...The competition within the $74 billion carbonated soft drink (CSD) industry has been remarkable ever since Coca-Cola was formulated in 1886, and further intensified when Pepsi was introduced in 1893. Ever since then, the CSD industry has been dominated by these two companies, with Coke taking the lead in the early stage, followed by Pepsi doubled its market share between 1950 and 1970 by offering its concentrate at a lower price than its competitor. The CSD industry has been profitable historically due to numerous reasons. Firstly, in the world’s largest market for CSD products, consumption had been growing at a steady rate of 3% annually from 1970 to 2000 in the U.S., marking a high growth stage in the industry life cycle (Appendix B). This allowed both Coke and Pepsi (C&P) to achieve annual sales growth of around 10%, while competing head-to-head against each other and other smaller CSD producers. Competition between C&P reinforced their brand image, as the increase in marketing efforts could be transferred into profit and sales growth when the overall demand was increasing in a growing industry. However, the increasing industry volume was largely obtained by C&P, leaving other smaller firms vulnerable with stagnated growth opportunity. Secondly, according to Porter’s Five Forces analysis in Appendix A, high barrier for new entrants, low bargaining power of suppliers of both concentrate producers and bottlers, moderate buyer’s bargaining power and low degree of threats of substitutes...
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...Case Analysis – Cola Wars Continue: Coke and Pepsi in 2010 Coke and Pepsi are two leading companies in the soft drink industry. They contend with each other during decades. The Cola Wars are a campaign of mutually-targeted television advertisements and marketing campaigns since the 1980s between soft drink manufacturers The Coca-Cola Company and PepsiCo. Historically, the soft drink industry has been so profitable. Porter’s Five- Forces Model of industry competition can define and analyze an industry in terms of five main factors. In this industry, competition is quite cruel between rivalries since Coca-Cola and Pepsi are already powerful leaders in the industry. It is basically a duopoly situation in soft drink field. The two companies share the whole market making them a huge profit even the industry itself is flattening. Due to the situation in the industry, there is not any barrier for entering but new company will be extremely risky to enter the market, since both Coca-Cola and Pepsi are mature companies with high reputation during decades. Unless the new enterprise is highly innovative and surely can do a better job than the two industry leaders. Therefore, threat of new entrants is expected to be very low. The threat of substitute products mainly comes from the promotion of a healthy diet, which makes juice, power drinks and other non-CSDs a better choice other than sodas with lots of sweetener and fat. This threat however, has been overcome by the introduction of...
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... Risk of Entry by Potential Competitors With high barriers to entry, the risk of potential competitors entering into the CSD industry is low. The high cost of developing a manufacturing plant in order to meet demand is a barrier that makes the risk of entry low. Coke and Pepsi have spent numerous amounts of money to gain the brand loyalty of their customers. Because brand loyalty is already established in the CSD industry, the risk of competitors entering is lowered. Due to brand loyalty, both Coke and Pepsi have a high demand for their products. Both companies are able to produce in mass quantities and lower the variable cost for each product. With the variable cost being lowered, they are able to lower their selling price. Another barrier that lowers the risk of entry is franchise agreements that Coke and Pepsi have made with their bottlers. The agreements state that the bottlers are prohibited from developing any new contracts with present or potential competitors. Rivalry among Established Companies The CSD industry is consolidated in regards to its competitive structure. The industry is made of a small amount of large companies meaning the competition in market share is high. Coke and Pepsi together make up 68% of the CSD industry. The rivalry...
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...Coca Cola Wars Case Analysis July 31, 2010 Executive Summary Coca-Cola was invented and marketed in 1886 by a pharmacist named Dr. John Pemberton he named Coca-Cola after the coca leaves and kola nuts he used in order to create the product. Twelve years later in 1898 Caleb Bradham created Pepsi Cola for the beneficial effects it claimed to have on upset stomachs and indigestion. The enmity between the two soda companies are known as the “Cola Wars”. The war began in the 1960’s when Coca-Cola’s supremacy ruled the market as the beverage of choice above Pepsi Cola. Due to the competition between the two rival cola companies actions became extreme and forced both companies to implement strategic methods in order to keep the competitive edge over the other. Coca Cola Wars Case Analysis I. Current Situation: Coca-Cola's and Pepsi Cola’s marketing strategies has been as impossible to tell apart as the products themselves, both companies rely on vibrant colors, catch phrases, attractive people, and famous entertainers to grab consumer’s attention and to entice them into purchasing their products. In 1941 Coca-Cola officially renamed their product to “Coke” as an official trademark with a series of advertisements informing consumers that “Coke” means Coca-Cola (Coca-Cola, 2011). Pepsi was first introduced as " Drink" in 1898 by Caleb Bradham its inventor who created Pepsi at his home, it was later that Bradham changed the name and officially named the beverage Pepsi...
