable. Suppliers and buyers have not had more power over the industry than it has had over them. Internal rivalry, while seeming intense, has not eroded the profitability of the industry because of its concentration and the fact that the two major players have primarily competed on the basis of advertising and promotion and not price. Entry is difficult both for reasons of scale and the strong brand identity of the current major players. Substitutes have not been close enough to take away significant market share, although the emergence of new substitutes may pose the largest threat to the industry’s profitability. Suppliers and Buyers Suppliers to the soft drink industry...
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...Introduction 3. Coke strategic Intent 4. External analysis 5. Internal analysis 6. resource based view 7. Value Chain Analysis 8. SWOT 9. Six Strategic Objectives 10. Financial analysis 11. Recommendations 12. Conclusions 13. Bibliography A brief Walkthrough Coca Cola is a well-known brand and the world’s leading beverage producer. The company is over 100 years old and enjoys patrons in over 200 countries. The company till date remains true to its vision and mission which has permeated through to all levels of the company. Coca Cola has a product of more than 3,500 beverages. These include * Energy drinks and Sports Drinks * Fruit and Fruit juices * Soft Drinks * Tea and coffee * Water * Other drinks The external environment analysis shows that coca cola enjoys a competitive position across the industry due to high capital requirements and exit costs. It has an intense but healthy rivalry with Pepsi. The Pestel analysis shows a growing demand for healthier alternatives to carbonated drinks which Coca-Cola is now addressing. Through the internal analysis of the company, we understand that the company has a competitive advantage in terms of its brand reputation and value chain process which it should continue to further use to its advantage. The value chain is perfectly aligned to ensure maximum efficiency. As the financial analysis, will show, Coca Cola has an extremely competitive share value and performance...
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...For the exclusive use of R. PONCE 9-702-442 REV: JANUARY 27, 2004 DAVID B. YOFFIE Cola Wars Continue: Coke and Pepsi in the Twenty-First Century For over a century, Coca-Cola and Pepsi-Cola vied for “throat share” of the world’s beverage market. The most intense battles of the cola wars were fought over the $60-billion industry in the United States, where the average American consumed 53 gallons of carbonated soft drinks (CSD) per year. In a “carefully waged competitive struggle,” from 1975 to 1995 both Coke and Pepsi achieved average annual growth of around 10% as both U.S. and worldwide CSD consumption consistently rose. According to Roger Enrico, former CEO of Pepsi-Cola: The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present-day success of the Coca-Cola company than . . . Pepsi.1 This cozy relationship was threatened in the late 1990s, however, when U.S. CSD consumption dropped for two consecutive years and worldwide shipments slowed for both Coke and Pepsi. In response, both firms began to modify their bottling, pricing, and brand strategies. They also looked to emerging international markets to fuel...
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...clusive use at Institute of Management Technology, Hyderabad (IMT,HYD), 2015 9-702-442 REV: JANUARY 27, 2004 DAVID B. YOFFIE Cola Wars Continue: Coke and Pepsi in the Twenty-First Century For over a century, Coca-Cola and Pepsi-Cola vied for “throat share” of the world’s beverage market. The most intense battles of the cola wars were fought over the $60-billion industry in the United States, where the average American consumed 53 gallons of carbonated soft drinks (CSD) per year. In a “carefully waged competitive struggle,” from 1975 to 1995 both Coke and Pepsi achieved average annual growth of around 10% as both U.S. and worldwide CSD consumption consistently rose. According to Roger Enrico, former CEO of Pepsi-Cola: The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present-day success of the Coca-Cola company than . . . Pepsi.1 This cozy relationship was threatened in the late 1990s, however, when U.S. CSD consumption dropped for two consecutive years and worldwide shipments slowed for both Coke and Pepsi. In response, both firms began to modify their bottling, pricing, and brand strategies. They also looked ...
