COLA WARS CONTINUE: COKE AND PEPSI
IN THE TWENTY-FIRST CENTURY
By,
Group 6
G. VAIBHAV KUMAR REDDY (P111012)
P. PRAVEEN (P1...
www.thecoca-colacompany.com
www.pepsico.com
CONCENTRATE PRODUCER AND
BOTTLERS
Concentrate Producer

1993
Net Sales

Dollars per
Case

Bottler

Percent of
Total

Dolla...
Concentrate Producer

2000

Bottler

Dollars per
Case

Percent of
Total

Dollars per
Case

Percent of
Total

Net Sales

0....
RETAIL CHANNELS
% of Industry
Volume
Coca-Cola

1993

2000

Pepsi-Cola

Coca-Cola

Pepsi-Cola

Food Stores

32.8%

28.5%

...
STRATEGIC PATH
COCA-COLA

PEPSI-COLA

• Franchise bottling system , reaching 370
franchises by 1910

• Franchise bottling ...
COCA-COLA

PEPSI-COLA

• In 1978, hike in concentrate price after
securing bottler approval.

• In 1970s, sold concentrate...
COCA-COLA
• In 1980, refranchised bottling
operations-helped in expansion.

PEPSI-COLA
• In late 80s, acquired MEI bottlin...
SWOT ANALYSIS OF COCA-COLA
STRENGTHS
• First mover advantage.
• More loyal customer base.
• Large market share.
• Economie...
SWOT ANALYSIS OF PEPSI-COLA
STRENGTHS
• Guerrilla Marketing strategies.
• More focus on young generation.
•Economies of Sc...
PORTERS FIVE FORCE ANALYSIS – SOFT
DRINK INDUSTRY
 Industry Competitors
 Coca-Cola, Pepsi-Cola, Cadbury Schweppes and

o...
 Threat of substitutes
 Non-CSD drinks like milk, alcoholic beverages, juices, sports
drinks, tea-based, dairy-based dri...
U.S. Non-Alcoholic Beverage Market Share, %
share by volume
Company

2005

2009

2011

Coca-Cola

30%

42.8% 43%

Pepsi-Co...
CURRENT FINANCIALS
Coca-Cola

Pepsi-Cola

Market Cap

154.38b

100.48b

Revenue Growth

5.20%

11.03%

Profit Margin

14.9...
Coke VS Pepsi Share price
ISSUES TO PONDER for Pepsi
 Hard to differentiate products in terms of taste as

product variety is very much limited wit...
RECOMMENDATIONS
 For Pepsi to grab the major pie,
 It needs to follow the “Cost Leadership” and

“Product Differentiatio...
THANK YOU

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  • During 60s, Coke wrongly believed that US market has saturated at 22.7 gallons per capita, which paved way for Pepsi to double its share.
  • Smcolawarscontinue group-6-130110121158-phpapp01

