With the ubiquity of Coca-Cola and Pepsi, two of today’s most well-known carbonated soft drink brands, identifying a clear winner between the two brands requires careful consideration. Both have battled head to head for the better part of a century, at times even employing similar strategies. By continually holding the top two spots in the market place, they have eclipsed the power of any other players. If you were the CEO of one of the biggest Cola brands in the world…how would you know what to do next? Read my approach to strategic analysis and management in the whitepaper about the Cola Wars.

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The Cola
Wars
Prepared by:
Name: Mohammed Serhan
ID#: 213263488
Email: mserhan14@schulich.yorku.ca
Prepared for:
Professor: Larry Ginsberg
Course: SGMT 6000 X
I Mohammed Serhan hereby certify that the attached assignment and all materials therein have been created by me unless otherwise footnoted and that all the material contained herein including charts, graphs and other materials have been created by me.
Signature: ________________________________________________

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BACKGROUND
With the ubiquity of Coca-Cola and Pepsi, two of today’s most well-known carbonated soft drink brands, identifying a clear winner between the two brands requires careful consideration. Both have battled head to head for the better part of a century, at times even employing similar strategies. By continually holding the top two spots in the market place, they have eclipsed the power of any other players.
As the CEO of Coca-Cola, it is my duty to present to you strategic recommendations for 2014 that will cement our company as the most successful beverage company in the world.
ANALYSIS
Coca-Cola has dominated market share since 1970 (see figure 1). This has provided Coca-Cola with a healthy cash flow. However, strong market share is only part of Coca-Cola’s secret recipe. A common goal for a corporation is to maximize shareholder value.1 In order to provide a well-rounded assessment of Coca-Cola’s performance, key elements from the DuPont model2 – ROE, ROA and cashflow – were utilized.
Return on Equity (ROE)
Coca-Cola has kept a stable ROE since the mid 2000’s (see figure 2). While lower than that of the competition, from 1990 to 2009 Coca-Cola’s ROE ratio averaged approximately 28%.3 This was in fact by design. Coca-Cola consistently re-invested working capital to break new ground while maintaining a debt to asset ratio of no more than 10%.4
These investments were part of an acquisition and debt payment strategy that started in the late 1990’s and continued into the 2000’s. This strategy included the acquisition of Schweppes in 1999 and Glaceau in 2007, allowing Coca-Cola to gain share in international markets. The creation of Beverage Partners Worldwide in 20005 enriched Coca-Cola’s portfolio with non-CSD lines of business.
Return on Assets (ROA)
Coca-Cola continues to deliver higher returns than the competition and steady and consistent ROA growth since 1980 with the exception of 2000 (see figure 3). The strength of Coca-Cola’s ROA is driven by its international asset division (see figure 4), which aside from the flagship Coke brand, includes lines such as Schweppes and Beverage Partners.
Environmental / Industry Analysis
Porter’s 5 Forces model6 (detailed in figure 5) and an appraisal of resources and capabilities (figure 6) were leveraged to determine Coca-Cola’s position within the beverage industry. The CSD industry has been in decline since 2000 (see figure 7) and is considered an industry at maturity. It is saturated with choices and ruled by brand-promiscuous drinkers driven by health fads.

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Healthy drinks, particularly bottled water, have seen modest increases in consumption, but they have not seen a dependable growth level. Some healthy alternatives that should have seen increase in market share have seen dramatic declines. One example is Minute Maid at 14% annual decline in market share.7
A key component of Coca-Cola’s success in the industry is the cost of set-up, which is a strong barrier to entry. To fortify this barrier, in 2010, Coca-Cola invested in a 90% buy back of North American operations of CCE.8 This effectively gave Coca-Cola exclusive access to its lead supplier and helped it grow its supply chain vertically.
RECOMMENDATIONS
Over the past 125 years, Coca-Cola has led by inspiring moments of optimism and happiness through its products. The five year road map proposed below will focus on stabilizing Coca-Cola’s position. It includes three key strategies:
Cherish the Core Brand
 Coca-Cola is ranked by many measures as the strongest brand in the world, including being the #1 brand as ranked by Interbrand.9 We will continue to feature Coca-Cola as our flagship brand while putting a strong emphasis on diet and low portions. This will appeal to diehard followers influenced by new health fads both globally and in North America.
Mix the right ingredients
 To compete in a shrinking CSD market (see figure 6), we will employ our best research to secure the correct product mix.
 We will divest from products that have shown negative or little growth such as Minute Maid.10
 We will re-invest equity from our divestments into products that tap into the health trend. One possible example is San Pellegrino sparkling products, which is a healthy water based beverage.
 Energy and Sports drinks have traditionally shown a 65-70% profit margin.11 We will partner with market renowned brands to supplement our entry and growth in this line. One such brand is Muscle MLK.
Go Global
 Developing BRIC countries have continued to be a large source of our income (see figure 4). It is imperative that we continue to invest in new regions where market share has growth potential.
 Aside from growing our flagship brand, we will also look at long term investments of locally established brands that fall outside of our core expertise. Coconut Water is a growing variety in the Asian market. Acquiring partners such as ZICO, which has established roots in Asia, will provide Coca-Cola with access to the Asian market.
It has long been our mission to refresh the world.12 Our strategies are built to create a company that brings value to our and future generations. I ask you to partner with me in bringing inspiring moments of optimism to the world for years to come.

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Appendix:
Figure 1: U.S. Soft Drink Market Share by Unit Case Volume
Source: Exhibit 2, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
Figure 2: Return on Equity (Coca-Cola Vs. Pepsi)
Data Source: Exhibit 3a, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
Computation: Net Profit / Equity=ROE, as seen in Robert M. Grant, Contemporary Strategy Analysis (United Kingdom; Wiley and Sons Ltd., 2013)
Figures 3 & 4: Return on Assets
Data Source: Exhibit 3a, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
Computation: Operating Profit / Total Assets=ROA, as seen in Robert M. Grant, Contemporary Strategy Analysis (United Kingdom; Wiley and Sons Ltd., 2013)

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Figure 5: Porters 5 Forces – The Cola Wars
Figure 6: Appraisal of Resources and Capabilities

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Figure 7: U.S. CSD consumption (gallons/Capita)
Data Source: Exhibit 1, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
1 Maximizing shareholder value is considered common for various types of corporations excluding not-for-profits. Maximizing stakeholder value is most common goal for not for profits.
2 Robert M. Grant, Contemporary Strategy Analysis (United Kingdom; Wiley and Sons Ltd., 2013)
3 Average is calculated based on adding % amounts for (’05, ’06, ‘08’ 09) / 4
4David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011), Exhibit 3a
5 Source: www.Coca-Colacompany.com/our-company/125-years-booklet-spreads
6 Robert M. Grant, Contemporary Strategy Analysis (United Kingdom; Wiley and Sons Ltd., 2013)
7 Exhibit 6, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
8 Page 12, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
9 http://www.interbrand.com/en/best-global-brands/2012/Coca-Cola
10 Exhibit 7 David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
11 Exhibit 10, David B Yoffie, Kennee Kim, Cola Wars Continue: Coke and Pepsi in 2010 (Harvard Business School, 2011)
12 http://www.Coca-Colacompany.com/our-company/mission-vision-values

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