...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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...The Cola Wars are a campaign of mutually-targeted television advertisements and marketing campaigns since the 1980s between soft drink manufacturers Coca-Cola Company and PepsiCo Incorporated. * | [edit]Competition Many of the brands available from the three largest soda producers, The Coca-Cola Company, PepsiCo and the Dr Pepper Snapple Group, are intended as direct, equivalent competitors. The following chart lists these competitors by type or flavor of drink. Flavor/type | PepsiCo | The Coca-Cola Company | Dr Pepper Snapple Group | Cola | Pepsi | Coca-Cola | RC Cola | Diet Cola | Diet Pepsi / Pepsi Light Pepsi ONE Pepsi Max Pepsi Next | Diet Coke / Coca-Cola Light Tab Coca-Cola Zero | Diet Rite Diet RC | Cherry-flavored cola | Pepsi Wild Cherry | Coca-Cola Cherry | Cherry RC | "Pepper"-style | Dr Slice | Mr. Pibb / Pibb Xtra | Dr Pepper | Orange | Mirinda Tropicana Twister Tango Slice | Fanta Minute Maid | Crush Sunkist | Lemon-lime | Teem Sierra Mist 7 Up (in countries other than US) | Sprite Lemon & Paeroa | 7 Up | Other citrus flavors | Mountain Dew Kas Izze | Mello Yello Vault Fresca Lift Lilt | Sun Drop Squirt | Ginger ale | Patio | Seagram's Ginger Ale | Canada Dry Schweppes Vernors | Root beer | Mug Root Beer | Barq's Ramblin' Root Beer (until 1995) | A&W Root Beer Stewart's Rootbeer Hires Root Beer | Cream soda | Mug Cream Soda | Barq's Red Creme Soda | A&W Cream Soda | Juices | Tropicana Dole (prepackaged...
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...CASE STUDY : COLA WARS CONTINUE : COKE AND PEPSI IN 2006 The case study “Cola Wars Continue: Coke and Pepsi in 2006” focuses on describing Coke and Pepsi within the CSD industry by providing detailed statements about the companies’ accounts and strategies to increase their market share. ‘ Cola war’ is the term used to describe the campaign of mutually targeted television advertisement & marketing campaigns between Coke & Pepsi. Furthermore, the case also focuses on the Coke vs. Pepsi goods which target similar groups of costumers, and how these companies have had and still have great reputation and continue to take risks due to their high capital. Both Coke & Pepsi have segmented the soft drink industry into two divisions, via – 1.Production of soft drink syrup. 2.Manufacturing & distribution of soft drinks at retail level. Coke & Pepsi have chosen to operate primarily on the production of soft drinks syrup,while leaving independent bottlers with more competitive segment of the industry.The purpose of this report is to gain insight into the possible strategies that can be applied, in order to expand the overall throat share in the future. History revealed that a highly competitive strategy that was utilized in the past by both companies resulted in cannibalization. Because of this, the report is described from the perspective of both Coca-Cola and Pepsi. This report focuses on increasing the overall share and finding new opportunities in the unrevealed...
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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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...clusive use at Institute of Management Technology, Hyderabad (IMT,HYD), 2015 9-702-442 REV: JANUARY 27, 2004 DAVID B. YOFFIE Cola Wars Continue: Coke and Pepsi in the Twenty-First Century For over a century, Coca-Cola and Pepsi-Cola vied for “throat share” of the world’s beverage market. The most intense battles of the cola wars were fought over the $60-billion industry in the United States, where the average American consumed 53 gallons of carbonated soft drinks (CSD) per year. In a “carefully waged competitive struggle,” from 1975 to 1995 both Coke and Pepsi achieved average annual growth of around 10% as both U.S. and worldwide CSD consumption consistently rose. According to Roger Enrico, former CEO of Pepsi-Cola: The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present-day success of the Coca-Cola company than . . . Pepsi.1 This cozy relationship was threatened in the late 1990s, however, when U.S. CSD consumption dropped for two consecutive years and worldwide shipments slowed for both Coke and Pepsi. In response, both firms began to modify their bottling, pricing, and brand strategies. They also looked ...
