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Cola wars continue - Coke and Pepsi 2010
 

Cola wars continue - Coke and Pepsi 2010

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Case Study: "Cola Wars Continue" from Harvard Business Review (Group Project)

Case Study: "Cola Wars Continue" from Harvard Business Review (Group Project)

UC Berkeley Extension - Marketing Strategy - Jim Prost

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    Cola wars continue - Coke and Pepsi 2010 Cola wars continue - Coke and Pepsi 2010 Presentation Transcript

    • VS Cola Wars Continue: Coke andPepsi in 2010 Marketing Strategy – Jim Prost Pamela Belluomini, Hristina Bencheva, Julia Kocs, Brianna Randall and Angela Teodoro
    • Situation Audit 2 Between 1975 and the mid- 1990s the most intense battles in the Coke and Pepsi COLA WARS were fought over the $74 billion carbonated soft drink (CSD) industry Coke and Pepsi claimed 72% of CSD market sales The CSD industry achieved an average annual growth of approximately 10% in the U.S. and was dominated by the cola segment In the early 2000’s the per capita CSD consumption started to decline from 53 gallons in 2000 (71% of market) to 46 gallons (55% of market) in 2009 The decline in CSD consumption was mirrored by an increase in consumer demand for non-CSD beverages
    • 3 0 10 20 30 40 50 60 1970 1975 1981 1985 1990 1995 2000 2005 2007 2008 2009 Gallons/capita U.S. Beverage Consumption Coffee Beer CSD Milk Bottled Water
    • Historical Timeline (Pre-Cola Wars) 4 1886-1899 1900-1929 1930-1959 1960-1973 1886-John S. Pemberton develops original recipe 1898-Caleb Brodham creates Pepsi • Big name endorsements • Iconic contour bottle • Bottling plants in Europe and the Philippines • Robert Woodruff named CEO • Franchises in 24 states • Files for bankruptcy • Second bankruptcy • Acquires sugar plantation in Cuba • Rebounds by marketing product value • Becomes second in the cola market • “Beat Coke” campaign • Emerges as cola market front-runner • Cregistered trademark • Price raised from a nickel to a dime • Diversifies offerings (Sprite, Tab) • Remains #1 in national cola sales • Diversifies offerings (Mountain Dew) • Merges with Frito-Lay (PepsiCo) & expands into the snack food business
    • Historical Timeline (Cola Wars and Beyond) 5 COLA War Years 1974-1999 2000-2010 • In response to federal nutrition guidelines and public concern with diet and obesity offers alternative low calorie beverages • Wins Subway account, retains exclusive deals with Burger King and McDonalds • Holds big lead over Pepsi in cola market • In response to federal nutrition guidelines and public concern with diet and obesity offers alternative low calorie beverages • Supplies all Taco Bell, KFCs and most Pizza Huts • Snack food lines very profitable • High-fructose corn syrup replaces sugar • Diet Coke introduced, boosts profits • New Coke fails, Coca Cola Classic returns • Coca Cola Enterprises established • Maintains lead in cola market share • The “Pepsi Challenge” • Pepsi Lite (1 Calorie) introduced • Enters fast-food business • Outpaces Coke in food store sales • High-fructose corn syrup replaces sugar • Pepsi Bottling Company goes public
    • 4Ps Analysis 6 PRODUCT • Carbonated soft drinks • Non- carbonated soft drinks PRICE • Pepsi value proposition • Coke the “premium” brand PROMOTION • Investment in Trademarks • Retail Shelf Space • Ad Campaigns PLACE • Retail channels • Fountain Outlets • Vending Machines • Mass merchandise
