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


Bottlers



Blended raw materials and shipped to Bottlers
Manufacturing of beverages
Distribution
Retail Channels

Supermarkets, Fountain Outlets, Vending Machines, Mass
Merchandisers, CV, Gas Stations
Industry Pipeline
Formulation Houses
Concentration Suppliers
Bottlers
Distributors
End Consumer
****Vertical Integration****
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.

Deployment Strategy



Vertical Integration
Internationalization
Internal Growth
Business Level Strategies

Differentiation, Initially (Uniqueness and
Broad Target)

Cost Leadership, Later On (Cost and Broad
Target)
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

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

Consumption declines as consumers find
healthier alternatives
Continued Growth

Don’t be fooled; CSD industry continues to
grow
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

Integrated Cost Leadership Differentiation



New Unique Products
Marketed towards niche and board markets
Most cost efficient as possible
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)

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

Strong Performance of New Products
2008 Update Con’t.
Thank You