Cola Wars Spring2008 Tigers


Published on

Published in: Business, Health & Medicine
1 Comment
  • good work tigers.
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Cola Wars Spring2008 Tigers

  1. 1. Cola Wars Continue: Coke and Pepsi in 2006 Presented by: Tigers Team Spring 2008
  2. 2. Overview <ul><li>History </li></ul><ul><li>Historical Industry Profitability </li></ul><ul><li>Concentrate vs. Bottler Profitability </li></ul><ul><li>Competition between Coke and Pepsi </li></ul><ul><li>Sustaining Profits </li></ul>
  3. 3. History of Pepsi <ul><li>Pepsi was created in 1893 in North Carolina by Pharmacist Caleb Bradham. </li></ul><ul><li>By 1910 Pepsi had built a network of 270 bottlers. </li></ul><ul><li>Pepsi struggled and declared bankruptcy twice </li></ul><ul><li>During Great Depression grew in popularity due to price decrease to a nickel. </li></ul><ul><li>In 1938, Coke sued Pepsi-Cola brand for infringement on Coca-Cola’s trademark. </li></ul>
  4. 4. History of Coca-Cola <ul><li>Coca-Cola was formulated in 1886 by pharmacist John Pemperton who sold the product at drug stores as “potion for mental and physical disorders.” </li></ul><ul><li>In 1891, Asa Candler acquired the formula, established a sales force and began brand advertising of Coca-Cola. </li></ul><ul><li>In 1919, went public under control of Robert Woodruff expanded and developed in national and international markets. </li></ul><ul><li>Successful during WWII with the high CSD consumption from the U.S soldiers. </li></ul>
  5. 5. Industry Profitability: Porter’s Five Forces <ul><li>Rivalry </li></ul><ul><ul><li>Coke </li></ul></ul><ul><ul><li>Pepsi </li></ul></ul><ul><ul><li>Cadbury </li></ul></ul><ul><li>Substitutes </li></ul><ul><ul><li>Alliances </li></ul></ul><ul><ul><li>Acquisitions </li></ul></ul><ul><ul><li>Product Innovation </li></ul></ul>
  6. 6. Porter’s Five Forces (Cont.) <ul><li>Barriers to Entry </li></ul><ul><ul><li>Exclusive Territories </li></ul></ul><ul><ul><li>Substantial Investment </li></ul></ul><ul><ul><li>Current Market Presence </li></ul></ul><ul><li>Power of Suppliers </li></ul><ul><ul><li>Sugar </li></ul></ul><ul><ul><li>Packaging </li></ul></ul>
  7. 7. Porter’s Five Forces (Cont.) <ul><li>Power of Buyers </li></ul><ul><ul><li>Super Markets </li></ul></ul><ul><ul><li>Convenience and Gas </li></ul></ul><ul><ul><li>Mass Merchandisers </li></ul></ul><ul><ul><li>Fountain </li></ul></ul><ul><ul><ul><ul><li>Vending </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Fast Food </li></ul></ul></ul></ul><ul><ul><li>Profitability of the CSD Industry </li></ul></ul>
  8. 8. Concentrate Business vs. Bottling Business <ul><li>Concentrate Producers </li></ul><ul><ul><li>Blend raw material ingredients </li></ul></ul><ul><ul><li>Packaged Mixture in plastic canisters </li></ul></ul><ul><ul><li>Shipped to bottlers </li></ul></ul><ul><li>Diet CSDs </li></ul><ul><ul><li>Added artificial sweeteners </li></ul></ul>
  9. 9. Concentrate Business vs. Bottling Business <ul><li>Bottlers </li></ul><ul><ul><li>Purchased Concentrate </li></ul></ul><ul><ul><li>Added carbonated water and high fructose corn syrup </li></ul></ul><ul><ul><li>Bottled CSD product </li></ul></ul><ul><ul><li>Delivered to customers accounts </li></ul></ul><ul><li>Diet CSDs </li></ul><ul><ul><li>Added sugar or high-fructose corn syrup </li></ul></ul>
  10. 10. Concentrate Business vs. Bottling Business <ul><li>Concentrate Producer </li></ul><ul><ul><li>Little Capital Investment </li></ul></ul><ul><ul><li>Cost of $25 million - $50 million </li></ul></ul><ul><ul><li>One plant to serve US </li></ul></ul><ul><ul><li>Significant cost-advertising, promotion, market research and bottler support </li></ul></ul><ul><li>Bottlers </li></ul><ul><ul><li>Capital Intensive </li></ul></ul><ul><ul><li>High-speed production lines </li></ul></ul><ul><ul><li>Bottling costs $4 million to $10 million </li></ul></ul><ul><ul><li>Capacity of $40 million warehouse cost $75 million </li></ul></ul><ul><ul><li>Coke and Pepsi each require 100 plants </li></ul></ul><ul><ul><li>Pressure from Coke/Pepsi </li></ul></ul>
  11. 11. Bottler Consolidation <ul><li>Bottler plants decreased in the US </li></ul><ul><ul><li>2000 plants to 300 from 1970-2004 </li></ul></ul><ul><ul><li>Coke’s re franchising bottling operations </li></ul></ul><ul><ul><li>Buying Poor managed bottlers </li></ul></ul><ul><ul><li>Infusing with capital </li></ul></ul><ul><ul><li>Selling to large bottling plants </li></ul></ul><ul><li>In 1985, Coke purchased two of the largest bottling companies </li></ul><ul><ul><li>Vertical integration </li></ul></ul>
  12. 12. Affects on Industry’s Profits <ul><li>Coke was the first concentrate producer to build a nationwide franchise bottling network, that Pepsi and Cadbury Schweppes followed suit. </li></ul><ul><li>Franchise agreements with both Coke and Pepsi allowed bottlers to handle the non-cola brands of other concentrate producers. </li></ul><ul><li>Bottlers could not carry directly competing brands. </li></ul>
  13. 13. Affects on Industry’s Profits (Cont.) <ul><li>Throughout the 1980s, the growth of Coke and Pepsi put a squeeze on smaller concentrate producers </li></ul><ul><li>Shelf space for small brands declined and were shuffled from one own to another. </li></ul>
  14. 14. Affects on Industry’s Profits (Cont.) <ul><li>In a five year span, Dr Pepper was sold several times, Canada Dry twice, Sunkist once, Shasta one, and A&W once. </li></ul><ul><li>Phillip Morris acquired Seven-UP in 1978 for a big premium, but racked up huge losses in the early 1980s, and then left the CSD business in 1985. </li></ul>
  15. 15. Affects on Industry’s Profits (Cont.) <ul><li>In 1990s, through a series of strategic acquisitions, Cadbury Schweppes became the third-largest concentrate product. </li></ul><ul><li>Coke has a world market share of 51.4%, Pepsi has 21.8% and Cadbury Schweppes has 6% </li></ul>
  16. 16. Sustaining Profits <ul><li>Shift to non-carbonated beverages (keep up with demand of health conscious society) </li></ul><ul><li>Continue on current path and see where it leads </li></ul>
  17. 17. U.S. Liquid Consumption Trends
  18. 18. THE END