Cola Wars

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Cola Wars

  1. 1. The Cola Wars<br />Zacharias Elinder 40094<br />Vanessa Meyer 40091<br />SofieKarlsson 40082<br />Kim Norlander 40088<br />
  2. 2. The Pepsi/Coke supply chain<br />Supplier<br />Supplier<br />Supplier<br />Supplier<br />Pepsi<br />Coca Cola<br />CCE<br />IB<br />Fountains<br />PBG<br />IB<br />Fountains<br />Supplier<br />End-customers<br />
  3. 3. Profitability/Attractiveness of Concentrate Industry<br />5 Forces Analysis<br />1. Suppliers: Low power, low cost, commodity ingredients, many suppliers<br />2. Substitutes: Mature market, new beverage trends<br />3. Buyers: Bottlers (low barging power) & fountains Low power. <br />4. New Entrants: Unequal access to bottlers (soft drink inter-competition act), economics of scale. <br />5. Competitors: Duopoly (Pepsi & Coke dominate the market)<br />
  4. 4. Is the concentrate industry profitable?<br />Yes, it is still profitable!<br />Why?<br />- Low capital costs<br /><ul><li>Low distribution and production cost
  5. 5. Duopoly, few actors share the profit
  6. 6. Huge growth potential</li></li></ul><li>Profitability/Attractiveness of Bottling Industry<br />5 Forces Analysis<br />Suppliers: concentrate Producers (1/3 of COGS), sweeteners (1/10 of COGS), packaging: can, plastic and glass (1/2 of COGS)<br />Substitutes: Soda fountains<br />Buyers: retail outlets, supermarkets, discount stores, vending machines other convenience stores<br />New Entrants: vertical integration (CCE & PBC)<br />Competitors: small local bottlers, alternative bottlers<br />
  7. 7. The Bottling Industry Life Cycle: Rivalry over Time <br />1970: 2000 <br /># of Industry players<br />1910: 370 <br />2000: 300<br />Introduction Growth Maturity Decline<br />Time<br />Grant 2008<br />
  8. 8. Profitability/Attractiveness of Bottling Industry<br />Bottler Industry:<br /><ul><li> Gross profits 40%
  9. 9. Operating Margins 9% (sell & delivery)</li></ul>Exclusive geo territory rights/ decision freedom<br />Large role in trade/consumer promo<br />DSD Relationship with Retailers<br />Capital intensive = barrier to entry<br />Franchise agreements CPI index= power of buyer (bottler)<br />“Soft drink act”= barrier to new entrants<br />Bottlers service soda fountains<br />Bottlers buy vending machines<br />Packaging represents 40% of COGS but has little power VS CP<br />Metal cans as commodities= power of buyers (bottler & CPs)<br />Patented “Skirt” Coke bottle= barrier to entry<br />Diversified Product Portfolio (hot-fill and Water)  raised capital requirements & Margins  threat/barrier of new entrants <br />Anchor bottle model (consolidation)  increased power of supplier (CPs)<br />Internationalization  imitation strategies  power of bottlers  localized competition <br />High Attractiveness<br />Low/high Attractiveness<br />Today’s Attractiveness<br />
  10. 10. Challenges Today<br />Health Debate (low cal skepticism/sugar)<br />Environmental debates (use of water/ recycling)<br />Change of brand meaning (Freedom VS Greedy Capitalism)<br />Changing industry structure<br />Soda streamers<br />Diversified product portfolio  growing localized competition<br />International trends: cultural differences, political instabilities, ad restrictions, regulations, soda taxes<br />
  11. 11. War effects on Industry Profitability<br />Price war had negative effect on whole industry<br />Ending price war and raising prices helped industry<br />Competition forced innovation and growth<br />Competition forced players to make trade-offs<br />Bottler proliferation (internationally) gives opportunity to new concentrate entrants<br />

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