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Cola Wars Con


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  • 1. Case solving: Cola Wars Continue: Coke and Pepsi in the Twenty-First Century
    Course 2304: Media Management
    Group 3a
    Andreas Kreidenweiss
    Lina Höglund
    Ziyi Xiong
    Josefine Bengtsson
    Jessica Wennerstein
  • 2. Group 3a
    PORTER ANALYSIS: Concentrate Producers
  • 3. Suppliers
    • Raw material ingredients (except from sugar/high fructose corn syrup and carbonated water)
    Bargaining Power of Suppliers – LOW
    • More supplies than buyers
    • 4. Coke and Pepsi help their CP’s to negotiate advantantageous purchasing
    • 5. Excess supply of raw material ingredients
    • 6. Low switching cost
    • 7. Undifferentiated raw material ingredients
  • Buyers
    • Bottlers
    • 8. Users of fountain outlets
    Bargaining Power of Buyers - LOW
    • Industry product is very differentiated
    • 9. Few vendors compared to number of buyers
    • 10. High switching costs due to extensive integration with vendor organization
    • 11. No possibilities to integrate backwards
  • Barriers to Entry
    Threat of Entry - HIGH
    • Strong brands/ market power of industry actors
    • 12. Strong presence of EOS
    • 13. Extensive mutual adaption
    • 14. Long-term contract agreements with buyers and distribution channels
    • 15. (Not capital-intensive)
  • Substitutes
    • Other beverages
    Threat of Substitutes - LOW
    • Great efforts to diversify within the category have been made
  • Level of Rivalry
    • High rivalry between the two big actors – but few competitors within the concentrate produce
    • 16. Actors are highly committed to become market leaders
    • 17. Equal in market share
    • 18. Slow/negative industry growth
  • Group 3a
  • 19. Suppliers
    Bargaining Power of Suppliers - LOW
    • Coke and Pepsi negotiate on behalf of Bottlers
    • 22. Metalcansviewedas a commodity
    • 23. Manysuppliers in themarket
    • 24. Usuallymorethan 1 supplier
  • Buyers
    Bargaining Power of Buyers – MEDIUM-LARGE
    • CSD‘srepresent a large
    • Supermarkets arehighlyfragmentedindustry
    • 30. However, intenseshelfspacepressure
    • 31. Thread of private labels
    • 32. Fountain Outlets important distribution channel (sales + awareness)
  • Barriers to Entry
    Barriers to Entry - HIGH
    • Long-term relationships with customers
    • 36. Long-term relationships with CP’s
    • 37. Long-term contracts
    • 38. Territory exclusivity
    • 39. Entering would require substantion capital investment
  • Substitutes
    • Fountain Outlets
    • 40. Vertical Integration
    Threat of Substitutes - LOW
    • Vertical integration was tried before by both Coke and Pepsi but both exited
    • 41. Fountain Outlets are of minor importance and least profitable
  • Rivalry
    • Other Bottlers striving to expand
    Rivalry within the bottling industry - LOW
    • Established industry
    • 42. Exclusive territories prevent competition
  • Comparison of Profitability
    • Bottlers have significantly lower profitability than the CP‘s
    • 43. This is due to very different industry conditions and bargaining power
    • 44. The fundamental difference is the added value which is much lower for Bottlers compared to CPs
    • 45. No branded products or unique formulas
    • 46. Bottlers Added Value stems from relationships with CPs and customers
    • 47. Bottlers face price pressure from their buyers while CPs are able to even charge higher prices
    • 48. Bottlers have no bargaining power with suppliers
    • 49. Bottlers have high fixed costs in relation to operations which CP‘s avoid
  • What challenges face these companies today?
    The Porter analysis set the frame for the factor affecting the industry profit:
    Entry Barriers:
    • Duopol situation on the market with very strong etablished brand
    • 50. Strong brand loyalty among consumers
    • 51. Established relationships within distribution and production
    • Extensive diversification by concentrate producers reducing the threat of substitutes
    • More suppliers than buyers (duopol market)
    • 52. Suppliers are largely controlled/internalized by Coke & Pepsi
  • What challenges face these companies today?
    • Supermarkets, convenience stores, gas stations, fountains, vending machines and mass merchandisers have low bargaining power as they need to stock up to meed the demand from the consumers
    • 53. Food outlets have some influence however they stand for a relatively low share of profits
    • The duopol situation is the most influencial situation on industry profitability. In the past, they used to compete on price however nowadays they compete with other attributes (brands etc.)
  • What challenges face these companies today?
    • Both companies’ brand image as producers of premium products are their key barrier to entry for other producers and preservation of this is essential also in the future
    • 54. Current markets are not likely to be their future areas of growth – instead they should try to acquire successful non-carbonated soft drink producers
    • 55. Possible future areas for expansion are the Middle East (Pepsi) and the Latin America (Coke)