1. COLA WARS CONTINUE: COKE AND PEPSI
IN THE TWENTY-FIRST CENTURY
By,
Group 6
G. VAIBHAV KUMAR REDDY (P111012)
P. PRAVEEN (P111033)
PRAGYA JAISWAL (P111037)
RAKESH NAVAL (P111039)
GREAT LAKES INSTITUTE OF ENERGY MANAGEMENT AND RESEARCH, GURGOAN
3. CONCENTRATE PRODUCER AND
BOTTLERS
Concentrate Producer Bottler
1993 Dollars per Percent of Dollars per Percent of
Case Total Case Total
Net Sales 0.66 100% 2.99 100%
Cost of sales 0.11 17% 1.69 57%
Gross profit 0.55 83% 1.30 43%
Selling and 0.01 2% 0.85 28%
delivery
Advertising and 0.26 39% 0.05 2%
marketing
General and 0.05 13% 0.13 4%
administrative
Pretax profit 0.23 29% 0.27 9%
4. Concentrate Producer Bottler
2000 Dollars per Percent of Dollars per Percent of
Case Total Case Total
Net Sales 0.71 100% 5.80 100%
Cost of sales 0.12 17% 3.77 65%
Gross profit 0.59 83% 2.03 35%
Selling and delivery 0.01 2% 1.22 21%
Advertising and 0.28 39% 0.12 2%
marketing
General and 0.06 8% 0.23 4%
administrative
Pretax profit 0.25 35% 0.52 9%
5. RETAIL CHANNELS
% of Industry 1993 2000
Volume Coca-Cola Pepsi-Cola Coca-Cola Pepsi-Cola
Food Stores 32.8% 28.5% 36.1% 32.2%
Convenience 29.6% 37.4% 35.7% 41.5%
and Gas
Fountain 58.9% 27% 65% 21%
Vending 48.6% 40.6% 50% 40%
Other 45.4% 32.5% 35.5% 33.3%
Total 40.7% 31.3% 44.1% 31.4%
6. STRATEGIC PATH
COCA-COLA PEPSI-COLA
• Franchise bottling system , reaching 370 • Franchise bottling system , reaching 270
franchises by 1910 franchises by 1910
• During 1920s and 30s, introduction of •In 1920s, lowered the price for its 12-
open-top coolers to storekeepers, automatic ounce bottle.
fountain dispensers, vending machines.
• Introduced Teem (1960), Mountain
• Introduced Fanta (1960), Sprite (1961), low- Dew (1964), Diet Pepsi (1964). Worked
calorie Tab (1963). with bottlers to modernize and improve
services.
• Purchased Minute Maid (fruit juice),
Duncan Foods (coffee, tea, hot chocolate), •In 1963, launched the ”Pepsi Generation”
Belmont Springs Water. campaign targeting the youth, which
helped narrow coke’s lead to 2-to-1
• Coke countered “Pepsi Challenge” with margin.
rebates, price cuts and price discounts. • In 1974, introduced the “Pepsi
Challenge”.
7. COCA-COLA PEPSI-COLA
• In 1978, hike in concentrate price after • In 1970s, sold concentrate to bottlers
securing bottler approval. @ 20% lower than coke.
• In 1980, switched from sugar to lower- •Merged with Frito-lay in 1965.
priced high fructose corn soup.
• In 1978, 15% increase in price of
• Increased advertising expenditure. concentrate.
• Sold off most of non-CSD businesses • Emulated the move of fructose corn
i.e. wine, coffee, tea etc. soup in 1983.
• Introduced Diet Coke in 1982 – huge • Increased advertising expenditure.
success.
• In 80s, introduced 13 new CSD
• Change in formula in 1985 – major products.
setback. Reintroduced original formula
in the name of Coca-Cola Classic after 3
months.
• In 80s, introduced 11 new CSD brands.
8. COCA-COLA PEPSI-COLA
• In 1980, refranchised bottling • In late 80s, acquired MEI bottling,
operations-helped in expansion. Grand Metropolitan’s bottling
operations and General Cinima’s
•Created independent bottling bottling operations.
subsidiary, Coca-Cola Enterprises (CCE)
in 1986. • In 1999, created Pepsi Bottling Group
(PBG).
