Present
MM6016
Branding and Marketing Communication
Cola Wars
continue
29111311
29111363
29111384
29111387
29111398
29111400
Haidir Afesina
Wirania Swasty
Chairunnisa Mirhelina
F X Kresna Paska
Aqsa Adhiperwira
Fajar Liem
Coke &Pepsi
in the Twenty-First Century
Prepared & Presented by:
“throat share”
Pepsi would not exist without Coca Cola,
Coca Cola would probably not be
as important without Pepsi
Prepared & Presented by:
Soft Drink
Production & distribution:
Concentrate
Producers,
Carbonated
water
flavored
sweetened
bottlers,
Soft
Drink
CP
concentrates
Produce
concentrate
from raw
material
retail
channels,
Produce soft
drinks
Distribute soft
drinks to
retailers & end
users
suppliers
Bottlers
Prepared & Presented by:
Concentrate
Producers
Bottlers
 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
 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
Prepared & Presented by:
Retail Channels
 Food stores (35%)
 Fountain outlets (23%)
 Vending Machines
(14%)
 Convenience stores (9%)
 Other outlets (20%)
Cola Wars Highlights
Coca-Cola invented
Prepared & Presented by:
1886
1893
Pepsi-Cola invented
“American’s Preferred Taste”
1950s
“Beat Coke”
“No wonder Coke Refreshes Best”
1960s
“Pepsi Generation”
1970s
“Pepsi Challenge”
1980
Foster entrepreneurial spirit of
Pepsi’s people
1990
Jettison slow-growing
businesses
2000
Diversify beyond
soft-drinks
“Kick Pepsi's can”
Diet Coke
New Coke
Repair Coke and restore
Stock price
Diversify product line
Prepared & Presented by:
Issues
 Saturated
 Healthy
 Huge
market
issues
potential market outside USA
 Highly
competitive industry
Prepared & Presented by:
Business Strategy



Single product strategy  flagship brand
Diversified products  acquisition
Niche strategy  targeted geographic area
adult
teen
teen
http://www.economywatch.com/in-the-news/infographic-the-cola-wars.17-11.html
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
Exhibit 3
44.1
31.4
14.7
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
Prepared & Presented by:
Industry analysis
Threat of
new
entrants:
High entry costs
High risk for entrants due to diversified nature
Government Policy regulations.
Existing Loyal customer base.
Acquisition of major bottling units by existing
firms, increases the entry barriers.
Low switching costs.
Huge number of suppliers.
Maintaining the quality and
flexibility of supply chain
Supplier's
power of
bargaining:
Rivalry
between
firms:
Customer's
power of
bargaining:
Higher buying power –
Choice of customers is high
Large industry size
Threat of
substitutes:
PORTER’S FIVE FORCES MODEL
Non-CSD drinks
Threat of saturation of consumption in US
market thereby leading to increase in the
consumption of non-Cola beverages.
Prepared & Presented by:
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.
Prepared & Presented by:
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
Prepared & Presented by:
Thanks !