...Product and Brand Strategies Cola Wars Continue: Coke and Pepsi in 2010 1. Why, historically, has the soft drink industry been so profitable? Coca Cola was formulated in 1886 by a pharmacist in Atlanta who started to sell it in drug stores as a ‟portion for mental and physical disorders.“ Five years later the Asa Candler acquired the formula for Coca-Cola syrup which was a well-protected secret of the company. He also granted the first bottling franchise which grew qucikly. In the following years a lot of imitations were fight agressively by court for protecting their carbonated soft-drink (CSD) with its special flavour. Later on Coca Cola was advertised as a ‟lifestyle“ product and the international business began to develop. Pepsi was founded in 1893 and they also adopted a franchise bottling system which built up a big network very quickly. About 20 years later Pepsi went bankrupt and later on they declared bankrupcy the second time. However business went on and Pepsi built up a marketing strategy ‟Twice as much for a nickel, too.“ Pepsi step for step gained market shares and became the second behind Coca Cola. The competition in the soft drink industry began to grow. The soft drink industry consists of bottlers and suppliers. One fact which supports the profitability of the soft drink industry is that there are only two relevant players Coca Cola and Pepsi who have enough power for setting rules. The rivalry between both can be seen as a copmpetitive...
Words: 1704 - Pages: 7
...Porter’s five forces 4 5 4 2 2 2 2 4 Competitive / corporate strategies of Coke and Pepsi 5 SWOT Analysis 6 Questions 6.1 How has the competition between Coke and Pepsi affected the industry’s profit? 6.2 If it has been such a profitable industry, why have so few firms successfully entered this business over the last century? What are the barriers? Why have Coke and been so successful in launching their products? 6.3 Why, historically, has the soft drink industry been so profitable? 6.4 Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different? 6.5 How can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-CSDs? 7 9 11 Exam Case Study Cola Wars Continue: Coke and Pepsi in 2010 1 Overview (Power Point Page (PPP) 2) For more than a century, Coke and Pepsi compete for market share within the world’s beverage market. The most intense battles were fought over the $74 billion carbonated soft drink (CSD) industry in the United States that lasted until the mid-1990s. Coke’s and Pepsi’s revenues grow annually, as the worldwide CSD consumption rose steadily by an average of 3% per year. In the early 2000s, however, domestic CSD consumption started to decline in consequence of the evolving linkage between CSDs and health issues such as obesity. Coke and Pepsi faced new challenges regarding the growth of non-CSD beverages...
Words: 5585 - Pages: 23
...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 strategy for differentiation over private label. Private label offered warehouse-delivered product. Historically, bottling had been a very good business: Franchised bottling contracts were very generous to the bottler. Coke and Pepsi had given bottles franchises in perpetuity, allowed bottlers the final say on pricing and gave bottlers significant influence...
Words: 2208 - Pages: 9
...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...
Words: 3841 - Pages: 16
...The competition within the $74 billion carbonated soft drink (CSD) industry has been remarkable ever since Coca-Cola was formulated in 1886, and further intensified when Pepsi was introduced in 1893. Ever since then, the CSD industry has been dominated by these two companies, with Coke taking the lead in the early stage, followed by Pepsi doubled its market share between 1950 and 1970 by offering its concentrate at a lower price than its competitor. The CSD industry has been profitable historically due to numerous reasons. Firstly, in the world’s largest market for CSD products, consumption had been growing at a steady rate of 3% annually from 1970 to 2000 in the U.S., marking a high growth stage in the industry life cycle (Appendix B). This allowed both Coke and Pepsi (C&P) to achieve annual sales growth of around 10%, while competing head-to-head against each other and other smaller CSD producers. Competition between C&P reinforced their brand image, as the increase in marketing efforts could be transferred into profit and sales growth when the overall demand was increasing in a growing industry. However, the increasing industry volume was largely obtained by C&P, leaving other smaller firms vulnerable with stagnated growth opportunity. Secondly, according to Porter’s Five Forces analysis in Appendix A, high barrier for new entrants, low bargaining power of suppliers of both concentrate producers and bottlers, moderate buyer’s bargaining power and low degree of threats of substitutes...
