Cola Wars - Porter Five Forces
Using your knowledge of industry structure (Porter’s five forces) do an analysis of the industry structure of the concentrate producers… Regarding the industry structure of the concentrate producers, the Porter’s five forces varied in each category: Industry Rivalry, suppliers, buyers, substitutes, and potential entrants. Of the five forces, competition is the highest weight between Pepsi and Coca-Cola.
Industry Rivalry
• Coca-Cola and Pepsi-Cola claim nearly 75% of the U.S. carbonated soft drinks marker sales volume in 2004. Each are globally established.
• Other competitors including Cadbury Schweppes, Dr. Pepper/Seven-up Cos., Cott Corporation, and Royal Crown Cos. struggle gaining market share due to Coca-Cola and Pepsi-Cola’s tight grip on retailers, bottlers, and distribution channels.
Suppliers
• Caramel coloring, phosphoric/citric acid, natural flavors, and caffeine are the key components for supplier power.
Buyers
• Buyer power lied in the hands of various forms/entities of distribution including mass merchandisers/discount retailers (Wal-mart), supermarket, venders, fast food industry, and fountain. National fountain account competition was intense; Pepsi-Cola and Coca-Cola landed contracts through use of rebates and discounts on mass purchases.
• The main core buyer was supermarkets; rivals paid extensively for shelf-space. As more competitors entered the market, companies got creative with bottle packaging and placement of coolers near checkouts.
Substitutes
• 3 main substitutes include alliances/contracts, and product innovation. Pepsi-Cola and Coca-Cola continually battled for fountain usage at fast food restaurants, bottler companies, sweetener pricing, and various territories.
• Product Innovation was used primarily for marketing and advertisement purposes. As more CSDs entered the market, companies had to utilize ways of differentiation which led to more flavors and bottles sizes.
Potential Entrants
• Entry barriers include
Industry Rivalry
• Coca-Cola and Pepsi-Cola claim nearly 75% of the U.S. carbonated soft drinks marker sales volume in 2004. Each are globally established.
• Other competitors including Cadbury Schweppes, Dr. Pepper/Seven-up Cos., Cott Corporation, and Royal Crown Cos. struggle gaining market share due to Coca-Cola and Pepsi-Cola’s tight grip on retailers, bottlers, and distribution channels.
Suppliers
• Caramel coloring, phosphoric/citric acid, natural flavors, and caffeine are the key components for supplier power.
Buyers
• Buyer power lied in the hands of various forms/entities of distribution including mass merchandisers/discount retailers (Wal-mart), supermarket, venders, fast food industry, and fountain. National fountain account competition was intense; Pepsi-Cola and Coca-Cola landed contracts through use of rebates and discounts on mass purchases.
• The main core buyer was supermarkets; rivals paid extensively for shelf-space. As more competitors entered the market, companies got creative with bottle packaging and placement of coolers near checkouts.
Substitutes
• 3 main substitutes include alliances/contracts, and product innovation. Pepsi-Cola and Coca-Cola continually battled for fountain usage at fast food restaurants, bottler companies, sweetener pricing, and various territories.
• Product Innovation was used primarily for marketing and advertisement purposes. As more CSDs entered the market, companies had to utilize ways of differentiation which led to more flavors and bottles sizes.
Potential Entrants
• Entry barriers include