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1. Cola Wars
The war between Cola and Pepsi has continued to grow despite the
effort to grasp world’s beverage market. With efforts aimed at
generating $ 66 billion carbonated soft drink industry. The struggle
continued from 1990 and 1975 enabled companies to achieve annual
average revenue of about ten percent of the global consumption
increased. In the study of this case, the issues that make up the focal
point of this paper include whether growth in sales fell short of the
expectations of the investor.
The paper shall at the same focus on the understanding as to whether
there is a new rivalry from brand or other carbonated drinks.
Knowledge as to whether the war is only about coke is also a question
that shall make up the focus of this study alongside whether there is
need for creation of a new product because of health
recommendations.
History of the Cola Wars
Cola wars in other words lasted for 100 years when both drinks were
created in 1800s at the cascade counter. By then Pepsi, was selling 12
ounces of its beverages at 5 cents while coke was selling 6.5 ounces for
5 cents. Because of this Pepsi Company almost went bankrupt but it
later on emerged in the 1930s. Coke during World War II and this made
it expand in size compared to Pepsi (Datta, 2001).
Even so, Pepsi in 1970s managed focused on supermarkets doubling its
shares, a strategy in which Coke did not emphasize on. According to a
challenge held in Dallas and Texas by a small Pepsi bottle revealed that
Pepsi was indeed a better brand than Coke thus losing the national
market share (Yoffie, 2004). The message was heated up when Coca-

2. Cola Company was taken over by Robert Goizueta and started
purchasing its bottlers.
Robert also introduced the diet coke and transformed Coca Colas
formula. There was also vertical integration as well as disintegration by
the company where coke enterprise spun off its bottlers and developed
new anchor bottlers. Coke managed the bottlers without owning them.
Pepsi by 1990 was forced to imitate Coke by regulating the bottlers
without owning them because the commercial venture was not
profitable (Chura, 2003).
Cola wars in terms of evaluation, had tools that will be utilized to
evaluate the case including the five Porter’s forces and SWOT analysis.
Brief and Relevant facts regarding the case
The growth rate of Cola and Pepsi according to available reports
indicates an increase between 1975 and the 1990s. The industry at the
same time had revenue of $ 66billion of the carbonated drink.
Americans also consumed 23 gallons CDs in 1970 (Mazzucato, (2002).
The cola wars case is also trying to include some elements of
competitive dynamics and historical patterns of vertical
integration in the US soft drink industry. The concentrate
manufacturers produced a wide range of raw materials and packaged
the blend in plastic canisters that were transported to bottlers to make
concentrate diet. Other products included sweeteners added to CSDs
and with the normal CSDs, the bottlers only needed to add high
fructose or sugar to the drink.
The best known producers of concentrate were Pepsi and Coke but in
mid 1990s, the two diversified their operations and maintained direct
control of bottling networks. The concentrate business in 1990 was
more profitable compared to the bottling business. Nonetheless, the
bottling business suffered in the following years because manufacturers

3. of the concentrate were not in a position to squeeze the bottles
without impacting their personal distribution.
The people who had invested in the bottling business would also get
margins ranging from seven to nine percent. Between the years 1970 to
2004, the number of bottlers reduced significantly from 2000 to 300
and as a result, coke became the first producer of concentrate to
develop a franchise followed by Schweppes and Pepsi. The major
assumptions used for the study include
Coke SWOT analysis
One of coke’s company strengths is the benefit of having mover
products as well as a large client base. The company at the same time
had a large market share allowing it to produce in large quantities thus
promoting economies of scale. The company has global brand
recognition with large distribution networks and global activities that
are highly successful. The introduction of coke was the company’s
strength.
Some of the company’s weaknesses included the fact that it faced
brand failure thus generating product recalls. Focusing on global market
at the same company made the company to shun from its focal
competencies.
On the other hand, opportunities for the company included creation of
innovative advertisement methods, new brands introduction and new
global markets. Even so, it still faced barriers including entry to global
markets, fierce competition and onset of new beverages.
Pepsi SWOT analysis
Pepsi’s strengths included the fact that it mainly focused on young
generation CSDs thus increasing its sales. Because of mass production,
the company was in a position to have large economies of scale and to
employ gorilla methods for instance Dallas challenge. The other

4. strength of the company included global brand recognition, flexible
franchise networks, large distribution networks and creative marketing
strategies (Gillespie & Hennessey, 2011).
Some of the weaknesses included smaller market share compared to
that of coke, falling behind renowned markets and slow take off
especially in global markets imitating Coca-Cola bottle specifically in
South America and in Venezuela. The opportunities for the company
included introduction of healthy drink Pepsi, the company’s beverage
image and its capability to venture into global market and new brand
introduction.
The company additionally is faced by major threats including fear to
lose market share because of market fluctuation. At the same time,
barriers to entry to global markets are a major threat. Reducing brand
loyalty and new age drinks also poses a significant threat and
competition from local markets selling their products at lower prices.
The five forces analysis of the cola wars
The soft drink industry is profitable and lucrative for producer of
concentrate compare to the bottlers because of ease of production of
the CSDs. There are reasons that clearly demonstrate the two entities
profitability via the five forces and they include
Threats of entrants
There were low entry barriers based on the fact that the two
organizations have franchise agreements with their bottlers therefore;
they have specific rights in given geographical areas. The companies at
the same time have bought different bottling companies thus, making it
hard for new entrants to get willing buyers to distribute their products.
The companies at the same time have the benefit of economies of scale
thus, allowing for mass production and sell of products at relatively
lower prices. This is a move that could lead to losses for new entrants.