Words: 1227 - Pages: 5
...Case Analysis – Cola Wars Continue: Coke and Pepsi in 2010 Coke and Pepsi are two leading companies in the soft drink industry. They contend with each other during decades. The Cola Wars are a campaign of mutually-targeted television advertisements and marketing campaigns since the 1980s between soft drink manufacturers The Coca-Cola Company and PepsiCo. Historically, the soft drink industry has been so profitable. Porter’s Five- Forces Model of industry competition can define and analyze an industry in terms of five main factors. In this industry, competition is quite cruel between rivalries since Coca-Cola and Pepsi are already powerful leaders in the industry. It is basically a duopoly situation in soft drink field. The two companies share the whole market making them a huge profit even the industry itself is flattening. Due to the situation in the industry, there is not any barrier for entering but new company will be extremely risky to enter the market, since both Coca-Cola and Pepsi are mature companies with high reputation during decades. Unless the new enterprise is highly innovative and surely can do a better job than the two industry leaders. Therefore, threat of new entrants is expected to be very low. The threat of substitute products mainly comes from the promotion of a healthy diet, which makes juice, power drinks and other non-CSDs a better choice other than sodas with lots of sweetener and fat. This threat however, has been overcome by the introduction of...
Words: 598 - Pages: 3
...Risk of Entry by Potential Competitors With high barriers to entry, the risk of potential competitors entering into the CSD industry is low. The high cost of developing a manufacturing plant in order to meet demand is a barrier that makes the risk of entry low. Coke and Pepsi have spent numerous amounts of money to gain the brand loyalty of their customers. Because brand loyalty is already established in the CSD industry, the risk of competitors entering is lowered. Due to brand loyalty, both Coke and Pepsi have a high demand for their products. Both companies are able to produce in mass quantities and lower the variable cost for each product. With the variable cost being lowered, they are able to lower their selling price. Another barrier that lowers the risk of entry is franchise agreements that Coke and Pepsi have made with their bottlers. The agreements state that the bottlers are prohibited from developing any new contracts with present or potential competitors. Rivalry among Established Companies The CSD industry is consolidated in regards to its competitive structure. The industry is made of a small amount of large companies meaning the competition in market share is high. Coke and Pepsi together make up 68% of the CSD industry. The rivalry...
Words: 852 - Pages: 4
...4. ¿Pueden Coke y Pepsi mantener sus ganancias ante una demanda declinante y la creciente popularidad de bebidas no gaseosas? Este problema lo obtuvieron ambas empresas desde el año de 1990 en el cual llevaban 2 años consecutivos donde el consumo anual por persona había disminuido, fue donde ambas empresas debieron de modificar su estrategia de comunicación en precio, embazado y la estrategia de la marca, así como también incluir en la marca productos de bebidas sin gas, tea, bebidas deportivas y agua embotellada. La estrategia que ellos han tomado en el negocio entero mejorando el proceso de entrega, de productos, de suministros para la producción, ha invertido en promoción y publicidad para impulsar las nuevas bebidas y las ya existentes. Desde el inicio de ambas compañías han luchado por la participación del mercado norteamericano y mundial introduciendo bebidas de sabores para seguir con la tendencia de crecimiento. Sin embargo ambas compañías no se dieron cuenta hasta después de hacer las investigaciones pertinentes que desde el año 1990 los consumidores empezaron a reflejar un cambio en el hábito de beber bebidas con gas y empezaron a tomar otro tipo de bebidas. Lo que paso con esto fue que el crecimiento fuera negativo o muy bajo sin embargo ambas marcas tiene una gran presencia en el mercado por lo cual la diversificación de productos según la tendencia del mercado. Si bien es cierto la competencia ahora es mayor sin embargo la estrategia de comunicación y de la...
Words: 297 - Pages: 2
...9/8/2015 PGDM/MBA Material: Case Study- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century www.mbapgdmstuff.blogspot.com Home Human Resource Marketing Information system management Images You are visitor # Case Study- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century 110,588 Search This Blog Translate Select Language ▼ Category Assignment Business Communication Business Environment Business Law Case Study Compensation MAnagement E- Business Summary: "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 globalization on competition and interaction in the industry. Analysis: It is quite clear that there was a “war" between Coca‐Cola and PepsiCo: not only have they been rivals for entrepreneurship For your Information Formates Human Resource Management Human Resource Mangement Human resource Planning Indian Labour Law Industrial Relation Information system Management International Marketing ...