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...Case Study: Cola Wars In this case study I will be comparing the economic factors that go into both the concentrate and bottling elements of the soft drink industry. I will touch on the varying factors of development for both and talk about the profitability of both types of companies. Coca-Cola and Pepsi both own their own concentrate company and bottling company and do not use outside help. We will be analyzing both companies extensively in this case study. Concentrate Producers First, I will touch on what costs go into a concentrate business and how these companies try to deflect some of these costs. Concentrate companies specialize in converting the raw materials of cola manufacturing into a concentrate and then sending this formula to the bottler. A concentrate factory usually requires little capital in machinery, overhead and labor because one piece of automated equipment will usually be enough to make the different formulas of soda. According to the case one plant with the capability of serving the United States would cost between $50 and $100 million dollars. The producer’s main costs come from the advertising, promotion and market research side. The concentrate company is focused on how to get the consumer to buy their formula and not the other companies. They also are focused on coming to agreements with national retailers in order to get their product on the shelf. Concentrate producers also focus on helping smaller bottlers improve and increase sales efforts...
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...For the exclusive use of R. PONCE 9-702-442 REV: JANUARY 27, 2004 DAVID B. YOFFIE Cola Wars Continue: Coke and Pepsi in the Twenty-First Century For over a century, Coca-Cola and Pepsi-Cola vied for “throat share” of the world’s beverage market. The most intense battles of the cola wars were fought over the $60-billion industry in the United States, where the average American consumed 53 gallons of carbonated soft drinks (CSD) per year. In a “carefully waged competitive struggle,” from 1975 to 1995 both Coke and Pepsi achieved average annual growth of around 10% as both U.S. and worldwide CSD consumption consistently rose. According to Roger Enrico, former CEO of Pepsi-Cola: The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present-day success of the Coca-Cola company than . . . Pepsi.1 This cozy relationship was threatened in the late 1990s, however, when U.S. CSD consumption dropped for two consecutive years and worldwide shipments slowed for both Coke and Pepsi. In response, both firms began to modify their bottling, pricing, and brand strategies. They also looked to emerging international markets to fuel...
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...<Strategic management case analysis-“Cola wars continue”> 1. There are several reasons for soft drink industry to have been so profitable. To calculate profit, we use this formula “Profit=Price*Quantity-Cost”. The sales of soft drink soared after the 1970s based on its increasing availability and diverse flavors. People literally demanded soda more than any other beverages so it affected the quantity. Due to inflation that made overall price higher, consumers felt the real price of CSD lower than before so the quantity demanded went up. In accordance with this, in my personal opinion, other than the large sales quantity of CSDs, the cost of this category is very low. The materials for soda are mainly concentrate, sweetener, and water-and it costs very low. With certain price and this cheap cost, its gross margin is very high. 2. Concentrate producer’s most significant costs were for advertising, promotion, market research and bottler support. Due to its industrial properties, the concentrate manufacturing process needed little capital investment in machinery, overhead or labor as you can figure out from what its major costs are. Building one plant only costs about $25million to $50million which serves the entire United States. On the contrary, the bottlers purchase concentrate, add additional materials, bottle it and deliver it to customer accounts. As you can see, most part of the manufacturing cycle that we can think of occurs in the hand of the bottlers...
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...Economics of the US Carbonated Soft Drink (CSD) Industry • • • Americans consumed 23 gallons of CSDs annually in 1970 Consumption grew by 3% per year over the next 3 decades Increasing availability of CSDs and introduction of diet and flavored varieties Non-cola CSDs were introduced • Production & Distribution of CSD 1. 2. 3. 4. Concentrate producers Bottlers Retail channels Suppliers 1. Concentrate Producer • • • • • • Blended raw material ingredients, packaged the mixture, shipped those container to the bottler Key production investment areas like machinery, overhead and labor A typical manufacturing plant cost - $25 million to $50 million Customer Development Agreements (CDA) with retailers like Wal-Mart Significant costs were spent for advertising, promotion, market research Coca-Cola and Pepsi-Cola claimed a combined 74.8% of the U.S. CSD market in sales volume in 2004 2. Bottlers • • Purchased concentrate Added carbonated water and high-fructose corn syrup Bottled or canned the resulting CSD product Delivered it to customer account • • 2. Bottlers • • Bottling process is capital intensive. Packaging accounted for 40% to 45% of cost of sales and same for concentrate and sweeteners for 5% to 10%. Coke and Pepsi bottlers offered “direct store door” delivery. Under Cooperative merchandizing agreements retailers agreed to promotional activities for sales of soft drinks • • 3. Retail Channels In 2004, distribution of...
