Coke Wars Presentation

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1st Speaker Mr. Koh 2nd Speaker Ms. Lim 3rd Speaker Ms. Siew 4th Speaker Mr. Tan 5th Speaker Mr. Loh 6th Speaker Ms. Cheong www.ruionkoh.blogspot.com G eneral I ntroduction

1st Speaker Mr. Koh Soft Drinks Industry - 1.1 What are “soft drinks” - 1.2 The growth of the soft drinks industry -1.3 The soft drinks industry’s value-chain www.ruionkoh.blogspot.com

1.1 What are “soft drinks”? - Carbonated - Functional - Juices - RTD Tea & Coffee - Water Bottled ? www.ruionkoh.blogspot.com I ndustry Introduction

1.1 What are “soft drinks”? Characteristics of Soft Drinks : - Non-alcoholic Flavoured (usually) Sweetened (usually) soft drink n. 1) In both senses also called soda pop; also called regionally cold drink, drink, pop, soda, soda water, tonic. Figure 1.1 Definition as according to The American Heritage® Dictionary of the English Language ( Barbara, 2003) 2) A non-alcoholic, flavoured, carbonated beverage, usually commercially prepared and sold in bottles or cans. www.ruionkoh.blogspot.com I ndustry Introduction

1.2 The growth of the soft drinks industry Total revenue generated by GLOBAL BEVERAGES industry in 2008 = $1,416.3 billion In other words, Total revenue generated by SOFT DRINKS industry in 2008 = 416.4 billion www.ruionkoh.blogspot.com Data compiled from datamonitor.com I ndustry Introduction

1.2 The growth of the soft drinks industry Figure 1.2, Figure 1.3, Table 1.2 and table 1.3 Compilation of Global Soft Drinks Growth (Market Value) from datamonitor.com www.ruionkoh.blogspot.com I ndustry Introduction

Factors that lead to the downward-slopping demand in soft drinks industry : - 1.2 The growth of the soft drinks industry Economical Condition Changes in Consumers’ Lifestyle www.ruionkoh.blogspot.com I ndustry Introduction

1.3 The soft drinks industry’s value-chain Concentrate Producers Bottlers -Produce soft drinks -Distribute soft drinks to retailers & end users -Produce concentrates from raw materials Concentrates Vertically Intergrated www.ruionkoh.blogspot.com I ndustry Introduction

1st Speaker Ms. Lim Porter's 5 Forces - 2 .1 Intensity of rivalry - 2.2 Barriers to entry - 2.3 Bargaining power of suppliers - 2.4 Bargaining power of buyers - 2.5 Threats of substitutes - 2.6 Conclusion www.ruionkoh.blogspot.com

Intensity of rivalry Bargaining power of buyers Bargaining power of suppliers Threat of substitute Risk of entry

Major firms fight for -competitive advantages

-market share

Difficult compete against cost efficient

concentrated producers

Adopted vertical integration in their

distribution channels

High investment for specialized technologies and

equipment

Difficult to dispose

Existing producers already have experience and

assets to process its concentrates

Commodities are homogenous goods

Turned to synthetic sweeteners

Size of concentrate producers dwindles

Size of bottling plants

Owed by concentrate producers

Adopted forward integration in their business line

Low switching cost for buyers

Taste of the concentrates are difficult to

be imitated

Most of the CSD products use high fructose

corn syrup

TCCC gain 47% market share

(largest share in soft drink industry)

www.ruionkoh.blogspot.com Porter’s Five Forces

Concentrate producing industry is PROFITABLE

High intensity of rivalry- duopolistic nature

Low threat of new entrants- high investment and

high cost to exit

Low bargaining power of suppliers- goods are difficult

to differentiate

Moderate bargaining power of buyers

- better control on bottlers but switching cost for

buyers is low

Low threat of substitute- no substitutes exist for concentrates

CONCLUSION www.ruionkoh.blogspot.com Porter’s Five Forces

Business Level Strategy 3rd Speaker Ms. Siew - 3.1 Components of Differentiation Strategy for PepsiCo - 3.2 Components of Differentiation Strategy for Coke www.ruionkoh.blogspot.com

Developing world-class advertising campaigns Introducing new can And bottle design Responsiveness towards customer needs Good distribution channel Innovating healthy products Providing the Coca-Cola Experience Comparison www.ruionkoh.blogspot.com B usiness level strategy

Developing world-class advertising campaigns Introducing new can And bottle design Responsiveness towards customer needs Good distribution channel Innovating healthy products Providing the Coca-Cola Experience Comparison www.ruionkoh.blogspot.com

