This document analyzes the cola wars case study through the lens of Porter's Five Forces model for both the concentrated producer industry and bottling industry. For the concentrated producer industry, the document finds low threat of new entry, substitution, and supplier power, as well as moderate customer power. This results in an attractive industry. For bottlers, the document finds moderate threat of substitution, supplier power, and customer power, as well as low threat of new entry, resulting in a moderately attractive industry with higher forces and smaller margins than concentrated producers.

1. Media Management 2304 Group Assignment Cola Wars – Case StudyGrop 1a Ekaterina (40192@student.hhs.se), Niklas, Maria, Franziska

2. Concentrate Producer Industry

3. Is the concentrated industry profitable? Threat of substitution Buy power of Suppliers Competitors Buy Power of Customers Threat of new entries

4. Concentrate Producers’ Five Forces Raw Material Producer Suppliers not too differentiated Low to moderate cost of switching suppliers (vs. Long-term commitment) Possible substitutes in the future (vs. original recipe) Other suppliers (maintenance, factory equipment, …)  standard business product Buy power of Suppliers LOW

5. Concentrate Producers’ Five Forces Threat of substitution LOW Coke and Pepsi reduced the threat of substitutes by including them in their portfolio (tea, juice, water…) Threat that fountain-buyers take on substitutes is reduced by fixing long-term contracts

6. Concentrate Producers’ Five Forces Fountain Few big accounts with rather high negotiation power Smaller accounts with low negotiation power Bottlers Tied closely to CP’s Consolidation of Bottlers Close contact to retailers is their competitive advantage LOW to MODERATE Buy Power of Customers

7. CP’s Five Forces Becoming a CP requires a rather low investment and establishing supplier relationships is possible Competing with the big player’s rather impossible  High risk of retaliation Threat of new entries LOW

8. Is the concentrated industry profitable? Threat of substitution LOW LOW Buy power of suppliers Strong rivalry among competitors Buy Power of Customers LOW to MODERATE Threat of new entrants LOW

9. Attractiveness of CP‘s Industry Size (of end market as products get pulled through the chain) US = mass market Europe and Asia developed into strong markets alike Growth Potential Consumption is more level in mature markets Emerging markets options Forces Low threat of 5 forces

10. Bottling Industry

11. Bottlers’ Five Forces Concentrate Producer Duopoly Long-Term binding contracts 1/3 of Bottlers’ cost Packaging Manufacturer Excess supply Consolidation of Bottlers Long-Term commitments (Quality) ½ of Bottlers’ Costs Sweetener Producer Undifferentiated product 1/10 of Bottlers’ Cost HIGH MODERATE Buy power of Suppliers LOW

12. Bottlers’ Five Forces Threat of substitution MODERATE Fountain sales do not influence Bottlers’ volumes directly Direct concentrate delivery ( Soda Stream) Environmental Awareness of Consumers

13. Bottlers’ Five Forces Supermarkets Consolidation of retailers and rise of power Large % of store‘s business Vending Invented by CP‘s and owend Convenience Stores Consumer Choice Some bargaining power of big chains Other Outlets MODERATE to HIGH Buy Power of Customers

14. Bottlers’ Five Forces High investments needed Distribution Network is essential Only few independent Bottlers left Threat of new entries LOW

15. Bottlers‘ Five Forces Threat of substitution MODERATE MODERATE to HIGH Buy power of suppliers Moderate rivalry among competitors Buy Power of Customers MODERATE to HIGH Threat of new entries LOW

16. Attractiveness of Bottling Industry Size Limited geographical area Growth Potential Industry Consolidation Forces Moderate to High threat of 5 forces

17. Concentrate vs Bottling Industry More flexibility for CP‘s (diversified buyers) High dependency of bottlers on CP‘s Higher overall forces for Bottlers which shrinks the margin High margin for CP‘s as main player Strong brand image of CP‘s BUT, attractivness of bottlers industry higher for new entrants as lower entry barriers

18. Current Challenges Slower growth of consumption in mature markets Financial crisis throughout various markets Rise of other beverages Win over emerging markets Rising power of retail conglomerates Build Strategy to Challenges

19. References Porter, ME, "What is Strategy" Porter, ME, “The Five Competitive Forces that Shape Competitive Strategy” David B. Yoffie, ”Cola Wars Continue: Cola and Pepsi in the Twenty-First Century”

20. Question & Answers