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...Case Study #2 Cola Wars Management 5650 Fall 1 October, 17, 2013 Introduction There has been stiff competition between companies that produce similar goods. This competition is alive and well, especially in situations where there is need for a multiple of companies that offer similar goods and services to counter monopoly. However, these wars can take a different turn and bring changes to general operations of some firms (Long & Harding, 1998). Coca Cola and Pepsi are such companies that produce soft beverages, and the wars between these cola firms are far from over. In the recent past, Pepsi has made essential changes in its line of production, and this decision has enabled the beverage firm earn more revenue than Coca Cola. This case study will look at the strategies that both Coca Cola and Pepsi have adopted in their recent operations and the effects of these policies on the two beverage firms’ operations. Pepsi has made use of the application of the Pearce and Robinson Strategic Management Model to outplay Coca Cola in most of its internal strategic operations. This strategic management model has eleven components, and each component plays an important role toward the full implementation of the model as a system (Pearce-Robinson, 2010). Indra Nooyi, the boss at the Pepsi Co. has made several steps to counter Coca Cola’s high quality products. One of her major concern has been to produce less sugary goods at fairly pocket friendly prices. She has applied the eleven...
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...Soft drink industry: The Soft Drink Industry is primarily engaged in manufacturing non-alcoholic, carbonated beverages, mineral waters and concentrates and syrups for the manufacture of carbonated beverages. Soft drink industry is very profitable, mainly for the concentrate producers than the bottler’s. The leading players of the market are Coca-Cola, Pepsi Cola, and Cadbury Schweppes. In this industry, fierce rivalry between dominant producers Coca-Cola & Pepsi and the bargaining power of the buyers who place huge orders for soft drinks are strong, while the threat of new entry and the threat of substitutes are mild. And, bargaining power of the suppliers is conditional. Threat of Entry: New Entrants to an industry bring new capacity and a desire to gain market share that puts pressure on prices, costs, and the rate of investment necessary to compete. Threat of a new entry is considerably low in today’s soft drink market. In the initial stages of the industry, Coca-cola was the dominant leader of the market, and then new entrant Pepsi made a huge impact on sales and profits of Coke. But, today Cola-Wars between Coke and Pepsi are so dominant, that possible threat of a new entrant is relatively low. The several factors that make it difficult for the new companies to enter the soft drink market include: 1. Role of bottlers: * Bottlers purchase concentrate, add carbonated water and high-fructose corn syrup, bottle the resulting CSD product and deliver it to...
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...CASE STUDY: COLA WARS 1. Why, historically, has the soft drink industry been so profitable? PORTER analysis: Soft drink industry Rivalry: HIGH: Exhibit 2 shows that in 2004, 95% of case volume is done by 4 companies (Pepsi: 31,7%, Coke:43,1%). Therefore rivalry is very strong and extremely concentrated. Buyer (=retailers): LOW: stores like Walmart need coke and pepsi to get profit. It represent 5,5% of their sales. Consumers are fan of Coca or Pepsi. So, Why changes? Supplier: LOW: main raw material is sweeteners and packaging. So, there is many sources and thus rivalry between suppliers. Substitute: LOW: USA is very addict with cola. Although there is a lot of derived from cola, cola consumption is still growing. These companies own already a lot of substitute product thanks to alliance (eg: Nestea) and acquisition (Minute Maid). Barrier entries: HIGH: If a new concentrate producer wants to become established, it must have a huge capital. Reputation is already done for actual CP thanks to marketing campaign in 1980s. CP’s have a strong relationship with retailers. Retailers are dependent of CP and bottlers because they get a lot of profit thanks to them. 2. Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different? In order to compare these 2 businesses, we use PORTER analysis. PORTER analysis: Concentrate producers Rivalry: HIGH: Exhibit 2 shows that in 2004, 95% of case volume is done by 4 companies...