    1. 1. COLA WARS CONTINUE: COKE AND PEPSI IN THE TWENTY-FIRST CENTURY By, Group 6 G. VAIBHAV KUMAR REDDY (P111012) P. PRAVEEN (P111033) PRAGYA JAISWAL (P111037) RAKESH NAVAL (P111039) GREAT LAKES INSTITUTE OF ENERGY MANAGEMENT AND RESEARCH, GURGOAN
    2. 2. www.thecoca-colacompany.com www.pepsico.com
    3. 3. CONCENTRATE PRODUCER AND BOTTLERS Concentrate Producer 1993 Net Sales Dollars per Case Bottler Percent of Total Dollars per Case Percent of Total 0.66 100% 2.99 100% Cost of sales 0.11 17% 1.69 57% Gross profit 0.55 83% 1.30 43% Selling and delivery 0.01 2% 0.85 28% Advertising and marketing 0.26 39% 0.05 2% General and administrative 0.05 13% 0.13 4% Pretax profit 0.23 29% 0.27 9%
    4. 4. Concentrate Producer 2000 Bottler Dollars per Case Percent of Total Dollars per Case Percent of Total Net Sales 0.71 100% 5.80 100% Cost of sales 0.12 17% 3.77 65% Gross profit 0.59 83% 2.03 35% Selling and delivery 0.01 2% 1.22 21% Advertising and marketing 0.28 39% 0.12 2% General and administrative 0.06 8% 0.23 4% Pretax profit 0.25 35% 0.52 9%
    5. 5. RETAIL CHANNELS % of Industry Volume Coca-Cola 1993 2000 Pepsi-Cola Coca-Cola Pepsi-Cola Food Stores 32.8% 28.5% 36.1% 32.2% Convenience and Gas 29.6% 37.4% 35.7% 41.5% Fountain 58.9% 27% 65% 21% Vending 48.6% 40.6% 50% 40% Other 45.4% 32.5% 35.5% 33.3% Total 40.7% 31.3% 44.1% 31.4%
    6. 6. STRATEGIC PATH COCA-COLA PEPSI-COLA • Franchise bottling system , reaching 370 franchises by 1910 • Franchise bottling system , reaching 270 franchises by 1910 • During 1920s and 30s, introduction of open-top coolers to storekeepers, automatic fountain dispensers, vending machines. •In 1920s, lowered the price for its 12ounce bottle. • Introduced Teem (1960), Mountain • Introduced Fanta (1960), Sprite (1961), low- Dew (1964), Diet Pepsi (1964). Worked calorie Tab (1963). with bottlers to modernize and improve services. • Purchased Minute Maid (fruit juice), Duncan Foods (coffee, tea, hot chocolate), •In 1963, launched the ”Pepsi Generation” Belmont Springs Water. campaign targeting the youth, which helped narrow coke’s lead to 2-to-1 • Coke countered “Pepsi Challenge” with margin. rebates, price cuts and price discounts. • In 1974, introduced the “Pepsi Challenge”.
    7. 7. COCA-COLA PEPSI-COLA • In 1978, hike in concentrate price after securing bottler approval. • In 1970s, sold concentrate to bottlers @ 20% lower than coke. • In 1980, switched from sugar to lowerpriced high fructose corn soup. •Merged with Frito-lay in 1965. • Increased advertising expenditure. • In 1978, 15% increase in price of concentrate. • Sold off most of non-CSD businesses i.e. wine, coffee, tea etc. • Emulated the move of fructose corn soup in 1983. • Introduced Diet Coke in 1982 – huge success. • Increased advertising expenditure. • Change in formula in 1985 – major setback. Reintroduced original formula in the name of Coca-Cola Classic after 3 months. • In 80s, introduced 11 new CSD brands. • In 80s, introduced 13 new CSD products.
    8. 8. COCA-COLA • In 1980, refranchised bottling operations-helped in expansion. PEPSI-COLA • In late 80s, acquired MEI bottling, Grand Metropolitan’s bottling operations and General Cinima’s bottling operations. •Created independent bottling subsidiary, Coca-Cola Enterprises (CCE) in 1986. • In 1999, created Pepsi Bottling Group (PBG). •Employed low-price strategy. •Employed low-price strategy. • Marketing agreements with celebs Harry Potter . • Marketing agreements with celebs – Britney Spears, Jackson. • Introduced PowerAde, Nestea, Dasani in 1998, 1999 in response to Pepsi. • By end of 90s, reintroduced “Pepsi Challenge”. • Started acquiring international markets in more structured way. • Non-Cola Beverages – introduced Aquafina (1998), Tropicana (1998), Gatorade and SoBe (2000). • Started acquiring international markets in more structured way.
    9. 9. SWOT ANALYSIS OF COCA-COLA STRENGTHS • First mover advantage. • More loyal customer base. • Large market share. • Economies of Scale. • International Brand recognition. • Huge distribution network. • Strategic move during world wars. • Success of diet coke. • Efficient global operations WEAKNESS • Moving away from core competencies. •Brand Failures •Product Recalls OPPORTUNITIES • Entry into new developing international markets. • Introduction of newer brands. • Innovative advertising strategies. THREATS • Barriers of entry in international markets. • New age beverages. • Fierce competitors in local markets; Private labels at low prices.
    10. 10. SWOT ANALYSIS OF PEPSI-COLA STRENGTHS • Guerrilla Marketing strategies. • More focus on young generation. •Economies of Scale. • International Brand recognition. • Huge distribution network. • Innovative advertising strategies. • More flexible franchise network. WEAKNESS • Smaller market than Coke. • Slower take off in international markets. • Imitation of Coca-Cola. •Falling Behind in All-embracing Markets, namely Russia, Venezuela, and South America. OPPORTUNITIES • Introduction of “Pepsi Health Drink”. • Image of “Total Beverage Company” • Entry new developing international markets. • Introduction of newer brands. THREATS • Fear of losing market share due to rapid market fluctuations. • Barriers of entry in international markets. • Decreasing brand loyalty among consumers. • New age beverages. • Fierce competitors in local markets; Private labels at low prices.
    11. 11. PORTERS FIVE FORCE ANALYSIS – SOFT DRINK INDUSTRY  Industry Competitors  Coca-Cola, Pepsi-Cola, Cadbury Schweppes and others.  Threat of New Entrants  High entry costs  High risk for entrants due to diversified nature of Coke and Pepsi.  Government Policy regulations.  Existing Loyal customer base.  Acquisition of major bottling units by existing firms, increases the entry barriers.
    12. 12.  Threat of substitutes  Non-CSD drinks like milk, alcoholic beverages, juices, sports drinks, tea-based, dairy-based drinks  Threat of saturation of consumption in US market thereby leading to increase in the consumption of on-Cola beverages.  Bargaining power of suppliers  Low switching costs.  Huge number of suppliers.  Maintaining the quality and flexibility of supply chain through backward integration i.e. acquiring bottling plants.  Bargaining power of buyers.  Higher buying power – large grocers, discount stores and restaurants buy large volumes demanding a lower price.  Choice of customers is high due to competition and variety in the market.
    13. 13. U.S. Non-Alcoholic Beverage Market Share, % share by volume Company 2005 2009 2011 Coca-Cola 30% 42.8% 43% Pepsi-Cola 22.6% 31.1% 31% Cadbury Schweppes 10.6% 15% 18% Other 36.9% 11.1% 8%
    14. 14. CURRENT FINANCIALS Coca-Cola Pepsi-Cola Market Cap 154.38b 100.48b Revenue Growth 5.20% 11.03% Profit Margin 14.98% 7.02% 0.55 0.52 Beta Source: http://ycharts.com/companies/KO
    15. 15. Coke VS Pepsi Share price
    16. 16. ISSUES TO PONDER for Pepsi  Hard to differentiate products in terms of taste as product variety is very much limited within cola beverages.  Coca-Cola has much stronger loyal customer base.  Consumer market moving from carbonated drinks towards functional soft drinks.  In US, Cadbury Schweppes competing aggressively.
    17. 17. RECOMMENDATIONS  For Pepsi to grab the major pie,  It needs to follow the “Cost Leadership” and “Product Differentiation” Strategies.  i.e. it needs to create a unique customer perception and differentiate one product from another.  Rather than being a price follower, it must face the market by a leading strategy of Price Setter, which can be made possible by improving the production efficiencies and reducing the bottlenecks.  It also needs to focus on strengthening its core competency.
    18. 18. THANK YOU 

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