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...life and if not then we see them every day in our comings and goings. Two of these world-wide brands that many of us know are also extremely similar in both product as well as marketing strategy. Those two brands are The Coca-Cola Company and PepsiCo, Inc. On May 8, 1886, a pharmacist named Dr. John Pemberton carried a jug of Coca-Cola syrup to Jacobs’ Pharmacy in downtown Atlanta, where it was mixed with carbonated water and sold for five cents a glass. (Our Heritage, 2012) Three years later in the summer of 1898 a young pharmacist named Caleb Bradham began experimenting with combinations of spices, juices and syrups, trying to create a refreshing new drink to serve to his customers. His success came in the form of the beverage now known around the world as Pepsi-Cola. (Pepsi Legacy, 2005) And from that day forward the rivalry between Coca-Cola and Pepsi would become legendary. These two beverage companies are competing for the top spot in a massive global market. The cola and carbonated beverage industry reaches to nearly every corner of the planet, and the vast majority of the market share belongs to the two giants Coke and Pepsi. With such a huge market and enormous revenue potential in an industry such as this, it is no wonder that the Coke versus Pepsi competition is so fierce. So how does either of these companies create an advantage over the other? We will compare and contrast the business and marketing strategies of these businesses in...
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...------------------------------------------------- Subject: Cola War Continues: Coke and Pepsi in 2010 Coke and Pepsi have duopoly the soft drink market for decades. It is a mature market with low growth. For all the years, Coca-Cola and Pepsi have built significant brand identity. When people thinking about buying cola, they cannot tell a third brand’s name. Both of them have built mature distribution channels and their large sales volume archives them economic of scale already. Suppliers to Coke and Pepsi have weak power since there are many suppliers in market due to low entry level. Suppliers have to give Coke and Pepsi lowest price to keep their business with the giants or they will lose business to competitors. Coke and Pepsi corporate with many bottling companies. These regional companies are not capable for developing their own drink and advertising. The barrier of entry is also low so their profitability are restricted by Coke and Pepsi, and distribution channels. They have no power to raise price or competitors will take over their business. As concentrates businesses, Coca-Cola and Pepsi have strong power over bottling business. As long as these bottling companies want to corporate with Coca-Cola or Pepsi, they have to agree to refuse similar products from other new brands. However, Coke and Pepsi always have rights to change to another bottling company with no restrictions. Coke and Pepsi are also buying bottling companies in mature market so increase profitability. Since Coke and Pepsi dominant the soft...
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...| Coca-Cola Versus Pepsi | The Coke Wars Financial Analysis | | Accounting 557: Financial Accounting Sumadi, Mohammad | | 12/15/2012 | | Possibly one of the biggest rivals in Corporate America today, the battle between Coca-Cola (KO) and PepsiCo (PEP) continues to baffle not only consumers but investors as well in determining which product is a better buy. While both companies have had recent problems in emerging nations such as India by having their products be condemned for improper ingredients, a shakeup like this might be necessary to promote future growth for possibly undersold equities. Coca-Cola Company is the world's leading manufacturer, marketer, and distributor of nonalcoholic beverage concentrates and syrups, with world headquarters in Atlanta, Georgia. In May, 1886, Coca Cola was invented by Doctor John Pemberton a pharmacist from Atlanta, Georgia. John Pemberton concocted the Coca Cola formula in a three legged brass kettle in his backyard. The soft drink was first sold to the public at the soda fountain in Jacob's Pharmacy in Atlanta on May 8, 1886.About nine servings of the soft drink were sold each day. Sales for that first year added up to a total of about $50. The funny thing was that it cost John Pemberton over $70 in expanses, so the first year of sales were a loss...
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...12 COLA WARS CASE Table of contents Introduction……………………………………………………………3 Question no. 1…………………………………………………………4 Question no. 2………………………...……………………………….4 Question no. 3………………………………………………………….7 Question no. 4………………………………………………………….9 Bibliography …………………………………………………………10 INTRODUCTION Over the years Coke and Pepsi managed their rivalry in the carbonated soft drinks (CSD) industry by following some of the tactics identified below. Both companies came up on the market with the same product coca-cola, two different recipes. Coca-Cola was discovered in 1886 in Atlanta Georgia, by pharmacist John Pemberton, while Pepsi-Cola was formulated 7 years later, in New Bern, North Carolina, by pharmacist Caleb Bradham. Since then the two giants, Coke and Pepsi are on a continuous “battle without blood” over the $74 billion CDS industry in the United States. One of the first tactics identified is that Coke first introduced its product in grocery stores and other channels through open-top coolers. Also, they developed automatic fountain dispensers and introduced vending machines. Pepsi had a rough start, but they were willing to achieve. In this way after bankruptcies in 1923 and again in 1932, they came back and the business started to pick up. Their first move was to price their 12-oz container to a nickel, same as Coke would charge for a 6.5-oz. After that Pepsi started focusing more on take-home sales to target family consumption. With an aggressive marketing campaign...