SWOT Analysis - 4.1 Strengths of Coke and Pepsi - 4.2 Weaknesses of Coke and Pepsi -4.3 Opportunities of Coke and Pepsi - 4.4 Threats of Coke and Pepsi 4th Speaker Mr. Tan www.ruionkoh.blogspot.com S wot Analysis

Strong Distribution channel

Well-establish company

High Market share

Leading brand

Strong brand Value

Largest players in soft drinks industry

Best recognized global brands

Innovative

Strong revenue growth

Strengths

Sensitive towards its Consumer

Aggressively adopts to the

inorganic growth

Cost saving

Acquisition

4.1 Strengths of Coke and Pepsi S wot Analysis

Sluggish performance in mature market

Poor cost management

Yet to overcome continued downward economic pressures

Weaknesses

Overdependence on single largest market

Low bargaining power

4.2 Weaknesses of Coke and Pepsi S wot Analysis

Increasingly health conscious

Expand in other beverage categories

The third largest player in functional drinks

Opportunities

Expand internationally

Tap the potential of growing market

Per capital consumption of its product

4.3 Opportunities of Coke and Pepsi S wot Analysis

Increasing concern of healthy concept beverages

Sluggish growth in carbonated drinks’ market

Overdependence on its bottler partners

Threats

Higher fuel price

Intensive competition

4.4 Threats of Coke and Pepsi S wot Analysis

Water bottled segment - 5.1 The water bottled industry - 5.2 By enhancing their well established bottling and distribution system -5.3 By aggressive advertising 5th Speaker - 5.4 By positioning the water bottled brands Mr. Loh W ater bottled segment

Water Bottled Industry Sparkling flavored Water Sparkling Unflavored Water Still flavored Water Still unflavored Water 2007 7.3% 119.4 Billion liters 5.1 The water bottled industry www.ruionkoh.blogspot.com W ater bottled segment

major types of water Spring Mineral Purified 3 5.1 The water bottled industry www.ruionkoh.blogspot.com W ater bottled segment

Will Coke and Pepsi repeat their success in the water segment

YES ? 5.1 The water bottled industry www.ruionkoh.blogspot.com W ater bottled segment

Home and office delivery-Nestle

Dasani (Coca-Cola) and Aquafina (Pepsi)

By enhancing their well established bottling system 5.2 By enhancing their well established bottling and distribution system www.ruionkoh.blogspot.com W ater bottled segment

China- Big market and offer great opportunity

Danone & Nestle- Increase promotion activities

Danone- Local presence – Dannon

Nestle- £1.25 million in marketing-Nestle Aquarel & Nestle Purelife

By aggressive advertising 5.3 By aggressive advertising www.ruionkoh.blogspot.com W ater bottled segment

Positioning to the targeted segments

In CSD- Diet Coke & Diet Pepsi as Health conscious products

Dasani- as affordable range water

Evian- expensive products

By positioning the water bottled brands 5.4 By positioning the water bottled brands www.ruionkoh.blogspot.com W ater bottled segment

-6.1 Pepsi’s targeting the youngster to build strong brand recognition -6.2 Pepsi’s effective cost reduction -6.3 Pepsi’s aggressiveness in seizing business opportunities 6th Speaker Ms. Cheong The Coca-cola Company or PepsiCo will be the leader? www.ruionkoh.blogspot.com F uture leader Coke or Pepsi?

The Coca-cola Company or PepsiCo will be the leader? www.ruionkoh.blogspot.com F uture leader Coke or Pepsi?

Strong brand recognition – adolescent

6.1 Pepsi’s targeting the youngster to build strong brand recognition “ Marketers plant the seeds of brand recognition in very young children, so that it will grow into lifetime relationships” (Media Awareness Network, 2009) www.ruionkoh.blogspot.com F uture leader Coke or Pepsi?

Market share Source: Bruemmer, 2009 6.1 Pepsi’s targeting the youngster to build strong brand recognition www.ruionkoh.blogspot.com F uture leader Coke or Pepsi?

6.2 Pepsi’s effective cost reduction

Effective management

Harvest own fruits

Lower price, gain competitive advantage

www.ruionkoh.blogspot.com F uture leader Coke or Pepsi?

Diversify into different business portfolio

Global snacks value $61.2billion, 2008

Pepsi held $20.6 billion (33.1%)

6.3 Pepsi’s aggressiveness in seizing business opportunities Source: Progressive Media Group, 2005 www.ruionkoh.blogspot.com F uture leader Coke or Pepsi?

Conclusion