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Pepsi Cola War

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Case Summary of Cola Wars Continue: Coke vs. Pepsi in the Twenty-First Century

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.

Case Analysis of Cola Wars Continue: Coke vs. Pepsi in the Twenty-First Century

1. 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 soda than any other beverage
d. Head-to-Head Competition between both Coke and Pepsi reinforced brand recognition of each other. This assumes that marketing added to profits rather than eating them up.
e. Very large market share. 53% in year 2000.
f. Average 10.65% net profit in sales for both Pepsi and Coke.

2. Why has Coke been so successful? Why was Coke so extraordinarily profitable?
a. Very High Market Share. Strong marketing campaign. A unique...

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