Words: 1069 - Pages: 5
...the Carolinas in 1898, Pepsi-Cola has a long and rich history. The drink is theinvention of Caleb Bradham (left), a pharmacist and drugstore owner in New Bern, NorthCarolina. In the late1890's, he had been experimenting withCoca andKola extracts in thesyrup form. By mixing this syrup with carbonated water, he produced a very pleasingbeverage that not only tasted good but also made his customers and friends feel good. Hepromoted it as a cure of dyspepsia (indigestion). Initially called Brads Drink by his local friends, the drink was formally titled PEPSI COLAin 1898. By 1902 the syrup was so popular that Caleb was devoting most of time in the preparation, packaging, marketing, advertising, and overseeing thedistribution of it to other pharmacies. His sales increased rapidly and in1904 he boughtthe Bishop Mill and converted it into his bottling plant for Pepsi Cola. In 1907, hepurchased adjoining land and built a three-story addition to the factory to serve as office space for his new company. By the end of1909 Caleb Bradham had250 franchises in24 different states, hisbusinesses continued to grow till1920 when volatile sugar prices caused the beginning ofthe rapid decline in his fortune. Bankruptcy was declared in March,1923 and the PEPSIformula passed through the series of folding companies until1931, when Loft CandyCompany in New York purchased it. In1934, Pepsi began offering twice as much softdrink for the same 5-cent price and sales soared. Pepsi Cola's profits reached...
Words: 1116 - Pages: 5
...The Cola Wars are a campaign of mutually-targeted television advertisements and marketing campaigns since the 1980s between soft drink manufacturers Coca-Cola Company and PepsiCo Incorporated. * | [edit]Competition Many of the brands available from the three largest soda producers, The Coca-Cola Company, PepsiCo and the Dr Pepper Snapple Group, are intended as direct, equivalent competitors. The following chart lists these competitors by type or flavor of drink. Flavor/type | PepsiCo | The Coca-Cola Company | Dr Pepper Snapple Group | Cola | Pepsi | Coca-Cola | RC Cola | Diet Cola | Diet Pepsi / Pepsi Light Pepsi ONE Pepsi Max Pepsi Next | Diet Coke / Coca-Cola Light Tab Coca-Cola Zero | Diet Rite Diet RC | Cherry-flavored cola | Pepsi Wild Cherry | Coca-Cola Cherry | Cherry RC | "Pepper"-style | Dr Slice | Mr. Pibb / Pibb Xtra | Dr Pepper | Orange | Mirinda Tropicana Twister Tango Slice | Fanta Minute Maid | Crush Sunkist | Lemon-lime | Teem Sierra Mist 7 Up (in countries other than US) | Sprite Lemon & Paeroa | 7 Up | Other citrus flavors | Mountain Dew Kas Izze | Mello Yello Vault Fresca Lift Lilt | Sun Drop Squirt | Ginger ale | Patio | Seagram's Ginger Ale | Canada Dry Schweppes Vernors | Root beer | Mug Root Beer | Barq's Ramblin' Root Beer (until 1995) | A&W Root Beer Stewart's Rootbeer Hires Root Beer | Cream soda | Mug Cream Soda | Barq's Red Creme Soda | A&W Cream Soda | Juices | Tropicana Dole (prepackaged...
Words: 1022 - Pages: 5
...Demand of Pepsi Julliet Indiana Wesleyan University February 21, 2012 Abstract Pepsi is a popular cola brand that is available for purchase at many convenient stores, grocery stores, department store, vending machines and restaurants. It is in an Oligopoly industry. One market place can have a stronger market share than another market place. There are several determinants of demand which can influence the shift in the demand curve left or right or decrease or increase in the demand. Demand of Pepsi Pepsi cola is a cola/soda-pop beverage brand from PepsiCo. PepisCo is known as an Oligopolistic industry. There aren’t that many firms the market that Pepsi cola is in. Pepsi cola first made a public appearance in the 1890s as “Brad’s Drink”. It later became known as Pepsi. It was trademarked on June 16, 1903 and its first logo in 1905. Pepsi made a world appearance in 1909 with the first celebrity endorser, Barney Oldfield. Due to the high price of sugar, which was in high demand, during WW1, Pepsi Cola Company went into bankruptcy. It bounced back in 1936 and started to sell a 12-ounce bottle for 10 cents. Because price is a main determinant of demand, the price was then drop to 5 cents. This price boosted the sales for the company. The company started to market to African Americans. The strategy was done to help market to others who can enjoy and contribute to the brand and the new popularity of Pepsi. In 1975, Pepsi was voted most favorite beating out its rival Coca-Cola...
