Cola Wars

1
Cola Wars

• Bus 497a
• Spring 2008
• TEAM JUPITER

2
Background

• Coke First formulated in 1886
• Pepsi Invented in 1893
• Cola War began when Alfred Steele (of Pepsi)
  became Coke CEO
• 1980s Bottler Consolidation began

3
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

4
Industry Pipeline

• Formulation Houses
• Concentration Suppliers
• Bottlers
• Distributors
• End Consumer
• Vertical Integration

5
Corporate Level Strategies of the Past

• Coke and Pepsi
• Single Business
• Economies of Scope
• Market Power
• Multipoint Competition
• Vertical Integration
• Profitability
• Expansion and Development

6
CL Strategies Cont.

• Deployment Strategy
• Vertical Integration
• Internationalization
• Internal Growth

7
Business Level Strategies

• Differentiation, Initially (Uniqueness and Broad
  Target)
• Cost Leadership, Later On (Cost and Broad Target)

8
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

9
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 doesnt 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

10
Decline In CSD Consumption

• Consumption declines as consumers find healthier
  alternatives

11
Continued Growth

• Dont be fooled CSD industry continues to grow

12
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

13
Recommended Strategies Business Level

• Integrated Cost Leadership Differentiation
• New Unique Products
• Marketed towards niche and board markets
• Most cost efficient as possible

14
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

15
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

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2008 Update Cont. Industry

• Strong Performance of New Products

17
2008 Update Cont.
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Thank You