Cola Wars Presentation slides

1. The Cola Wars Zacharias Elinder 40094 Vanessa Meyer 40091 SofieKarlsson 40082 Kim Norlander 40088

2. The Pepsi/Coke supply chain Supplier Supplier Supplier Supplier Pepsi Coca Cola CCE IB Fountains PBG IB Fountains Supplier End-customers

3. Profitability/Attractiveness of Concentrate Industry 5 Forces Analysis 1. Suppliers: Low power, low cost, commodity ingredients, many suppliers 2. Substitutes: Mature market, new beverage trends 3. Buyers: Bottlers (low barging power) & fountains Low power. 4. New Entrants: Unequal access to bottlers (soft drink inter-competition act), economics of scale. 5. Competitors: Duopoly (Pepsi & Coke dominate the market)

5. Duopoly, few actors share the profit

7. The Bottling Industry Life Cycle: Rivalry over Time 1970: 2000 # of Industry players 1910: 370 2000: 300 Introduction Growth Maturity Decline Time Grant 2008

9. Operating Margins 9% (sell & delivery)Exclusive geo territory rights/ decision freedom Large role in trade/consumer promo DSD Relationship with Retailers Capital intensive = barrier to entry Franchise agreements CPI index= power of buyer (bottler) “Soft drink act”= barrier to new entrants Bottlers service soda fountains Bottlers buy vending machines Packaging represents 40% of COGS but has little power VS CP Metal cans as commodities= power of buyers (bottler & CPs) Patented “Skirt” Coke bottle= barrier to entry Diversified Product Portfolio (hot-fill and Water)  raised capital requirements & Margins  threat/barrier of new entrants Anchor bottle model (consolidation)  increased power of supplier (CPs) Internationalization  imitation strategies  power of bottlers  localized competition High Attractiveness Low/high Attractiveness Today’s Attractiveness

10. Challenges Today Health Debate (low cal skepticism/sugar) Environmental debates (use of water/ recycling) Change of brand meaning (Freedom VS Greedy Capitalism) Changing industry structure Soda streamers Diversified product portfolio  growing localized competition International trends: cultural differences, political instabilities, ad restrictions, regulations, soda taxes

11. War effects on Industry Profitability Price war had negative effect on whole industry Ending price war and raising prices helped industry Competition forced innovation and growth Competition forced players to make trade-offs Bottler proliferation (internationally) gives opportunity to new concentrate entrants