1. COLA WARS CONTINUE: COKE AND PEPSI
IN THE TWENTY-FIRST CENTURY
By,
Group 6
G. VAIBHAV KUMAR REDDY (P111012)
P. PRAVEEN (P111033)
PRAGYA JAISWAL (P111037)
RAKESH NAVAL (P111039)
GREAT LAKES INSTITUTE OF ENERGY MANAGEMENT AND RESEARCH, GURGOAN
3. CONCENTRATE PRODUCER AND
BOTTLERS
Concentrate Producer
1993
Net Sales
Dollars per
Case
Bottler
Percent of
Total
Dollars per
Case
Percent of
Total
0.66
100%
2.99
100%
Cost of sales
0.11
17%
1.69
57%
Gross profit
0.55
83%
1.30
43%
Selling and
delivery
0.01
2%
0.85
28%
Advertising and
marketing
0.26
39%
0.05
2%
General and
administrative
0.05
13%
0.13
4%
Pretax profit
0.23
29%
0.27
9%
4. Concentrate Producer
2000
Bottler
Dollars per
Case
Percent of
Total
Dollars per
Case
Percent of
Total
Net Sales
0.71
100%
5.80
100%
Cost of sales
0.12
17%
3.77
65%
Gross profit
0.59
83%
2.03
35%
Selling and delivery
0.01
2%
1.22
21%
Advertising and
marketing
0.28
39%
0.12
2%
General and
administrative
0.06
8%
0.23
4%
Pretax profit
0.25
35%
0.52
9%
5. RETAIL CHANNELS
% of Industry
Volume
Coca-Cola
1993
2000
Pepsi-Cola
Coca-Cola
Pepsi-Cola
Food Stores
32.8%
28.5%
36.1%
32.2%
Convenience
and Gas
29.6%
37.4%
35.7%
41.5%
Fountain
58.9%
27%
65%
21%
Vending
48.6%
40.6%
50%
40%
Other
45.4%
32.5%
35.5%
33.3%
Total
40.7%
31.3%
44.1%
31.4%
6. STRATEGIC PATH
COCA-COLA
PEPSI-COLA
• Franchise bottling system , reaching 370
franchises by 1910
• Franchise bottling system , reaching 270
franchises by 1910
• During 1920s and 30s, introduction of
open-top coolers to storekeepers, automatic
fountain dispensers, vending machines.
•In 1920s, lowered the price for its 12ounce bottle.
• Introduced Teem (1960), Mountain
• Introduced Fanta (1960), Sprite (1961), low- Dew (1964), Diet Pepsi (1964). Worked
calorie Tab (1963).
with bottlers to modernize and improve
services.
• Purchased Minute Maid (fruit juice),
Duncan Foods (coffee, tea, hot chocolate),
•In 1963, launched the ”Pepsi Generation”
Belmont Springs Water.
campaign targeting the youth, which
helped narrow coke’s lead to 2-to-1
• Coke countered “Pepsi Challenge” with
margin.
rebates, price cuts and price discounts.
• In 1974, introduced the “Pepsi
Challenge”.
7. COCA-COLA
PEPSI-COLA
• In 1978, hike in concentrate price after
securing bottler approval.
• In 1970s, sold concentrate to bottlers
@ 20% lower than coke.
• In 1980, switched from sugar to lowerpriced high fructose corn soup.
•Merged with Frito-lay in 1965.
• Increased advertising expenditure.
• In 1978, 15% increase in price of
concentrate.
• Sold off most of non-CSD businesses
i.e. wine, coffee, tea etc.
• Emulated the move of fructose corn
soup in 1983.
• Introduced Diet Coke in 1982 – huge
success.
• Increased advertising expenditure.
• Change in formula in 1985 – major
setback. Reintroduced original formula
in the name of Coca-Cola Classic after 3
months.
• In 80s, introduced 11 new CSD brands.
• In 80s, introduced 13 new CSD
products.
8. COCA-COLA
• In 1980, refranchised bottling
operations-helped in expansion.
PEPSI-COLA
• In late 80s, acquired MEI bottling,
Grand Metropolitan’s bottling
operations and General Cinima’s
bottling operations.
•Created independent bottling
subsidiary, Coca-Cola Enterprises (CCE)
in 1986.
