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Cola Wars. Bus 497a Spring 2008 TEAM JUPITER. Background. Coke: First formulated in 1886 Pepsi: Invented in 1893 “Cola War” began when Alfred Steele (of Pepsi) became Coke CEO 1980’s Bottler Consolidation began. Key Terms. CSD – Carbonated Soft Drink CP – Concentrate Producers

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cola wars

Cola Wars

Bus 497a

Spring 2008

TEAM JUPITER

background
Background
  • Coke: First formulated in 1886
  • Pepsi: Invented in 1893
  • “Cola War” began when Alfred Steele (of Pepsi) became Coke CEO
  • 1980’s Bottler Consolidation began
key terms
Key Terms
  • CSD – Carbonated Soft Drink
  • CP – Concentrate Producers
    • Blended raw materials and shipped to Bottlers
  • Bottlers
    • Manufacturing of beverages
    • Distribution
  • Retail Channels
    • Supermarkets, Fountain Outlets, Vending Machines, Mass Merchandisers, CV, Gas Stations
industry pipeline
Industry Pipeline

Formulation Houses

Concentration Suppliers

Bottlers

Distributors

End Consumer

****Vertical Integration****

corporate level strategies of the past
Corporate Level Strategies of the Past
  • Coke and Pepsi
    • Single Business
    • Economies of Scope
    • Market Power
    • Multipoint Competition
    • Vertical Integration
    • Profitability

****Expansion and Development****

cl strategies con t
CL Strategies Con’t.
  • Deployment Strategy
    • Vertical Integration
    • Internationalization
    • Internal Growth
business level strategies
Business Level Strategies
  • Differentiation, Initially (Uniqueness and Broad Target)
  • Cost Leadership, Later On (Cost and Broad Target)
what are the key issues
What are the key issues?
  • Decline in overall sales of cola industry
  • Emergence of New Age Beverages
  • Coke vs. Pepsi
    • Companies focused on rivalry rather than on the industry itself
industry issues
Industry Issues
  • Major bottlers have been consolidated which puts smaller bottlers at the mercy of Pepsi and Coca-Cola's distribution systems
  • Bottlers' profitability is in danger with slim margins and declining growth
  • CSDs made up a substantial share of US Liquid Consumption, but this doesn’t make them immune to risk (limited portfolio, non diversified)
  • International markets are an important source of revenue and improvements in world economies are forecasted
  • Growing health concerns for caffeine and sugar consumption threatens industry performance
decline in csd consumption
Decline In CSD Consumption
  • Consumption declines as consumers find healthier alternatives
continued growth
Continued Growth
  • Don’t be fooled; CSD industry continues to grow
recommended strategies to follow corporate
Recommended Strategies to Follow (Corporate)
  • Deployment Strategy
    • Acquisition of Smaller Beverage Companies
    • New Relations (contracts) w/ bottlers
  • Directional Strategy = DEVELOPMENT
  • Portfolio Strategy = DIVERSIFICATION
    • Diversification Marketing Product
      • Old Market, New Product
recommended strategies business level
Recommended Strategies Business Level
  • Integrated Cost Leadership Differentiation
    • New Unique Products
    • Marketed towards niche and board markets
    • Most cost efficient as possible
industry recommendations
Industry Recommendations
  • Industry should be proactive about growing health concerns in US Market
  • Companies need to refocus energies on advertising to rejuvenate industry and to fuel product demand both domestically and abroad
  • Cola industry leaders, Coca-Cola and Pepsi, should take steps to better understand their competitive market environment
2008 update recent strategic movies
2008 Update (Recent Strategic Movies)
  • Pepsi
    • Acquisition of Naked Juice
    • Acquisition of Fuze
    • Expansion of existing product lines
  • Coke
    • $4.1 Billion acquisition of Glacaeu (Vitamin Water)
    • Multiple New Age beverages

****PORTFOLIO DIVERSIFICATION****

2008 update con t industry
2008 Update Con’t. Industry
  • Strong Performance of New Products