    • Problem Statement 7 Changes in U.S. consumer preferences lead to a decline in CSD sales and the emergence of non-CSDs. 1. How should Coke and Pepsi respond to these changes in consumer preferences? 2. In what ways can Coke and Pepsi boost CSD sales while competing in the growing non-CSD category, thereby ensuring sustainable growth and profitability?
    • Critical Issues 8 • Declining CSD sales, including Cola in the US • Emerge of private labels • Health Issues Sales • Price pressure from the mass merchandises • More product variety = increase in distribution and sales costs Profitability • New products: cannibalism • Each local market is different Market Growth
    • U.S. Non-alcoholic beverage volume (%) 9 0 20 40 60 80 100 120 2000 2009 Non-Carbs Water CSD
    • Strategic Analysis - S.W.O.T 10 strengths opportunities weakness threats
    • S.W.O.T - Strengths  Most valuable brand for 13 years  Worlds largest in beverages: 15bi dollar brands  Diversification: 500+ brands, 200 countries  Extensive global dist. network  Leader in fountain accounts  Forward integration: power of supplier and buyer (90%)  Strong in emerging markets: China, Brazil, Eastern Europe  22nd most valuable brand  2nd largest F&B in the world, 22 bi dollar brands  Diversification: “The power of one”  Extensive global dist. network  Leader in non-CSD  Forward integration: 80 %  Successful marketing campaigns: celebrity endorsements 11
    • S.W.O.T - Weaknesses  Declining market share since 2000  Negative publicity  CSD focus: only 32% non-CSD share  Price pressure from mass retailers (Wal-Mart) : 40% of U.S. packaged sales  Declining market share in bev.  Negative publicity  Overdependence on U.S. markets: 50% of total sales  Low market share in fountain accounts: 20% vs. Coke’s 69%  Price pressure from mass retailers: 12% of revenue(Wal-Mart) 12
    • S.W.O.T - Opportunities  Expand non-CSD: juice, sport, energy, bottled water VitaminWater, Odwalla (Coke), Gatorade, Naked (Pepsi)  Expand and modify CSD line: Stevia Sprite Green (Coke), Pepsi Next, Trop50 (Pepsi)  Global expansion in emerging markets: India, China, Brazil (Coke) Russia (Pepsi)  Innovative offerings tailored to local tastes Sprite Tea (Coke), herb drinks (Pepsi)  Growing nutritious snacks product markets 13
    • S.W.O.T - Threats  Changing consumer tastes and preferences  Competition with each other  Threat of substitutes  Price pressure from mass retailers  Price pressure from int'l bottlers  Government restrictions in U.S. and abroad 14
    • Identification of Alternatives 15 Investment Strategy Action 1. Status Quo Maintain status Quo “Milk” CSD 2. Market Development Focus abroad Bottler control/ownership Streamline “Milk” CSD 3. Product Development Diversify lines Modify CSD, re-position Develop “complements” “Milk” CSD and discontinue “dogs” 4. Market Penetration & Market Development & Product Development All of the above
    • Analysis of Alternatives 16 Criteria Weight (1) Status Quo (2) Market Development (3) Product Development (4) Market Penetration + 2 + 3 Profitability 0.15 4 4 3 4 Sales and market share 0.25 3 5 4 5 Customer needs 0.25 2 3 5 5 Brand Image/ Corporate Image 0.20 2 3 4 5 Corporate Mission & Vision: “6Ps” “Performance with Purpose” 0.15 1 2 4 5 Total: 1 2.4 3.5 4.1 4.85
    • Recommendations CSD Market 17 . • Company image+ “healthy” choices • Focus on core products: • US Market: Zero/Diet + Lite • Global market: leverage Classic brand • Access to distribution overseas
    • Recommendations non-CSD Market 18 . • Sports and energy drinks • Re-ignite/innovate bottled water • Engage the “green” consumer • Control of production and distribution • Healthy+ convenient choices for busy lifestyles