5. The two companies in terms of advertisement heavily invested on
promotion making it almost impossible for new entrants to competent
with the two and achieve visibility.
The two companies at the same time because of their business period
have already built brand images and global client loyalty. This could
make it hard for new entrants to reach such heights in soft drink
markets (Oldroyd, 2012). Any retailer the two companies’ product is
given margins between 15 and 20 percent for shelve space. This being
the case, new entrants would have a hard time trying to convince
retailers to substitute their new products of the two, coke and Pepsi.
As a result, the big organizations may retaliate in case there are new
entrants with different prices that would affect them. What’s more, the
entry would force one to highly invest in fixed costs as well as
distribution charges which can be difficult.
Supplier’s power
Since there are just a few requirements for concentrate merchandise,
the supplier’s bargaining power is relatively low. This is based on the
fact that many supplies include carbon dioxide, sugar and caffeine
among other basic commodities (Jeffs, 2008). Therefore this leaves the
supplier with no bargaining power over pricing because of weak
suppliers.
Power of Buyers
According to market share order as indicated in exhibit 6, the main
channels for soft drinks are Fast food foundation, food stores,
convenience stores and vending among others (Yoffie & Slind, 2006).
Being the case, the buyer’s power has been significantly increasing
because of retail consolidation, large number of major players and
discount prices that are highly sensitive.

6. Convenience stores are also highly fragmented and as a result, the
companies need to pay high prices. At the same time, vendors directly
sell to clients hence; they have no power over consumers or buyers.
Threat of substitute
There are many substitutes in the soft drink industry including beer,
juice, water and coffee among others available to end users. Many
clients are turning from CDSs to non-alcoholic options based on health
issues in regards to carbonated drinks leading to obesity and poor
health.
Despite the threat being relatively high, concentrate manufacturers
adverts, accessibility of the products and brand equity help to provide
the products mainly for clients, a fact that many clients cannot realize
or meet. These organizations at the same time offer the substitutes to
protect themselves from cut throat competition.
Rivalry
It is with no doubt that soft drink industry operates in a duopoly setting
with main competitors being Pepsi and Coke. The market for other
companies is too small because of the effect in the structure of the
industry. The two companies do not agree on advertisement and
differentiation and not on pricing thus, preventing the possibility to
trading at loss (Gupta, 2009).
Key difficulties while conducting the analysis
Different challenges were encountered when carrying out the analysis
including the fact that it was hard to understand how the actual
consumers boycott effect in Dallas. The international impact of the
products at the same time in other countries in relevance to
internationalization and diversification has not been exhausted.

7. There were wars and counter wars between the two companies and
this did not reveal the impact of the other emerging two brands in the
market. Lastly, there were geographical areas where other brands
besides Pepsi and coke did not perform well and this has not been
recorded. The ownership percentages also in the market share could
not be verified clearly because the main focus was on the two major
brands.
Limitations of the analysis
Difficulty in access of factual record of information of other beverages
consumption besides the two major brands was a major limitation for
the study. The other limitation is the fact that the study was restricted
to the US only and as a result, the impact on other states cannot be
ascertained. The study therefore limits itself on Pepsi and coke only
comparing only the two.
Conclusions from the Cola Wars
The competing wars between Pepsi and Cola and growing substitutes is
affecting the sales and performance of the two brands. Introduction of
new brands with different tastes in various markets is one of the
available options. It is clear that Coke gained world culture and as a
result, they can divide the market into manageable sections with
various needs.
They should at the same time focus on globalization where the globe is
generally considered and it only needs what it can be offered. The
companies by focusing on demographics are in a position to meet
different client needs whether non-carbonated or carbonated. The Five
porter’s analysis despite this fact reveals that Coke and Pepsi will still
enjoy a large market share despite changes in the market.

8. This is based on the availability of few threats in the market and low
suppliers bargaining power with buyers enjoying moderate bargaining
power and low substitute threats as well as low economic rivalry.
The two companies therefore ought to face cropping challenges using
healthy sweeteners to counter aerated drinks claims that they can lead
to obesity facing them. They also need to employ a green strategy to
create customer loyalty and enhance their brand. Additionally, they
need to settle for more advertising and promotional strategies besides
growing their shelf space.
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9. References
Capparell, S. (2008). The Real Pepsi Challenge: The Inspirational Story of
Breaking the Color Barr. Simon and Schuster.
Chura, H, (2003, Marcb 10), Lemon-lime the battlefront in this
summer’s cola wars. Advertising Age, 74(10), 15.
Datta, J, (2001, April 23), India: It’s a ‘virtual’ cola war, BusinessLine
(Cbennai), p, 1,
Gillespie, K., & Hennessey, H. D. (2011). Global marketing. Australia:
South-Western Cengage Learning.
Gupta, M. (2009). Principles of management. New Delhi: PHI Learning
Pvt. Ltd.
Jeffs, C. (2008). Strategic management. Los Angeles: SAGE.
Mazzucato, M., & Open University. (2002). Strategy for business: A
reader. London: Sage.
Oldroyd, M. (2012). CIM Coursebook Marketing Environment 07/08.
Routledge.
YofFie, D, (2004). Cola Wars Continue: Coke and Pepsi in the Twenty-
First Century. Harvard Business Review, 9-702-442,
Yoffie, D. B., & Slind, M. (2006). Cola wars continue: Coke and Pepsi in
2006. Harvard Business School Pub..
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