SSE_cola wars_group4b_2011

Coca-Cola vs Pepsi
Media Management 2304
Alexandra Drissner, Johan Ericsson, EmelieLevall, Charlotta Storckenfeldt
21373@student.hhs.se

Outline
Steps in industryanalysis
Porter‘sfiveforces – concentrateindustry
Porter‘sfiveforces – bottler‘sindustry
Challengestoday

Industry analysis
Industry definition:
Concentrate industry is the industry that produces concentrates for carbonated soft drinks (only producer no service provider)
Bottling industry is the industry that fills concentrates, which might also include DSD (producer and service provider)
Geographicscopeis North America

Valuechain
Definition of participants
Fountainchannel
Packagin& sweeteners
Consumer
Concentraterawmaterials (naturalflavors etc.)
Concentrate
Bottlers
Retailerchannel

Concentrateindustry

Rivalry
High intensity of rivalry due to slowindustry growth and two equal sized, highly committed rivals that strive for leadership
Dimension of competition is based on price (premium) but even more on branding
 High rivalryamongexistingfirms

Threat of entry
High entry barriers due to high capital investments for research, branding, advertising etc. and unequal access to distribution channels (dependent on bottler networks of Coke & Pepsi)
Expected retaliation of existing players high
 Low threat of entry

Buyer power
Bottlers:
Low negotiation power as “anchor bottler” account for the majority of volumes from the concentrate producers; high switching costs for buyers
 Low buyer strength
Fountain Channel:
High negotiation power as switching costs for fountain accounts are low
 High buyer strength

Threat of Sub.
Substitutes of growing importancee.g. due to health issues
High switching costs for bottlers
 Medium threat of substitutes

Suppliers power
Less concentration than in the concentrate industry
No product differentiation
Low switching costs
Few or no substitutes
Little threat of forward integration
Low supplier strength

Bottlingindustry

Rivalry
Exclusive territories lowers rivalrybetween bottlers of the same brand
Franchise agreements forces each area to have several bottlers (higher concentration than needed?)
High rivalry between different brand bottlers and low rivalry between same brand bottlers.

Threat of entry
New Entrants
Capital intense industry
Difficult to get retailer shelf space
Coke/Pepsipolicy of exclusiveterritories
 Low threat of newentrants.

Buyer power
Retailers have high negotiation power,but Coke/Pepsi are better off than small brands.
 Moderate to high buyerstrength

Threat of Sub.
Substitutes
Fountains
 Threat of substitutesdiffersbetweenrestaurants (high) and retailers (low)

Suppliers power
High concentration of suppliers
Substitutes associated with switching costs.
High threat of forward integration  High supplierstrength
Packaging
High share of bottler’s total cost
No differentiation  Low to mediumsupplierstrength
 Low supplier strength

Challengestoday
Increasingimportance of private labels
Non-CSDbeverages of growingimportancebutadjustments of bottlingfacilitiesrequires high investments
Power of retailersincreasing
Health issues
CSD-marketissaturated

Consequences of Cola Wars
Changedbase of competition: Fromprice to brand
Reducedprofitabilitybecause of:
high advertisingspendings
Increasedprofitabilitybecause of:
consolidation of bottlers
onlyfewconcentrateproducers (whoareincreasinglydependent on coke‘s/pepsi‘sbottlernetwork)

The End

SSE_cola wars_group4b_2011

by alexandradrissner

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