There are a few reasons why the soft drink industry has been historically profitable for so long. One such reason is that soft drinks have been seen as a great and delicious alternative to drinking just water. Though water is essential to life and its even a main ingredient in soft drinks, its naturally very bland in taste and unexciting to the consumer. Soft drinks however are funs, flavorful, and delicious to drink so they give the consumer something else to desire and are bought to break up the monotony of drinking just plain water. A second reason that the soft drink industry has been historically profitable would be because of the fact that soft drinks have been a cheap buy for the consumer in comparison to anything else on the market. Soft drinks have been sold for as little as a nickel per a drink for varying sizes and quantities of the beverage, while other non soft drink beverages have gone for rate that are much higher than this. Even in todays market a consumer can go out to a store and buy any kind of soft drink product off the shelf and it would cost the a great deal less than it would for a bottle of juice or even a case of the healthy option, water. With a low purchase cost they have been able to entice consumer to continue to buy their products. A third reason that soft drink industry has been has a strong history of being profitable would be that they have always had strong marketing campaigns that appeal to their consumer base and audience. With campaigns such as the Pepsi Generation which lasted for more than a decade to help them set target those who were young, or at least young at heart, and even had the catch phrase “For those who think young” at one point helped them capture and steal away from Cokes large market share, and even brought them to within a 2-1 sales gap, while Coca-Cola used it’s a Coca-Cola lifestyle to market its soft drinks, even going as far as being a sponsor of the U.S. armed services and offering soldiers a flat rate...
...Colawars continue: Coke and Pepsi in 2006 Written by Alyona Kuzmina.
Soft drink industry Shares of beverage companies have always been ranked high among other industries. Although, when consumer incomes decrease, sales of beer and soda don't drop that much. Additionally, it is cheap to produce those and drinks are so popular so companies can sell them for a large price. Actually, it is a very unique case, that such a product, which is in the group of basic commodities, is profitable. Both concentrate and bottling businesses are interrelated, because they create one product, but at different stages, they have the same consumers, however, there is a big difference in the structure and most significant is gaining profitability. 5 forces structure of both businesses would help to explain the phenomenon:
The power of suppliers: Concentrate and bottling producers would need sugar and corn syrup, flavors, sweeteners, packages and some other additives suppliers. However, they are not unique and rare products, so in case if one supplier offers goods for unreasonable price, concentrate producer would always have a chance to switch to the other. For example, Coca Cola and Pepsi are biggest customers in can industry and they have relations with multiple suppliers, giving them with that less bargaining power because of availability of different suppliers. So due to the reason that those commodities are basic and widely...
...The case study “ColaWars Continue: Coke and Pepsi in the Twenty-First Century” focuses on describing Coke and Pepsi within the CSD industry by providing detailed statements about the companies’ accounts and strategies to increase their market share. Furthermore, the case also focuses on the Coke vs. Pepsi goods which target similar groups of costumers, and how these companies have had and still have great reputation and continue to take risks due to their high capital. This analysis of the ColaWars Continue case study will focus mainly on the profitability of the industry by carefully considering and analyzing the below questions:
Why is the soft drink industry so profitable?
Compare the economics of the concentrate business to the bottling business: Why is the profitability so different?
How has the competition between Coke and Pepsi affected the industry’s profits?
Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-carbonated drinks?
The soft drink industry is a highly profitable industry and its success is due to the large consumption of non-alcoholic beverages through which both concentrate producers and bottlers are profitable. Given the U.S. Industry consumption Statistics, Exhibit 1, it is clear that, after deducting beer and wine, soft drinks account for about 90 % of the total liquid consumption, while Coke and Pepsi account for about...
...Marketing Mix Of Pepsi-Cola Today¡¦s PepsiCo, Inc. was found in 1965 through the merger of Pepsi Co and Frito-Lay, the world¡¦s largest manufacturer and distributor of snack chips. In 1998, it acquired Tropicana, the world¡¦s largest marketer and producer of branded juices. In addition to the main body of 3 companies, the Pepsi-Cola Incorporation also owns four well-known fast food restaurants in the world; they are Pizza Hut, Taco Bell, KFC, and Burger King. Furthermore, with its 4 fast food restaurants, PepsiCo Inc. owns 24,000 restaurants, more than McDonald¡¦s 14,000. Based on PepsiCo Inc.¡¦s annual report in year 2000, PepsiCo Inc. has total net sales of 20.438 billion US dollars and they are worth 44 billion dollars in stock value right now.
There are several reasons why the world¡¦s second largest soft-drink company, the PepsiCo Inc., is very successful in the world and almost exceed the current market leader in soft drink industry, Coca-Cola. These reasons are taste, investment, management policy, and marketing strategy. In this report, we will put our main focus on marketing strategies and more details analysis, such as 4Ps (product, price, place, promotion), SWOT analysis (strength, weakness, opportunity, threaten), Marketing Environment (economic, technological, cultural, social, and competitor), advertising, and target market, etc.
First element of 4Ps is product. With more and more customers¡¦ unique needs, besides...
...History of Pepsi-Cola and its advertising
History of Pepsi-Cola
Advertising as Weaponry
Pepsi has marked more than the Hundred Years War with no decisive victory in sight. But then, perhaps victory would spoil all the fun -- not to mention the price wars that frequently let thirsty consumers load up at grocery chains for less than 17 cents a can. If it were just a matter of stuffing cola into an endless procession of cans, the days at Purchase and Somers, N.Y. (home of the Pepsi division) would hold no intrigue. (Ellis, 1979).