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...paper investigates the strategic management of Pepsi Cola and Coca-Cola in an effort to make recommendations on how Pepsi Cola can build strategies in gaining a larger share of the market. The assessment of strategic management begins with the vision and mission of both organizations, which leads into literature review that identifies the consumer preferences of both Pepsi Cola and Coca-Cola. Following the literature review is the teams’ own personal assessment of consumer preferences for the Pepsi Cola and Coca-Cola brand (Please refer to Appendix A for the assessment). Finalizing the investigation are recommendations for Pepsi Cola to gain a larger share of the market. The Cola Wars Research Paper According to an industry report from Hoover’s (2014), the U.S. soft drink industry yields $34 billion annually and continues to grow internationally. The largest markets of consumption for soft drinks outside the U.S. are: Mexico, Chile, Argentina, and Uruguay (Hoover’s, 2014). The constant change of consumer preferences is what drives Pepsi Cola and Coca-Cola to compete for a larger share of the market. The intense rivalry between Coca-Cola and Pepsi Cola have been going on since the late 1800’s (Economy Watch, 2011); when Pepsi Cola was born from a “combination of: carbonated water, kola nuts, vanilla, and rare oils” (Pepsi Legacy Book, p.7. 2005). This paper focuses on the diversified strategies of both Pepsi Cola and Coca-Cola in their efforts to gain the largest share...
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...In the “Cola Wars Continue: Coke and Pepsi in 2010” the history of Carbonated Soft Drinks (CSD) and its development in modern society illustrates how these two companies advance and compete within an oligopoly market. One of the approaches used in oligopolies is the Game Theory Approach. The basic elements of game theory are (1) the players, (2) the strategies available for each, and (3) the payoff each receives. There are different “battlefields” on which Coke and Pepsi compete: products, pricing, and marketing. Product: * Launch of Diet products - Pepsi launched Diet Pepsi in 1964 while Coke launched Diet Coke in 1982 * Launched new varieties, flavors and acquisition of non-soda products - Pepsi introduced a variety of non-carbonated drinks; Coke responded by acquiring some non-carbonated products. * Use of high fructose syrup instead of sugar (cut cost) - Coke began using high-fructose corn syrup in 1980, Pepsi followed three years later. Pricing: * World War II - Coke made sure all soldiers got coke for only five cents, with government exemptions from wartime sugar rationing gave Coke the upper hand and allowed them to have a dominant strategy; Pepsi responded with the best strategy they could, increasing their bottle size to 12 ounce bottle “twice as much for a nickel too” Marketing: * International markets - Both secured contracts to be sole providers to specific countries; both companies plan to invest $2 billion in China to build up their market...
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...Pepsi Project Table of Contents Executive Summary Pepsi (PEP) Background Statement of Cash Flows Analysis of ‘Cash Flow to Net Income’ Analysis of ‘Cash Flow Adequacy Ratio’ Analysis of ‘Free Cash Flow / Operating Cash Flow’ Competition Marketing Campaign Innovation References Pepsi (PEP) Background PepsiCo, Inc. is a global food, snack and beverage company. The Company's brands include Quaker Oats, Tropicana, Gatorade, Lay's, Pepsi, Walkers, Gamesa and Sabritas. Pepsico Inc. is registered on NYSE using the ticker symbol of ‘PEP’. Using the available data from 1978 till now, the PEP ticker symbol has seen the stock price increase of approximate 4400% , which is comparable to its closest competitor Coca-Cola’s (Ticker : KO) growth of 4500% in the same time period. Pepsico’s current Market Cap is approximately 98.83B with a P/E ratio of 15.90. A high P/E ratio suggests investor's confidence in the future growth prospects of the company and Pepsico has the highest P/E ratio as compared to its major competitors in the sparkling soda industry including Coca-Cola and Dr. Pepper. Even though it can be interpreted that PEP has lagged behind Coca-Cola over the years in US market but it is very important to understand that the majority of PepsiCo's revenues do not come from carbonated soft drinks.In fact, beverages account for less than 50% of total revenue. Additionally, over 60% of PepsiCo's beverage sales come from its key non-carbonated brands like Gatorade...