    • Implementation 19 • Cost control measures (plants, process management, consolidation) • Ads aimed at re-capturing gender/generational market share • Diet/Zero and other lower-calorie CSD products in EU + Asia • Remove questionable ingredients from products sold in the US • Pursue high visibility sponsorships Non-CSD • Health education campaign on non-CSD products • Improve image + environmental-friendly packaging • CSR reports and CSR transparency • Market research: innovation + product development opportunities • Access to distribution CSD Market Non- CSD Market
    • Budget 20 0 5 10 15 20 25 2000 2005 2007 2008 2009 Net profit/sales Coca-Cola Pepsi Total Sales Pepsi Coca-Cola $30mm $43mm 0 1 2 3 4 % Non CSD shares Gatorade Aquafina Dasani Powerade
    • Where are they now? 21
    • The Coca-ColaCompany  Overview  Still a beverage focused company: 70% of their revenue comes from CSD sale  #57 in Fortune 500  International market corresponds 59% net revenue  Reached 1.9 billion servings each day  Present in +200 countries  #3 best global brand - $79.2 billion value  1.4%in sales growth 22
    • The Coca-ColaCompany 23  Portfolio  +500 non-alcoholic beverage brands  Acquired Zico Pure Premium Water  Launched Coca-Cola life in Argentina & Chile: 1st reduced- calorie cola sweetened w/ a blend of sugar and stevia
    • Pepsi Co  Overview  It is a diversified company: beverages, snacks and breakfast  #43 in Fortune 500  52% of their net revenue comes from food  US is still responsible for 51% net revenue  38% more revenue than Coca in 2011, but only 12bi came from Soda 24
    • Pepsi Co  Portfolio  Product mix: 63% food 37% beverage  22 brands that generates 1bi in retail sales each 25
    • 26 In March 2011 Pepsi feel from the n.2 spot Ever since, Coca-Cola has reigned supreme with Classic in the No.1 sales spot and Diet Coke as No.2. 1.6 billion case 927 million 892 million
    • Can and ever be friends? 27
    • 28
    • 29 Thankyou Q&A
    • Media Credits  Pepsi or Coke http://www.the-exponent.com/wp-content/uploads/2013/02/coke-or-pepsi.jpg  Coke vs Pepsi http://createmeaning.com/wp-content/uploads/2011/02/Coke-vs-Pepsi5.jpg  Coke Logo http://www.dafont.com/forum/attach/orig/3/6/36145.jpg  PespsiCo Logo http://hdwallpapersrc.com/wp-content/uploads/2013/09/New-Pepsi-Logo.jpeg  Strength: http://workingwahm.com/wp-content/uploads/2011/11/iStock_000011272144XSmall.jpg  Weakness: http://truecourseblog.files.wordpress.com/2012/08/istock_000011329650xsmall.jpg  Opportunities: http://img104.job1001.com/upload/adminnew/2014-03-24/1395635680-HHEWT3O.JPG  Threats; http://www.gfi.com/blog/wp-content/uploads/2009/06/bomb-300x206.png  Coke logo w/ bottle: http://www.fishlakerelay.com/sponsors/coke-bottle-round/  Pepsi & Coke bottle: http://blog.livedoor.jp/clock510/tag/%E7%93%B6?p=3  Logo history: http://www.create.net/blog/76487-andys-design-tips-how-to-design-a-logo.html  Logo history: http://www.core77.com/blog/object_culture/will_the_real_coca- cola_logo_story_please_stand_up_14264.asp  Pepsi cap: http://www.houzz.com/photos/5345407/Pepsi-Cola-Bottle-Cap-Metal-Sign---Tin-Signs--- RetroPlanet-com---  where are they now: http://nowiknow.com/soda-jerks/  Pepsi & Coke friends: http://eyugho.deviantart.com/art/Coke-and-Pepsi-332534678  Coke bottle cap: http://suncruiserdogsnmore.com/our-menu/  Coke bottle cap and Pepsi bottle cap: http://money.cnn.com/gallery/news/companies/2013/03/21/greatest- business-rivalries.fortune/2.html  Pepsi obesity: http://calorielab.com/news/2009/02/18/americans-trans-fats-peanut-plant-closed-redesigned- pepsi-logo/  Coke obesity: http://dalandofatblog.blogspot.com/2011/05/addictive-coke-addictive-diet-coke.html  Ïllustration: http://jamesdawsonmartin.com/blog/category/free-articles/ 30