Cola War Continues:
Coke and Pepsi in the Twenty first
           Century
    By Lisa, Jiantong, Johanna, Sofie, Xiaoyi
Scope

• Industry = Cola beverage
• Coke and Pepsi mainly
• Global market
Concentrate industry-
             Threat of New Entry
         •   Moderate threat of new entry

 •   Low capital require...
Concentrate Industry -
      Bargaining power of buyers
  Concentration of buyers (bottlers, end-consumers, retailers) rel...
Concentrate Industry -
       Bargaining power of suppliers
  •    Concentration – Don't know, but guessing low (weak pwr)...
Concentrate Industry -
       Threat of substitutes

•   Large threat of substitutes (fanta, sprite, water, tea, lemonade
...
Concentrate Industry -
         Rivalry among existing

•   Intense rivalry

    •   equally balanced competitors,

    • ...
Bottler Industry - Bargaining
Power of suppliers (low)

Bottlers require
1. packaging: cans, plastic bottles, glass bottle...
Bottler Industry - Bargaining
power of buyer
•   most mass merchandisers have private label CSDs.

•   intense competition...
Bottler Industry - Threat of substitutes
  •   (a lot, numerous)

1. in 2000, proposition of CSD consumption continue to d...
Bottler Industry - threat of new
entrants
  •   1. High brand loyalty

   Coke, pepsi, control 89.3% of Soft drink market
...
Bottler Industry - valry in             Ri




existing companies
  •   1. Main players: Coke and Pepsi

compete in innova...
•    What challenges face these companies today?



  •    Changes in consumer behavior tastes and preferences

    •    A...
Sum up
              Threat of
             New Entrants




Bargaining   Rivalry Among   Bargaining
Power of        Exist...
Sse Cola Wars Group5
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  • Sse Cola Wars Group5

    1. 1. Cola War Continues: Coke and Pepsi in the Twenty first Century By Lisa, Jiantong, Johanna, Sofie, Xiaoyi
    2. 2. Scope • Industry = Cola beverage • Coke and Pepsi mainly • Global market
    3. 3. Concentrate industry- Threat of New Entry • Moderate threat of new entry • Low capital requirements after the initial investment in production facilities make the barriers to entry low • even lower for already established soft drinks producers who are now not producing cola beverage • high importance of the brand to consumers • With the ability to find your own market niche entry is possible. Conclusion: As there are many, many competitors but no really strong ones  -> A threat of new entrants exists, although should not be exaggerated
    4. 4. Concentrate Industry - Bargaining power of buyers Concentration of buyers (bottlers, end-consumers, retailers) relative to sellers (concentrate producers) – Low, but increasing with concentration (300 in 2000 and decreasing trend) (weak pwr) • Industry dependence – yes, can bottle other things, but not competitors' (weak supl. pwr) • Differentiation of the purchased item  – high between diff. concentrates (weak pwr) • Few switching costs – essentially no, but strong relationships? Coke wrote unfair contracts (p. 3), but at the same time contributed with millions in marketing and infrastructure support • Big part of cost structure – yes 65% of profits • Low profits/bad finances – low profits (9% of sales vs. 35 for concentrate producers) • Quality little affected by input product – very much affected • Input product little effect on costs – very big effect on costs
    5. 5. Concentrate Industry - Bargaining power of suppliers • Concentration – Don't know, but guessing low (weak pwr) • Industry dependence – no, can supply to other industries as well (strong supl. Pwr) • Switching costs – low (weak supl. Pwr) • Differentiation – low, ingredients taste the same (weak pwr) • Substitutability – high (weak pwr) • Threat of forward integration - low, more likely that Coke/Pepsi Conclusion: Bargaining power of suppliers is low to moderate, since on the one hand differentiation between suppliers and the substitutability between them is high, combined with the fact that Coke & Pepsi are important to their suppliers and the low concentration pf suppliers make their bargaining power low. On the other hand, suppliers' industry dependence is very low to moderate (low for coloring, moderate to high for caffeine?), giving suppliers some bargaining leverage. 
    6. 6. Concentrate Industry - Threat of substitutes • Large threat of substitutes (fanta, sprite, water, tea, lemonade etc.).  coke volume change +0.8, pepsi -0.6 -- dasani +117, lipton +10 etc etc  • Trend towards increased (beverage) market share for healthier options • Although many consumers strongly favor Coke and are more or less addicted 
    7. 7. Concentrate Industry - Rivalry among existing • Intense rivalry • equally balanced competitors, • slow industry growth, • high costs (marketing) • low switching costs for the end consumer
    8. 8. Bottler Industry - Bargaining Power of suppliers (low) Bottlers require 1. packaging: cans, plastic bottles, glass bottles. 2. Sweeteness: High fructose corn syrup and sugar, artificial sweeteners   reliable supply   faster delivery   lower price 3. there are many local concentrate producers in US, and the cost of sales is 17%(compare to bottler , it is not high). Cola and pepsi- cola, the soft drink unit of     pepsico claimed a combined 76% of
    9. 9. Bottler Industry - Bargaining power of buyer • most mass merchandisers have private label CSDs. • intense competition for shell space due to expanding array of products and packaging options • Intense competition for fountain accounts’ • power is currently moderate increasing in future • Increasing brands of beverages • In American market, there was chronic excess supply in the industry,therefore to buyers they have more choice.
    10. 10. Bottler Industry - Threat of substitutes • (a lot, numerous) 1. in 2000, proposition of CSD consumption continue to decline slightly according to John,C, Maxwell, Beverage Digest FAct book 2001. (1998-30%->1999-29.4%->2000-29%) 2. Bottled water and non-carbonated drink popularity is rising 3. discount retailers, warehouse clubs had their own private label CSD. sum up: threat of substitutes is high, because although comsuption habit is difficult to change at a moment and also the market share is big, there is a potential threat of substitues to existed companies.
    11. 11. Bottler Industry - threat of new entrants • 1. High brand loyalty    Coke, pepsi, control 89.3% of Soft drink market 2. DSD system    Coke and pepsi had already have intimate relationship with the retail channels. 3. Regulations.    The soft drink interbrand competition Act in 1980, make it impossible for a new bottler to be established in any regions if there is already a bottler running. 4. Capital intensive and involved specilized, high-speed lines are barrier for new entrants.
    12. 12. Bottler Industry - valry in Ri existing companies • 1. Main players: Coke and Pepsi compete in innovation and marketing. duopoly competition (Fierce competition) - hamper the profitability 2. The number of US soft drink bottlers had fallen, from over 2,000 in 1970 to less than 300 in 2000. mostly acquired by and sold to either Coke or Pepsi. sum up: the rivalry is intense
    13. 13. • What challenges face these companies today? • Changes in consumer behavior tastes and preferences     •    A slow growth/ stagnation of growth/ in U.S. sales volume of CSDs     •    Financial crisis (Coke and Pepsi bottlers over-invested and under utilized)     •    A need for diversification and entry into new markets • Industry growth rate in new markets bring challenges in terms of coping with:  ◦ Cultural differences ◦ Government regulations ◦ High investments in winning grounds ◦ Need to adapt distribution channels to different markets ◦ Need to adapt business model to new markets ◦ Above mentioned points can however be seen both as threats and opportunities • By changing the underlying structure of the industry, setting the rules of the game • In beginning spurred business     •   By previously going head-to-head in competition and at times, in some distribution channels, competed with price (i.e. grocery stores) industry profits has decreased.
    14. 14. Sum up Threat of New Entrants Bargaining Rivalry Among Bargaining Power of Existing Power of Suppliers Competitors Buyer Threat of Substitute Products or

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