Cola wars case presentation
Transcript of Cola wars case presentation
Cola WarsCola WarsCoke and PepsiCoke and Pepsi
Deanna ChangJamie PrescottJonathan Wong
Shaistah BahrainwalaYau Lo
Overview
Industry Background
1886: John Pemberton
1893: Caleb Bradham
Production and Distribution
Industry Background
Problems
Recommendation
Focus on advertising and promotion to differentiate from competitor and to change the image and perception of cola to fit the
healthy living trend
Supplier Power
Buyer PowerMajor buyers of CSD are bottlers and fast-food restaurants
Low bargaining power
The Threat of Substitutes Ease of substitution is high Many alternatives to CSDs Different diet brands Customer switching costs are low
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Beer
Milk
Coffee
Bottled Water
Juice
Tea
Powdered Drinks
Wine Sports Drinks
Distilled Spirits
Energy Drinks
Tap water
Historic Carbonated Soft Drink Consumption
The Threat of New Entry
Threat of Rivals
Rivalry Conclusions
This level of rivalry is expected given the strength of other forces
Which Force is Changing the Most?
Negative health perception of CSD
Negative health perception of CSD
RecommendationAdjust strategy to align with new climate
QUESTIONS?
APPENDIX
Overview Industry analysis using Porter’s 5-Forces
Model Bargaining power of buyers and sellers Threats of new entrants and substitutes Competitive rivalry withing industry
Level of rivalry given strengths of other industry forces
Force that is changing the most in the industry
Industry Background Coca-Cola was formulated in 1886 by John
Pemberton Pepsi Cola was formulated in 1893 by
Caleb Bradham Production and distriubtion of CSDs
involves concentrate producers, bottlers, retail channels, and suppliers Both companies developed a franchise bottling
system which changed over time
Supplier Power Low bargaining power
Raw materials required in the production of CSD: Caramel coloring, phosphoric or critic acid, natural flavors, and caffeine
Commodities and easy to purchase in the market
Choose their suppliers based on their needs and costs
Low switching cost of suppliers
Buyer Power Low bargaining power Major buyers of CSD: bottlers and fast-food restaurants Weaken the bargaining power of bottlers by having a
franchise agreement with them Coke’s Master Bottler Contract granted Coke the right to
determine concentrate price and other terms of sales Pepsi’s Master Bottler Contract granted Pepsi the right to
force its bottlers to purchase raw materials from Pepsi at prices, and on terms and conditions, determined by Pepsi
Weaken the bargaining power of big fast-food restaurants by acquisition Pepsi acquired Pizza Hut (1978), Taco Bell (1986), and
KFC (1986) Coke retained exclusively deal with Burger King and
McDonald
The Threat of Substitutes Alternatives to CSDs
Beer, Milk, Coffee, Bottled Water, Juice, Tea, Powdered Drinks, Wine, Sports Drinks, Distilled Spirits, Energy Drinks, and Tap Water.
Different diet brands Diet, With Splenda, No Caffeine.
Customer switching costs are low. Ease of substitution is high.
This industry force is high.
Threat of Rivals
The Threat of New Entry High investment costs to build a concentrate
manufacturing plant and bottling processes. Soft Drink bottlers fell from 2,000 to fewer
than 300 in 2004. (High Competition.) Competition for shelf space. Concentrate makers raised prices. Trademark Infringements. Demand for CSDs seemed to have leveled off.
This industry force is low.
Substitutes!
Starting in late 1990s, demand seemed to have leveled off
2005, Federal Nutrition Guidelines identified regular CSDs as the largest source of obesity causing sugars in the American diet
Schools banned the sale of soft drinks on their premises
Which Force is Changing the Most?
Substitutes!
Starting in late 1990s, demand seemed to have leveled off
2005, Federal Nutrition Guidelines identified regular CSDs as the largest source of obesity causing sugars in the American diet
Schools banned the sale of soft drinks on their premises
Which Force is Changing the Most?