Words: 1218 - Pages: 5
...Coca Cola Wars Case Analysis July 31, 2010 Executive Summary Coca-Cola was invented and marketed in 1886 by a pharmacist named Dr. John Pemberton he named Coca-Cola after the coca leaves and kola nuts he used in order to create the product. Twelve years later in 1898 Caleb Bradham created Pepsi Cola for the beneficial effects it claimed to have on upset stomachs and indigestion. The enmity between the two soda companies are known as the “Cola Wars”. The war began in the 1960’s when Coca-Cola’s supremacy ruled the market as the beverage of choice above Pepsi Cola. Due to the competition between the two rival cola companies actions became extreme and forced both companies to implement strategic methods in order to keep the competitive edge over the other. Coca Cola Wars Case Analysis I. Current Situation: Coca-Cola's and Pepsi Cola’s marketing strategies has been as impossible to tell apart as the products themselves, both companies rely on vibrant colors, catch phrases, attractive people, and famous entertainers to grab consumer’s attention and to entice them into purchasing their products. In 1941 Coca-Cola officially renamed their product to “Coke” as an official trademark with a series of advertisements informing consumers that “Coke” means Coca-Cola (Coca-Cola, 2011). Pepsi was first introduced as " Drink" in 1898 by Caleb Bradham its inventor who created Pepsi at his home, it was later that Bradham changed the name and officially named the beverage Pepsi...
Words: 3366 - Pages: 14
...CASE STUDY : COLA WARS CONTINUE : COKE AND PEPSI IN 2006 The case study “Cola Wars Continue: Coke and Pepsi in 2006” focuses on describing Coke and Pepsi within the CSD industry by providing detailed statements about the companies’ accounts and strategies to increase their market share. ‘ Cola war’ is the term used to describe the campaign of mutually targeted television advertisement & marketing campaigns between Coke & Pepsi. Furthermore, the case also focuses on the Coke vs. Pepsi goods which target similar groups of costumers, and how these companies have had and still have great reputation and continue to take risks due to their high capital. Both Coke & Pepsi have segmented the soft drink industry into two divisions, via – 1.Production of soft drink syrup. 2.Manufacturing & distribution of soft drinks at retail level. Coke & Pepsi have chosen to operate primarily on the production of soft drinks syrup,while leaving independent bottlers with more competitive segment of the industry.The purpose of this report is to gain insight into the possible strategies that can be applied, in order to expand the overall throat share in the future. History revealed that a highly competitive strategy that was utilized in the past by both companies resulted in cannibalization. Because of this, the report is described from the perspective of both Coca-Cola and Pepsi. This report focuses on increasing the overall share and finding new opportunities in the unrevealed...
Words: 1192 - Pages: 5
...Coca Cola vs. Pepsi: Competitive Strategies Christoper Gilchrist BUS 508 7/28/2013 Coca Cola and Pepsi marketing are a consumer products company operating in highly competitive markets. They heavily rely on continued demand for products. To generate profit and bonus, they both must sell products that appeal to our customers and to consumers. Any significant changes in consumer preferences or any inability on the part to anticipate or react to such changes could result in reduced demand for our products and erosion of our competitive and financial position (Dyer, Jeffrey H., page 3). The achievements of Pepsi and Coca Cola relies on being able to answer to daily needs of buyers, concerning health and wellness, obesity, product attributes and ingredients, and to broaden into similar categories. Changes in product category consumption or consumer demographics could indicate a deductible demand for the good that’s produced. Consumer preferences could change for many reasons, such as generations being affected by the age (Hoffman, Benjamin, page 17). Socializing has also expanded and became very diverse. Traveling, vacation or leisure activity patterns, weather, seasonal consumption cycles, negative publicity resulting from regulatory action or litigation against companies in our industry, a downturn in economic conditions or taxes specifically targeting the consumption of our products. Any of these changes may reduce consumers’ willingness to purchase the goods of Pepsi...
Words: 994 - Pages: 4
