Cola War Case
Cola Wars Continue: Coke and Pepsi in 2010
Pepsi and Coke fought over the 74 billion CSD (carbonated soft drinks) industry.
--> Nothing contribute as much to the success of Pepsi than Coke and vice-versa
What had to be done to ensure sustainable growth and profitability?
Economics of the U.S CSD Industry 1970 - consumption grew by an average of 3% per year
--> increasing availability of CSD + intro of new diet and flavoured variety
+ Declining real prices --> CSD more affordable
--> Americans drink more soda than any other beverage
The Production and Distribution of CSD involved 4 major players: Concentrate producers, bottlers, retail channels and suppliers
Concentrate Producers
They blended raw material ingredients, packaged the mixture in plastic canisters, and shipped those containers to bottler
--> Required little capital - cost for advertising, promotion, market research and bottler support
==> Once fragmented --> Consolidated with Coke and Pepsi (72% of market sales)
Bottlers
They purchased concentrate, added carbonated water and high fructose corn syrup, bottled or canned the resulting CSD product, and delivered it to customer account
--> Capital Intensive + Involved high speed production lines
Coke built a nationwide franchised bottling network --> Pepsi and Doctor Pepper followed
Master Bottle Contract (Coke): Coke had the right to determine concentrate price and other terms of sale - no legal obligation to assist bottlers in ad but made huge investment to support them anyways
Pepsi's Master Bottling Agreement: bottler perpetual right to distribute Pepsi's CSD products but required it to purchase raw materials from Pepsi at prices, and on terms and conditions, determined by Pepsi.
==> Bottlers could carry non-competing brands + final say in retail pricing
Retail Channel - Supermarkets - Fountain outlets ( war Pepsi acquired Pizza Hut taco bell etc. Coca Cola persuade Wendy’s and Burger King to switch to
Pepsi and Coke fought over the 74 billion CSD (carbonated soft drinks) industry.
--> Nothing contribute as much to the success of Pepsi than Coke and vice-versa
What had to be done to ensure sustainable growth and profitability?
Economics of the U.S CSD Industry 1970 - consumption grew by an average of 3% per year
--> increasing availability of CSD + intro of new diet and flavoured variety
+ Declining real prices --> CSD more affordable
--> Americans drink more soda than any other beverage
The Production and Distribution of CSD involved 4 major players: Concentrate producers, bottlers, retail channels and suppliers
Concentrate Producers
They blended raw material ingredients, packaged the mixture in plastic canisters, and shipped those containers to bottler
--> Required little capital - cost for advertising, promotion, market research and bottler support
==> Once fragmented --> Consolidated with Coke and Pepsi (72% of market sales)
Bottlers
They purchased concentrate, added carbonated water and high fructose corn syrup, bottled or canned the resulting CSD product, and delivered it to customer account
--> Capital Intensive + Involved high speed production lines
Coke built a nationwide franchised bottling network --> Pepsi and Doctor Pepper followed
Master Bottle Contract (Coke): Coke had the right to determine concentrate price and other terms of sale - no legal obligation to assist bottlers in ad but made huge investment to support them anyways
Pepsi's Master Bottling Agreement: bottler perpetual right to distribute Pepsi's CSD products but required it to purchase raw materials from Pepsi at prices, and on terms and conditions, determined by Pepsi.
==> Bottlers could carry non-competing brands + final say in retail pricing
Retail Channel - Supermarkets - Fountain outlets ( war Pepsi acquired Pizza Hut taco bell etc. Coca Cola persuade Wendy’s and Burger King to switch to