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...Cola Case Study 1: Attractiveness of the Carbonated Soft Drink Industry By Section 1_8 Paul Ponomaryov (100390461) Gerald-René Goldwater (100491316) Eric Packer (100481757) Course Name: Strategic Management for Professionals BUSI-3700U- 001 Submitted to: Hamid Akbari Due Date: September 30, 2015 Word Count: 798 Introduction The carbonated soft drink industry has been a very competitive industry over the last hundred years. The two main players in the carbonated soft drink (CSD) market, Pepsi and Coca-Cola, have been in a nonstop rivalry to become the market leader. Smaller players also exist, but how attractive is the industry as a field to do business? We will use Porter’s Five Forces to analyze the market’s overall attractiveness. 1. Buyer Bargaining Power Buyer Bargaining Power has always been high in the CSD industry. Although brand loyalty has always been important, it’s very easy for most customers to change products if they don’t like the price or taste. In the case of New Coke, the outcry from Coca-Cola’s consumers caused Coca-Cola to revert their entire formula. The consumers quickly let it be known that they did not like the change, and Coca-Cola had no choice but to acquiesce. By the early 2000s US soft drink consumption began falling, but by as little as 3% - CSDs still held the majority of market share; around half of the total drinks market (Yoffie & Kim, 2011, pg. 13). In response to this slight decline another outbreak in...
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...Cola Wars Continue Coke vs Pepsi in 2010 Submitted by: Dinesh MR (13141) Submitted to: Prof. NR Govinda Sharma Case Description Carbonated soft drinks (CSD’s) are popular drinks constituting very attractive and profitable business for more than a century. This business is capital intensive and was and still dominated for long period by few giants who had patent rights and who gained very high brand recognition over the years. The competition between Coca Cola and Pepsi was very aggressive and caused the industry profitability to fluctuate up and down. The rivalry in this industry was fatal for small concentrate producers as well as small bottlers and lead to merging and acquisitions that left the industry controlled by big players of huge firms. Since the year 2000, the industry is facing a big challenge with the increase in the popularity of the non-CSD drinks especially with the multiple warnings issued by the health organizations against the carbonated soft drinks. With huge market size in US and worldwide, with few giants existing in the market for more than a century mainly Coca and Pepsi controlled more than 70% total of market share and constituted a duopoly market in this industry, with low product price, with perfect setup of the business, with vertical integration pattern and with the huge marketing campaigns that created strong brand names with high customer loyalty. Analysis through Porter’s Five Forces Model Barriers to Entry Barriers to entering...
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...Cola Wars Case Study DMBA 630 Marketing and Strategy Management in the Global Markeplace Introduction Carbonated Soft Drinks (CSD) have been around for over a century and now accounts for a $60 Billion market with the average American consuming about 53 gallons a year. Coca-Cola was invented in 1886 by John Pemberton as a “potion for mental and physical disorders.” Asa Candler acquired the formula and began marketing it as Coca-Cola. The first bottling franchise was accorded in 1899 for a sum of one dollar. Pepsi-Cola was invented in 1893 by Caleb Bradham a pharmacist from North Carolina. Pepsi also franchised its bottling operations. Pepsi struggled over the years going bankrupt twice within a decade, first in 1923 and again in 1931. Pepsi competed aggressively against coke offering almost twice the amount of Pepsi for the same price in the 1930s. Coca –Cola or Coke on the other hand was the market leader through the early 20th century with numerous imitators popping up trying to clone Coke. Coke fought back in the courts to aggressively deter imitators and counterfeiters. During the 1920s and 1930s, Coke was marketed to multiple market segments making it available to anyone desiring the brand. Eventually Coke sued Pepsi for trademark infringement in 1938 and lost. Pepsi gained market share and became a titan competitor in the market for CSDs beating out all other brands except Coke. Thus began the “Cola Wars” in 1950 with Pepsi’s aggressive “beat Coke”...
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...Roberto ARDITA Giuseppe CARIOLA Elena FILIPPELLO Gloria FILOCAMO Andrea ALI’ Andrea RIZZO Emanuele ARENA Annamaria AIELLO Sebastiano SPORTARO Prospero CONTI Maria Cristina LUISI Paola FAILLA Stefania ALAIMO Massimo Maria AYARI Neila CALVAGNA Giorgia CRUCITTI Alessia Case study Cola Wars continue: Coke and Pepsi in 2006 Google Inc. Nucor at Crossroad Caterpillar Tractor Co Komatsu Ltd. Crown Cork and Seal Apple Inc. in 2010 Cola Wars continue: Coke and Pepsi in 2006 Google Inc. Nucor at Crossroad Caterpillar Tractor Co Komatsu Ltd. Crown Cork and Seal Apple Inc. in 2010 Cola Wars continue: Coke and Pepsi in 2006 Google Inc. Nucor at Crossroad Caterpillar Tractor Co Komatsu Ltd. Crown Cork and Seal Apple Inc. in 2010 Seminar guidelines 1. Each student has 20 minutes for presentation. You are required to provide a Powerpoint presentation (please download your Powerpoint file before presentations start) 2. Presentation must be organized as follows: - first, a summary of the case must be given; then - answer to each question (see below) must be provided. The answer must make explicit reference to the relevant parts of the theory and of the data provided by the case study. 1 QUESTIONS: 1. Coca Wars...
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