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...Marketing Management, Millenium Edition Philip Kotler Custom Edition for University of Phoenix Excerpts taken from: A Framework for Marketing Management, by Philip Kotler Copyright © 2001by Prentice-Hall, Inc. A Pearson Education Company Upper Saddle River, New Jersey 07458 Marketing Management Millenium Edition, Tenth Edition, by Philip Kotler Copyright © 2000 by Prentice-Hall, Inc. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Compilation Copyright © 2002 by Pearson Custom Publishing. This copyright covers material written expressly for this volume by the editor/s as well as the compilation itself. It does not cover the individual selections herein that first appeared elsewhere. Permission to reprint these has been obtained by Pearson Custom Publishing for this edition only. Further reproduction by any means, electronic or mechanical, including photocopying and recording, or by any information storage or retrieval system, must be arranged with the individual copyright holders noted. This special edition published in cooperation with Pearson Custom Publishing Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 Please visit our web site at www.pearsoncustom.com ISBN 0–536–63099-2 BA 993095 PEARSON CUSTOM PUBLISHING 75 Arlington Street, Suite 300, Boston, MA 02116 A Pearson Education Company SECTION ONE Understanding Marketing Management Marketing in...
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...FAMILY OF SECRETS The Bush Dynasty, America’s Invisible Government, and the Hidden History of the Last Fifty Years RUSS BAKER Contents Foreword by James Moore 1. How Did Bush Happen? 2. Poppy’s Secret 3. Viva Zapata 4. Where Was Poppy? 5. Oswald’s Friend 6. The Hit 7. After Camelot 8. Wings for W. 9. The Nixonian Bushes 10. Downing Nixon, Part I: The Setup 11. Downing Nixon, Part II: The Execution 12. In from the Cold 13. Poppy’s Proxy and the Saudis 14. Poppy’s Web 15. The Handoff 16. The Quacking Duck 17. Playing Hardball 18. Meet the Help 19. The Conversion 20. The Skeleton in W.’s Closet 21. Shock and . . . Oil? 22. Deflection for Reelection 23. Domestic Disturbance 24. Conclusion Afterword Author’s Note Acknowledgments Notes Foreword When a governor or any state official seeks elective national office, his (or her) reputation and what the country knows about the candidate’s background is initially determined by the work of local and regional media. Generally, those journalists do a competent job of reporting on the prospect’s record. In the case of Governor George W. Bush, Texas reporters had written numerous stories about his failed businesses in the oil patch, the dubious land grab and questionable funding behind a new stadium for Bush’s baseball team, the Texas Rangers, and his various political contradictions and hypocrisies while serving in Austin. I was one of those Texas journalists. I spent about a decade...
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...62118 0/nm 1/n1 2/nm 3/nm 4/nm 5/nm 6/nm 7/nm 8/nm 9/nm 1990s 0th/pt 1st/p 1th/tc 2nd/p 2th/tc 3rd/p 3th/tc 4th/pt 5th/pt 6th/pt 7th/pt 8th/pt 9th/pt 0s/pt a A AA AAA Aachen/M aardvark/SM Aaren/M Aarhus/M Aarika/M Aaron/M AB aback abacus/SM abaft Abagael/M Abagail/M abalone/SM abandoner/M abandon/LGDRS abandonment/SM abase/LGDSR abasement/S abaser/M abashed/UY abashment/MS abash/SDLG abate/DSRLG abated/U abatement/MS abater/M abattoir/SM Abba/M Abbe/M abbé/S abbess/SM Abbey/M abbey/MS Abbie/M Abbi/M Abbot/M abbot/MS Abbott/M abbr abbrev abbreviated/UA abbreviates/A abbreviate/XDSNG abbreviating/A abbreviation/M Abbye/M Abby/M ABC/M Abdel/M abdicate/NGDSX abdication/M abdomen/SM abdominal/YS abduct/DGS abduction/SM abductor/SM Abdul/M ab/DY abeam Abelard/M Abel/M Abelson/M Abe/M Aberdeen/M Abernathy/M aberrant/YS aberrational aberration/SM abet/S abetted abetting abettor/SM Abeu/M abeyance/MS abeyant Abey/M abhorred abhorrence/MS abhorrent/Y abhorrer/M abhorring abhor/S abidance/MS abide/JGSR abider/M abiding/Y Abidjan/M Abie/M Abigael/M Abigail/M Abigale/M Abilene/M ability/IMES abjection/MS abjectness/SM abject/SGPDY abjuration/SM abjuratory abjurer/M abjure/ZGSRD ablate/VGNSDX ablation/M ablative/SY ablaze abler/E ables/E ablest able/U abloom ablution/MS Ab/M ABM/S abnegate/NGSDX abnegation/M Abner/M abnormality/SM abnormal/SY aboard ...
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