•Employed low-price strategy.
•Employed low-price strategy.
• Marketing agreements with celebs -
Harry Potter . • Marketing agreements with celebs –
Britney Spears, Jackson.
• Introduced PowerAde, Nestea, Dasani
in 1998, 1999 in response to Pepsi. • By end of 90s, reintroduced “Pepsi
Challenge”.
• Started acquiring international
markets in more structured way. • Non-Cola Beverages – introduced
Aquafina (1998), Tropicana (1998),
Gatorade and SoBe (2000).
• Started acquiring international
markets in more structured way.
9. SWOT ANALYSIS OF COCA-COLA
STRENGTHS WEAKNESS
• First mover advantage. • Moving away from core competencies.
• More loyal customer base. •Brand Failures
• Large market share. •Product Recalls
• Economies of Scale.
• International Brand recognition.
• Huge distribution network.
• Strategic move during world wars.
• Success of diet coke.
• Efficient global operations
OPPORTUNITIES THREATS
• Entry into new developing • Barriers of entry in international
international markets. markets.
• Introduction of newer brands. • New age beverages.
• Innovative advertising strategies. • Fierce competitors in local markets;
Private labels at low prices.
10. SWOT ANALYSIS OF PEPSI-COLA
STRENGTHS WEAKNESS
• Guerrilla Marketing strategies. • Smaller market than Coke.
• More focus on young generation. • Slower take off in international
•Economies of Scale. markets.
• International Brand recognition. • Imitation of Coca-Cola.
• Huge distribution network. •Falling Behind in All-embracing
• Innovative advertising strategies. Markets, namely Russia, Venezuela, and
• More flexible franchise network. South America.
OPPORTUNITIES THREATS
• Introduction of “Pepsi Health Drink”. • Fear of losing market share due to
• Image of “Total Beverage Company” rapid market fluctuations.
• Entry new developing international • Barriers of entry in international
markets. markets.
• Introduction of newer brands. • Decreasing brand loyalty among
consumers.
• New age beverages.
• Fierce competitors in local markets;
Private labels at low prices.
11. PORTERS FIVE FORCE ANALYSIS – SOFT
DRINK INDUSTRY
Industry Competitors
Coca-Cola, Pepsi-Cola, Cadbury Schweppes and
others.
Threat of New Entrants
High entry costs
High risk for entrants due to diversified nature of
Coke and Pepsi.
Government Policy regulations.
Existing Loyal customer base.
Acquisition of major bottling units by existing firms,
increases the entry barriers.
12. Threat of substitutes
Non-CSD drinks like milk, alcoholic beverages, juices, sports drinks,
tea-based, dairy-based drinks
Threat of saturation of consumption in US market thereby leading to
increase in the consumption of on-Cola beverages.
Bargaining power of suppliers
Low switching costs.
Huge number of suppliers.
Maintaining the quality and flexibility of supply chain through
backward integration i.e. acquiring bottling plants.
Bargaining power of buyers.
Higher buying power – large grocers, discount stores and restaurants
buy large volumes demanding a lower price.
Choice of customers is high due to competition and variety in the
market.
13. U.S. Non-Alcoholic Beverage Market Share, %
share by volume
Company 2005 2009 2011
Coca-Cola 30% 42.8% 43%
Pepsi-Cola 22.6% 31.1% 31%
Cadbury Schweppes 10.6% 15% 18%
Other 36.9% 11.1% 8%
16. ISSUES TO PONDER for Pepsi
Hard to differentiate products in terms of taste as
product variety is very much limited within cola
beverages.
Coca-Cola has much stronger loyal customer base.
Consumer market moving from carbonated drinks
towards functional soft drinks.
In US, Cadbury Schweppes competing
aggressively.
17. RECOMMENDATIONS
For Pepsi to grab the major pie,
It needs to follow the “Cost Leadership” and
“Product Differentiation” Strategies.
i.e. it needs to create a unique customer perception
and differentiate one product from another.
Rather than being a price follower, it must face the
market by a leading strategy of Price Setter, which can
be made possible by improving the production
efficiencies and reducing the bottlenecks.
It also needs to focus on strengthening its core
competency.
