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Cola Wars - Coke Vs Pepsi Harvard Business School Case Study

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A brief presentation on case study Cola Wars where we try to analyse the past history and predict the future of their business and growth opportunities from a Marketing Management Perspective.

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Cola Wars - Coke Vs Pepsi Harvard Business School Case Study

  1. 1. Case Study Analysis on Cola Wars Continue : Coke and Pepsi in 2010 Presented by : Mohan Kanni Dhanunjay Naidu Thentu Vivek Lalam
  2. 2. History Of Coca-Cola • Coca-Cola was formulated in 1886 by John Pemberton (pharmacist). • It was served at Jacobs Pharmacy. • Frank Robinson named it as Coca-Cola. • In 1891, Asa Candler acquired the formula of Coca-Cola. • In 1919 Company was sold to a group of investors and four years later, Robert Woodruff became the Leader.
  3. 3. History Of Pepsi-Cola • Pepsi-Cola was invented in 1893 by Caleb Bradham (Pharmacist). • During the Great depression (1929-1939),Pepsi lowered the price to a nickel. • PepsiCo was established through the merger of Pepsi-Cola and Frito-Lay in 1965.
  4. 4. Cola Wars • In 1959, Alfred Steele became CEO of Pepsi and his motto was “Beat Coke”. • To target family consumption through supermarkets. • In 1970, marketing campaign “Pepsi Generation” was launched. • In late 1950’s, Coca-Cola advertised as “Americans Preferred Taste” • Other Advertisements included “No Wonder Coke Refreshes Best”
  5. 5. Cola Wars • Pepsi launched Teem (1960), Mountain Dew (1964) and Diet Pepsi (1964). Non CSD Pepsi merged with Frito-lay • Coke launched Fanta (1960), Sprite (1961) and Cola Tab (1963). Non CSD Coke purchased Minute maid, Duncan foods and Belmont Springs Water.
  6. 6. The Pepsi Challenge • In 1974 Pepsi launched “Pepsi Challenge” in Dallas. • Blind taste tests. • Coke countered with rebates, retail price cuts.
  7. 7. Cola Wars Heat Up • Pepsi doubled its advertising expenses. • Pepsi introduced Lemon-Lime Slice (1984) and Caffeine Free Pepsi (1987) • In 1980 Coke switched from sugar to high-fructose corn syrup. • Doubled the advertising expenses. • Diet Coke was introduced in 1982. • Coke introduced Caffeine Free Coke (1983) and Cherry Coke (1985)
  8. 8. PRODUCTION AND DISTRIBUTION • CONCENTRATE PRODUCERS : The concentrate producer blended raw material ingredients, packaged the mixture in plastic canisters and shipped those containers to bottler. • BOTTLERS : Bottlers purchased concentrate ,added carbonated water and high- fructose corn syrup, bottled and canned the resulting CSD product to the consumers.
  9. 9. • RETAIL CHANNELS :The distribution of CSD’S took place through Super Markets, Fountain Outlets, Vending Machines, Mass merchandizers, Convienience stores and gas stations and other outlets. • SUPPLIERS to concentrate producers and Bottlers :  Concentrate producers required inputs like caramel colouring, phosphoric or citric acid, natural flavours and caffeine.  Bottlers purchased two major inputs : Packaging (including cans, plastic bottles and glass bottles) Sweeteners (including high fructose corn syrup, sugar and artificial sweeteners such as aspartame)
  10. 10. • The Franchised bottler owned a manufacturing and sales operation in an exclusive geographical territory, with rights granted in and other terms of sale by the franchiser. • The 1987 Master Bottler contract granted coke the right to determine the concentrate price. • Under this contract coke could assist bottlers with advertising or marketing • In case of Pepsi, the agreement granted the bottler perpetual rights to distribute Pepsis CSD products but required it to purchase raw materials from pepsi at prices determined by Pepsi.
  11. 11. SWOT Analysis Weakness Threats Strengths Opportunities Most Valuable Brand for 13 years  Worlds largest in beverages : $15 Billion  Diversification:500+brands;200 countries  Extensive Global Dist. Network  Leader in Fountain Accounts  Strong in emerging markets : China, Brazil, Eastern Europe  Declining market share since 2000  Negative publicity  CSD focus : only32% non-CSD share  Price Pressure from mass retailers(Wal-Mart):40% of US packaged sales  Expand non CSD Products  Expand and Mostly CSD line ;Sprite Green(coke)  Global Expansion in emerging markets: India ,China, Brazil(coke)  Innovative Offerings tailored to local taxes  Growing "health-conscience" society  Changing Consumer tastes and preferences  PepsiCo’s Gatorade, Tropicana and Aquafina are stronger brands  Boycott in the Middle East  Protest against Coke in India  Negative publicity in Western Europe
  12. 12. SWOT Analysis Weakness Threats Strengths Opportunities  22nd Most Valuable Brand  2nd Largest in F & B in world : $22 Billion  Leader in Non CSD  Diversification : “The power of One”  Extensive Global Dist. Network  Successful marketing Campaigns and celebrity endorsements.  Declining market share in beverages  Negative publicity  Overdependence on US 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)  Expand non CSD juice sport energy bottled water  Gatorade, Naked(Pepsi)  Expand and Mostly CSD line ;Pepsi Next,Trop50(Pepsi)  Global Expansion in emerging markets: India ,China & Russia(Pepsi)  Innovative Offerings tailored to local taxes  Herb drinks (Pepsi)  Growing nutritious snacks product markets  Obesity and Health Concerns  Changing Consumer tastes and preferences  Coca-Cola Increases Marketing and Innovation Spending to $400M Globally  Relying on North America only is Bad  Decline in Demand for Carbonated Drinks.  Negative publicity during 2003 World cup incident of Pepsi Blue.
  13. 13. BCG Matrix – Coca Cola Thumbs up Kinley Limca Fanta Coca Cola Diet Coke Gold Spot(India) Root Beer Sprite Maaza Minute maid
  14. 14. BCG Matrix - Pepsi Aquafina Miranda Mountain Dew Pepsi Diet Pepsi 7 UP Tropicana Pepsi Max Pepsi Blue, Pepsi Gold Mist Twist
  15. 15. Bottler Consolidation and Spin-Off • Coke started refranchise bottling operation by buying up poorly managed bottlers, infusing them with capital and quickly reselling them to better performing bottlers. • Coke created an independent bottling subsidiary called Coca-Cola Enterprises. • Pepsi did the same through Pepsi Bottling Group.
  16. 16. The Quest for Alternatives • Pepsi replaced high fructose corn syrup with natural sugar. • Coke and Pepsi both developed their own versions of Stevia (herb with zero calorie sweetener). • Pepsi developed non-CSD products like Gatorade and Tea based drinks (Lipton). • Coke acquired maker of Vitamin water drinks and also entered business of supplying coffee and tea to food service customers.
  17. 17. Internationalizing the Beverage Wars • India and China emerged as future battlegrounds. • Coke relied on International market (80% of sales) • Pepsi chose to focus on emerging markets
  18. 18. Who has been wining the war? 1950: Coke have 47% and Pepsi have 10% 1970: Coke have 35% and Pepsi have 29% 1990: Coke have 41% and Pepsi have 32% 2000:Coke have 44%Pepsi have31.4% other beverage Cadbury Schweppes 14.7% 2006:Coke have 43.1% Pepsi have 31.7% Cadbury Schweppes 14.5%

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