Cola Wars

Coke and Pepsi

Gyan Prakash
Bikash Acharya
Vishal Rana
Ankush Tiwari
Pratap Reddy

Overview

Industry Background

1886: John
Pemberton
Production and Distribution

1893: Caleb
Bradham

Industry Background

Problems

Recommendation

Focus on advertising and promotion to

differentiate from competitor and to change
the image and perception of cola to fit the
healthy living trend

Supplier Power

Buyer Power
Major buyers of CSD are bottlers and fast-food
restaurants

Low bargaining power

The Threat of
Substitutes
Ease of substitution is high
Many alternatives to CSDs
Different diet brands
Customer switching costs are low

.
Bottled
Water
Beer
Juice

Coffee
.

Tea

Wine
Powdered
Drinks

Sports Drinks

Milk

Energy Drinks
Distilled Spirits

Tap water

Historic Carbonated Soft Drink

Consumption

The Threat of New Entry

Threat of Rivals

Rivalry Conclusions

This level of rivalry is expected given the strength of other

forces

Which Force is Changing

the Most?

Negative health perception of CSD

Negative health perception of CSD

Recommendation
Adjust strategy to align with new climate

Overview

Industry analysis using Porters 5-Forces

Model

Bargaining power of buyers and sellers

Threats of new entrants and substitutes
Competitive rivalry withing industry

Level of rivalry given strengths of other

industry forces
Force that is changing the most in the
industry

Industry Background
Coca-Cola was formulated in 1886 by John
Pemberton
Pepsi Cola was formulated in 1893 by
Caleb Bradham
Production and distriubtion of CSDs
involves concentrate producers, bottlers,
retail channels, and suppliers

Both companies developed a franchise bottling

system which changed over time

Supplier Power

Low bargaining power

Raw materials required in the production of CSD:

Caramel coloring, phosphoric or critic acid, natural
flavors, and caffeine

Commodities and easy to purchase in the market

Choose their suppliers based on their needs and

costs

Low switching cost of suppliers

Buyer Power

Low bargaining power

Major buyers of CSD: bottlers and fast-food restaurants
Weaken the bargaining power of bottlers by having a franchise
agreement with them
Cokes Master Bottler Contract granted Coke the right to
determine concentrate price and other terms of sales
Pepsis Master Bottler Contract granted Pepsi the right to
force its bottlers to purchase raw materials from Pepsi at
prices, and on terms and conditions, determined by Pepsi
Weaken the bargaining power of big fast-food restaurants by
acquisition
Pepsi acquired Pizza Hut (1978), Taco Bell (1986), and KFC
(1986)
Coke retained exclusively deal with Burger King and
McDonald

The Threat of
Substitutes

Alternatives to CSDs

Beer, Milk, Coffee, Bottled Water, Juice, Tea,

Powdered Drinks, Wine, Sports Drinks, Distilled
Spirits, Energy Drinks, and Tap Water.
Different diet brands

Diet, With Splenda, No Caffeine.

Customer switching costs are low.

Ease of substitution is high.

This industry force is high.

Threat of Rivals

The Threat of New Entry

High investment costs to build a concentrate

manufacturing plant and bottling processes.
Soft Drink bottlers fell from 2,000 to fewer
than 300 in 2004. (High Competition.)
Competition for shelf space.
Concentrate makers raised prices.
Trademark Infringements.
Demand for CSDs seemed to have leveled off.

This industry force is low.

Which Force is Changing

the Most?

Substitutes!

Starting in late 1990s, demand seemed to have

leveled off

2005, Federal Nutrition Guidelines identified

regular CSDs as the largest source of obesity
causing sugars in the American diet

Schools banned the sale of soft drinks on their

premises

Which Force is Changing

the Most?

Substitutes!

Starting in late 1990s, demand seemed to have

leveled off

2005, Federal Nutrition Guidelines identified

regular CSDs as the largest source of obesity
causing sugars in the American diet

Schools banned the sale of soft drinks on their

premises