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P r e s e n t
Cola Wars continue
MM6016 Branding and Marketing Communication
29111311 Haidir Afesina29111363 Wirania Swasty29111384 Chairunnisa Mirhelina29111387 F X Kresna Paska29111398 Aqsa Adhiperwira29111400 Fajar Liem
Coke &Pepsi in the Twenty-First Century
Prepared & Presented by:
Pepsi would not exist without Coca Cola,
Coca Cola would probably not be as important without Pepsi
“throat share”
Prepared & Presented by:
Concentrate Producers,
bottlers,
retail channels,
suppliers
Soft Drink
flavored
Carbonated water
sweetened
Soft Drink
Produce concentrate
from raw material
Produce soft drinks
Distribute soft drinks to
retailers & end users
concentr
ate
s
Production & distribution:
CP Bottlers
Prepared & Presented by:
Business Process Purchased concentrate Added carbonated water
and high fructose corn syrup
Bottled or canned the CSD Delivered it to customer
accounts
Supplier Packaging $3.4 billion in cans $1.3 billion in plastic bottles $0.6 billion in glass
Sweeteners $1.1 billion in sugar and
high fructose corn syrup $1.0 billion in artificial
Bottlers
Business Process Producer blended raw material
ingredients
Packaged it in plastic canisters
Shipped it to the bottler
Supplier Caramel coloring
Phosphoric and / or citric acid
Natural flavors and caffeine
ConcentrateProducers
Prepared & Presented by:
Food stores (35%)
Fountain outlets (23%)
Vending Machines (14%)
Convenience stores (9%)
Other outlets (20%)
Retail Channels
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Cola Wars Highlights
Coca-Cola invented
“Kick Pepsi's can” Diet CokeNew Coke
Repair Coke and restore Stock price Diversify product line
1886
1893
1950s
1960s
1970s
1980
1990
2000
“Beat Coke”
“Pepsi Generation”
“Pepsi Challenge”
Foster entrepreneurial spirit of Pepsi’s people
Jettison slow-growing businesses
Diversify beyond soft-drinks
Pepsi-Cola invented
“American’s Preferred Taste”
“No wonder Coke Refreshes Best”
Prepared & Presented by:
Issues
Saturated market
Healthy issues
Huge potential market outside USA
Highly competitive industry
Prepared & Presented by:
http://www.economywatch.com/in-the-news/infographic-the-cola-wars.17-11.html
Business Strategy
Single product strategy flagship brand
Diversified products acquisition
Niche strategy targeted geographic area
teen teen
adult
Prepared & Presented by:Prepared & Presented by:
Why is the soft drink industry so profitable ?Consumption• CSD consumption consistently grow
53 galons in 2000 (exhibit 1)Growth • The growth because of downward-slopping
(economical condition-changed in consumer lifestyle)• Dominance the market share
Industry• 1970-2000: average growth 3 % (exhibit 1)• $60-billion industry in US• Widely available and conveniently packaged.• Became a part of their life style in US and worldwide
huge potential market• Highly competitive
44.1 31.4 14.7
Exhibit 3
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Industry analysis
Rivalry between firms:
Threat of new
entrants:
Customer's power of
bargaining:
Threat of substitutes:
Supplier's power of
bargaining:
PORTER’S FIVE FORCES MODEL
Low switching costs.Huge number of suppliers.Maintaining the quality and flexibility of supply chain
Higher buying power –Choice of customers is high
Non-CSD drinks Threat of saturation of consumption in US market thereby leading to increase in the consumption of non-Cola beverages.
Large industry size
High entry costsHigh risk for entrants due to diversified natureGovernment Policy regulations.Existing Loyal customer base.Acquisition of major bottling units by existing firms, increases the entry barriers.
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Business Comparation
Concentrate Business Bottling Business
Little capital investment Large capital Investment
Short line of procurement & Distribution Long line of Procurement & Distribution
Strong position in determining the price of their product
Less favorable position regarding for pricing on their product
Prepared & Presented by:
Why is the profitability so different?
Exhibit 5 Cost of sale is more in bottler
the differences in added value between CPs and bottlers
in a slowing market, the bottlers faced increasing price pressure while CPs could continue raising their prices.
As the price of the concentrate rose, bottlers could not react in the same way and increase price of the final product as they were squeezed by other suppliers of different fruit drinks and other beverages. All of these factors contributed to lower returns in bottling business
Prepared & Presented by:
How has the competition between Coke and Pepsi affected the industry’s profits?
the companies diversified to other packaged foods and drinks,
aggressive entry of PepsiCo into the food business thus increasing their consumer base as well as the industry 's
Innovation in new product category / product line extension
Higher retail prices for alternative beverages meant that margins for the franchiser, bottler and distributor were consistently higher than on CSDs.
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Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non carbonated drinks?
Yes, by introduction of new brands and diversification
Both companies predicted that future increases in market share would
come from beverages other than CSDs
advantage from the barriers to entry exist.
a strong brand identification; huge investments in advertising,
customer service and trademark itself stable consumption levels and
profit sustainability in future
Both companies predicted that future increases in market share would
come from beverages other than CSDs
To increase sales, they tried to make their products more affordable
through measures such as refundable glass packaging (instead of plastic)
and cheaper 6.5 ounce bottles
The cola wars are going to be played now across a lot of different
battlefields
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Thanks !