The Cola War Continues
Cola Wars Continue: Coke and Pepsi in 2010
The software drink industry has been very profitable historically because the manufacturing process requires low cost of overhead. Although this is not the case for bottlers, the high volume and demand for CSD allow for the market to be very attractive to incumbents. Since the 1970s, the CSD industry has been enjoying an average growth every year of 3% for the last 30 year. Even at the lowest point in 2009, CSD sales compose of 87% of all beverage sales. In addition, the introduction of a variety of cola favors allows consumers with more choices and more consumption. Volume, variety and low cost have made the soft drink industry such a lucrative market.
The concentrate producers have high profit margin and little relatively low operating cost compared to bottlers. Not only is the bottling process capital intensive which resulted in a lower margin, the bottlers provides distribution and stocking service to the retail channels and suppliers resulting in additional cost to the bottlers. The concentrate producers franchise their product to bottlers. In the agreement, the producers prohibit bottlers from working with direct competitors which further limits the sales and flexibility of bottlers.
The Competition between Coke and Pepsi has tremendous effect in the industry. During the 1990s, the two companies engage in a price war in the supermarket channel in order to compete for shelf space and consumer purchase. Profit for the other CSD companies is down as well in order to stay in business as two CSD giants compete for market share. In recent years, the CSD concentrate manufacturers lose market share in the throat share because health conscience Americans are turning to non-CSD. For Pepsi to remain competitive in the industry the company needs to expand product line to include drinks such as juices and energy drinks so that the health conscience population are not being alienated by Pepsi’s products. In addition,
The software drink industry has been very profitable historically because the manufacturing process requires low cost of overhead. Although this is not the case for bottlers, the high volume and demand for CSD allow for the market to be very attractive to incumbents. Since the 1970s, the CSD industry has been enjoying an average growth every year of 3% for the last 30 year. Even at the lowest point in 2009, CSD sales compose of 87% of all beverage sales. In addition, the introduction of a variety of cola favors allows consumers with more choices and more consumption. Volume, variety and low cost have made the soft drink industry such a lucrative market.
The concentrate producers have high profit margin and little relatively low operating cost compared to bottlers. Not only is the bottling process capital intensive which resulted in a lower margin, the bottlers provides distribution and stocking service to the retail channels and suppliers resulting in additional cost to the bottlers. The concentrate producers franchise their product to bottlers. In the agreement, the producers prohibit bottlers from working with direct competitors which further limits the sales and flexibility of bottlers.
The Competition between Coke and Pepsi has tremendous effect in the industry. During the 1990s, the two companies engage in a price war in the supermarket channel in order to compete for shelf space and consumer purchase. Profit for the other CSD companies is down as well in order to stay in business as two CSD giants compete for market share. In recent years, the CSD concentrate manufacturers lose market share in the throat share because health conscience Americans are turning to non-CSD. For Pepsi to remain competitive in the industry the company needs to expand product line to include drinks such as juices and energy drinks so that the health conscience population are not being alienated by Pepsi’s products. In addition,