• In 1999, created Pepsi Bottling Group
(PBG).
•Employed low-price strategy.
•Employed low-price strategy.
• Marketing agreements with celebs Harry Potter .
• Marketing agreements with celebs –
Britney Spears, Jackson.
• Introduced PowerAde, Nestea, Dasani
in 1998, 1999 in response to Pepsi.
• By end of 90s, reintroduced “Pepsi
Challenge”.
• Started acquiring international
markets in more structured way.
• Non-Cola Beverages – introduced
Aquafina (1998), Tropicana (1998),
Gatorade and SoBe (2000).
• Started acquiring international
markets in more structured way.
9. SWOT ANALYSIS OF COCA-COLA
STRENGTHS
• First mover advantage.
• More loyal customer base.
• Large market share.
• Economies of Scale.
• International Brand recognition.
• Huge distribution network.
• Strategic move during world wars.
• Success of diet coke.
• Efficient global operations
WEAKNESS
• Moving away from core competencies.
•Brand Failures
•Product Recalls
OPPORTUNITIES
• Entry into new developing
international markets.
• Introduction of newer brands.
• Innovative advertising strategies.
THREATS
• Barriers of entry in international
markets.
• New age beverages.
• Fierce competitors in local markets;
Private labels at low prices.
10. SWOT ANALYSIS OF PEPSI-COLA
STRENGTHS
• Guerrilla Marketing strategies.
• More focus on young generation.
•Economies of Scale.
• International Brand recognition.
• Huge distribution network.
• Innovative advertising strategies.
• More flexible franchise network.
WEAKNESS
• Smaller market than Coke.
• Slower take off in international
markets.
• Imitation of Coca-Cola.
•Falling Behind in All-embracing
Markets, namely Russia, Venezuela, and
South America.
OPPORTUNITIES
• Introduction of “Pepsi Health Drink”.
• Image of “Total Beverage Company”
• Entry new developing international
markets.
• Introduction of newer brands.
THREATS
• Fear of losing market share due to
rapid market fluctuations.
• Barriers of entry in international
markets.
• Decreasing brand loyalty among
consumers.
• New age beverages.
• Fierce competitors in local markets;
Private labels at low prices.
11. PORTERS FIVE FORCE ANALYSIS – SOFT
DRINK INDUSTRY
Industry Competitors
Coca-Cola, Pepsi-Cola, Cadbury Schweppes and
others.
Threat of New Entrants
High entry costs
High risk for entrants due to diversified nature of
Coke and Pepsi.
Government Policy regulations.
Existing Loyal customer base.
Acquisition of major bottling units by existing firms,
increases the entry barriers.
12. Threat of substitutes
Non-CSD drinks like milk, alcoholic beverages, juices, sports
drinks, tea-based, dairy-based drinks
Threat of saturation of consumption in US market thereby leading to
increase in the consumption of on-Cola beverages.
Bargaining power of suppliers
Low switching costs.
Huge number of suppliers.
Maintaining the quality and flexibility of supply chain through
backward integration i.e. acquiring bottling plants.
Bargaining power of buyers.
Higher buying power – large grocers, discount stores and restaurants
buy large volumes demanding a lower price.
Choice of customers is high due to competition and variety in the
market.
13. U.S. Non-Alcoholic Beverage Market Share, %
share by volume
Company
2005
2009
2011
Coca-Cola
30%
42.8% 43%
Pepsi-Cola
22.6% 31.1%
31%
Cadbury Schweppes
10.6% 15%
18%
Other
36.9% 11.1%
8%
16. ISSUES TO PONDER for Pepsi
Hard to differentiate products in terms of taste as
product variety is very much limited within cola
beverages.
Coca-Cola has much stronger loyal customer base.
Consumer market moving from carbonated drinks
towards functional soft drinks.
In US, Cadbury Schweppes competing
aggressively.
17. RECOMMENDATIONS
For Pepsi to grab the major pie,
It needs to follow the “Cost Leadership” and
“Product Differentiation” Strategies.
i.e. it needs to create a unique customer perception
and differentiate one product from another.
Rather than being a price follower, it must face the
market by a leading strategy of Price Setter, which can
be made possible by improving the production
efficiencies and reducing the bottlenecks.
It also needs to focus on strengthening its core
competency.