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...Group 1 Stephen Grance Stephanie Morales Scott Chase Janice Fuentes Since the beginning, Coca-Cola and PepsiCo have shown a great ability to adjust to changes in the market, as well as a great capacity to constantly innovate their products. When facing changing trends by consumers, they were both able to overcome difficult situations, turning them into the industry favorites and to convert them into potential progress, through the creation of new products, which allowed them to keep their profit margins high. In this case, Coca-Cola and PepsiCo it is essential that this strategy follows an increase in the investment on marketing, with a constant innovation of campaigns, which could lead to a boost in sales and convey a different image of the companies, portraying them as being involved in the whole of the beverage market, rather than just the carbonated drinks market, thus reinforcing its orientation towards non-carbonated drinks. If we think that the introduction of non-carbonated drinks by Pepsi and Coke represent 80% and 100% of their growth, respectively, we can predict the impact of this measure. Despite the need to adapt to consumers, Coca-Cola and Pepsi should maintain their focus on their core products, which is where they hold a strong advantage, as far as competition is concerned. These wars affected the industry’s profits: firstly, the competition for supermarket shelf space led to a decrease in retail...
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...The Cola Wars Competitive Strategy Introduction Coke and Pepsi have been going to war for over a century. This war has been fought with prices, with taste challenges, and with advertising. Throughout this bottle battle both companies have remained dominant players in the carbonated soft drink industry and have moved beyond their original products into many new areas. Resources The core resources that have allowed Coke and Pepsi to maintain dominance are their brand image and their marketing strategies. Coke has focused on a brand image that relates more to a way of life then to a soft drink. With “Buy the world a Coke” and other such campaigns Coke has strived to position itself in the minds of consumers as a lifestyle choice to choose Coke instead of just a purchase decision. Pepsi has pursued a similar yet differentiated version of Coke’s strategy. “The Pepsi Generation” was an ad campaign aimed at making Pepsi the drink of the next generation. Advertising was trying to position Pepsi as the preferred drink of the youth of America. Pepsi furthered this image as the preferred drink through the Pepsi challenge, a campaign aimed at boosting total soft drink sales as well as allowing the two soda giants to be directly compared. What makes these resources valuable? The large anchor-bottling corporations and the contracts that bind them to Coke and Pepsi are also huge resources. Both companies own large equity stakes in these major bottlers and are able to use this to...
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...Group 8 - Core B Session 4 - Case Notes 08/24/2006 Professor: Arvind Bhambri Case: Cola Wars Continued: Coke versus Pepsi in the Twenty-First Century Intro: Syllabus Page 16 The Soft Drink industry has been assigned as the vehicle for tackling the topic of industry analysis and competitive dynamics. The case covers developments in the soft drink industry through 1993. It describes how the industry evolved into its current structure largely following Coca-Cola’s leadership. What is particularly interesting is determining why the major competitors in the industry have been able to earn above normal returns for close to 100 years, and why the industry is organized the way it is. The case allows us to analyze how the actions and reactions of competitors over time work to create their own industry structure. The case also allows us to examine how prior strategic commitments to particular strategies create competitive positions, which in turn constrain the future competitive moves of firms. Since competitive positioning determines a firm’s long-run performance, we need to thoroughly grasp the essentials of what makes some competitive positions and competitive strategies more viable, and others not, and why. Discussion Questions: 1. 2. 3. Why has the soft drink industry been so profitable? a. Since 1970 consumption grew by an average of 3% b. From 1975 to 1995 both Coke and Pepsi achieve average annual growth of around 10% c. American’s drank more...
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