For decades Pepsi has defined itself through the wizardry of the slogan, the jingle and the storyboard and all that a succession of four ad agencies has spun from them. One hundred years after New Bern, N.C., druggist Caleb Bradham called it Pepsi-Cola (actually, Caleb Cola would have had a nice ring and spared Mr. Bradham the necessity of buying out an existing trademark, Pep-Kola, for the princely sum of $100), this worldly and sophisticated company still succumbs to the temptation to see itself as the ``feisty newcomer'' struggling in the shadow of tradition and Americana cast by ``the competitor.'' (Martin, 1962)
Selling In Bottles
The demand, it turned out, was already there. The race was how to make enough Pepsi without going broke in the process. Spritzing it out of fountain dispensers didn't begin to do the...
...BUAD497 Strategic Management Fall 2011 Session 3:
ColaWars Continue: Coke and Pepsi in 2010
Sun Hyun Park, Ph.D. Assistant Professor Marshall School of Business University of Southern California
Blind Test “Can you tell the difference?”
Student A 1: Coca Cola
Student B 1: Big K Cola (Kroger) 2: Pepsi 3: Coca Cola
Student C 1: Pepsi
2: Pepsi 3: Big KCola (Kroger)
2: Coca Cola 3: Big K Cola (Kroger)
Agenda for Today
• Recap - Value chain analysis - Five Forces Model • Case Discussion: ColaWars - Industry profitability analysis using five forces model - Rivalry of CPs: Who is winning the colawar? - Can the war continue?
Industry Profitability: 1975-1995
Industry Pharmaceuticals Printing & Publishing Food & Kindred products Chemicals & allied products Petroleum & Coal products Instruments & related products Industrial chemicals Paper & allied products Aircraft, guided missiles ROA 11.8 7.1 6.6 7.5 6.5 7.2 6.2 6.0 4.1 Industry Fabricated metal Motor vehicles, equipment Rubber & Plastic products Electric & electronic equipment Machinery, except electrical Stone, clay & glass products Textile mills products Nonferrous metals Iron & Steel ROA 5.7 5.6 5.1 5.4 5.8 4.8 4.3 3.9 1.5
Profit Margin Structure Across the Value...
...WEEK 1 DISCUSSION
STRUCTURAL FORCES EFFECTS
COLA DRINKS INDUSTRY SUPPLY CHAIN
Carbonated soft drinks branded under Coca Cola and Pepsi Cola remain major household names in the soft drinks industry. Spanning operation from the original Franchise agreement of 1899 to-date, is an indication of managerial ingenuity of strategy design, implementation and control. Profitability and sustainability as a key issue in business operations necessitates these value chain components to critically evaluate the Structure-conduct-performance framework as an ongoing process. As suggested by Porter (2008/1977), the evaluation of the industry structure would assume the assessment under the five forces concept: The threat of entry, the power of suppliers, the power of buyers, the threat of substitutes and the competitive rivalry.
The major players in the Carbonated Soft Drinks (CSD) industry in the production and distribution process are classified in four major groupings: Concentrate producers, bottlers, retailer channels and suppliers. As major part players in the Carbonated Soft Drinks Industry (CSD), analysis of the Industry structure is synonymous to assessment of the Industry major players on Structure-Conduct-Performance (SCP) paradigm. This essay seeks to subject to assessment the CSD Industry major players to the five forces concept.
The rivalry between the soda giants, also known as the "ColaWars", began in the 1960's when Coca-Cola's dominance was being increasingly challenged by Pepsi Cola...
domestically and abroad (See Exhibit 3) C. Cola industry leaders, Coca-Cola and Pepsi, should practice game theory to better understand their competitive market...
with the well established brands of Coca-Cola and Pepsi. Organization Due to the colawars both Coca Cola and Pepsi have a similar organizational structure. By...
• ColaWars Continue: Coke And Pepsi In 2006
from the other company to battle with. Pepsi and Coke had a vast understanding on game theory and demonstrated it with their sequential and simultaneous move games...
• Game Theory In Business
Connecticut. The authors research, teaching, and consulting focus on game theory and business strategy, and their book on the subject will be published by Currency...
• Terrorism And Game Theory
strategy to deal with terrorists? Since September 11, 2001 game theory has been used to analyze how governments and how terrorists should act to achieve their best...
• What Is Significant About Developments In Post-Cold War Ir Theory?
will explore the...
...Colawars continue: Coke and Pepsi in 2010 (HBS 9-711-462)
a. Use the 5-forces framework to explain why the soft drink concentrate industry has been so profitable.
The soft drink concentrate industry has been very profitable for over 100 years. The reason can easily be found by analyzing the concentrate industry using the 5-forces model.
According to the 5-forces model, each industry’s profitability can be assessed considering the five forces that influence the market – The rivalry among existing competitors, bargaining power of suppliers, bargaining power of buyers, threat of new entrants, and threat of substitute products or services. Considering the rivalry among existing competitors, the rivalry is very intense. Among national concentrate producers, Coke and Pepsi claimed a combined 72% of the U.S. CSD market’s sales volume. The Colawar has begun in 1950s and the competition is still ongoing. Also, the competitions in other sectors of drinks and between small concentrate producers were harsh.
Next, regarding the bargaining power of suppliers, it was relatively low. The concentrate producers blend caramel coloring, phosphoric or citric acid, natural flavours, and caffeine. Since they do not require many inputs, the suppliers of concentrate producers remain profitable.
The bargaining power of buyers – the bottlers - was relatively low. The main costs components of bottlers are concentrate and syrup. However,...