Cola Wars Continue: Coke and Pepsi in 2006

AGEC 4433 Group 7 Spring 2011

Background
John Pemberton creates Coca-Cola formula in 1886 Imitation brands followed, along with the creation of Pepsi-Cola in 1893 Increased consumption and concentration in the Carbonated Soft Drink (CSD) market.

Company Goals
Boost the domestic demand for CSD products

Increase Cokes market share of noncarbonated products in the U.S.

Capture uncharted markets not catered to by CSD companies.

Central Problem
Flat growth in Coca-Colas market share
Waning demand for CSDs in domestic market Coca-Cola is less competitive in non-carb market due to Pepsis successful pursuit of that market

Constraints
Increased health information concerning obesity deterring consumers Market for non-carbonated beverages is dominated by Pepsi

Untapped market segments reluctant to associate with Coca-Cola

Competitive Analysis
Barriers to Entry Very High
Coke and Pepsi hold 75% of the market Economies of Scale: Capital Intensive Industry Limited bottling and distribution (all owned by existing concentrate producers)

Rivalry High
Pepsi and Coke in direct competition, push smaller competitors out

Competitive Analysis
Threat of Substitutes Medium
Consumers tend to buy on price without differentiation Coke and Pepsi market and price strategically to avoid that

Power of Buyers
Consumers High; price increases lead to reduced consumption Bottlers Low; bottling contracts force them to take higher prices

Competitive Analysis
Power of Suppliers High
Bottlers unable to negotiate, concentrate produces get pricing power Door-to-store format allows Coke to monitor processes from beginning to end, gives little room for negotiation

Alternatives
Increase CSD demand
Alternative 1: Marketing Coca-Colas socially conscious initiatives Alternative 2: Innovating carbonated products to fit in with health and wellness trends Alternative 3: Combined marketing and innovation approach

Alternatives
Compete more aggressively in non-carb market
Alternative 4: Reformulate and position PowerAde to better compete with Pepsis Gatorade Alternative 5: Market PowerAde towards college and professional sports markets Alternative 6: New product development

Solution
Alternative 3: Combined Innovation and Marketing Approach in CSDs
Develop green or natural formula for flagships (Coca-Cola and Diet Coke) Advertise with eco-drive marketing strategy

Implementation
Invest in reformulation for green CSD line
Replace high fructose corn syrup with real sugar, aspartame with stevia (natural no-calorie sweetener) Substitute artificial dyes, flavors

New packaging
Planbottle and biodegradable can More visible recycling symbol

Eco-friendly marketing strategy

Bottle deposit stations (get demographic data) Product premier on Earth Day