09-08-2012, 12:13 PM
Coca Cola Company and Pepsi Co.
coke_vs_pepsi.ppt (Size: 4.6 MB / Downloads: 54)
Coca Cola Company and Pepsi Co. are the largest players in the Carbonated Soft Drinks (CSD) industry.
Cola war is the term used to describe the campaign of mutually targeted television advertisement & marketing campaigns between Coke & Pepsi.
Both Coke & Pepsi have segmented the soft drink industry into two divisions, via –
1. Production of soft drink syrup.
2. Manufacturing & distribution of soft drinks at retail level.
Coke & Pepsi have chosen to operate primarily on the production of soft drinks syrup, while leaving independent bottlers with more competitive segment of the industry.
The purpose of this report is to gain insight into the possible strategies that can be applied, in order to expand the overall throat share in the future
This report focuses on increasing the overall share and finding new opportunities in the unrevealed markets
Highly competitive strategies were utilized in the past by both companies which resulted in cannibalization
Gaining Hold
Bottling
Pricing
Brand Strategies
To emerge in international markets, they expanded their brand portfolios to include non carb beverages like Tea, Juice, Sports Drink and Bottled Water
Company Profile
Dr. John Stith Pemberton for the first time produced the syrup for
Coca-Cola on May 8, 1886
Interbrand’s Global
Brand Scorecard for
2003 ranked Coca-Cola
the #1 Brand in the
World and estimated
its brand value at
$70.45 billion
PEPSI-COLA HITS THE SPOT
Times were tough and five cents was a lot to pay for a six-ounce soft drink. So, Guth decided to make Pepsi- Cola a great value for hard-pressed consumers. In Baltimore, he offered twice as much Pepsi for the same price as other soft drinks—a 12-ounce bottle of cola for just a Nickel- and it was a big hit.
ADVERTISING
Pepsi:
Leaned towards the appeal of celebrities, popular music, and young people in television commercials
Coke
Relies more heavily on images of happiness and togetherness, tradition, and nationalism
The Cola War
The Warfare must be percieved as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca Cola company did not exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at coke would say that nothing contributes to their present day success than Pepsi…
- Roger Enrico, former CEO of Pepsi
Economics of U.S. CSD Industry
In 1970, average consumption 23 gallons
3% growth every year
Many alternatives – yet CSDs highest consumed drink
Cola segment of CSD industry dominated
Major participants of the soft drink industry
Concentrate producers
Bottlers
Retail channels
Suppliers
Concentrate Producers
Raw material- blended and packaged in plastic canisters
Low capital investment in labor, machinery, overhead
Manufacturing plant cost $25 to 50 million- 1 plant could serve the entire US
Significant costs include
Advertising
Promotion
Market Research
Bottler Relations
Concentrate Producers Contd..
Marketing programs financed jointly by concentrate producers and bottlers
Concentrate producers helped bottlers
to improve their performance
negotiations with their suppliers to ensure reliable supply at lower prices
Coke & Pepsi CPs combined market share-76%
Bottlers
DSD delivery
Product stacking
Positioning the trademarked label
Cleaning the packeages and shelves
Point-of-purchase & end-of-aisle displays
Capital-intensive- bottling plant cost $25mn to $75 mn
80-85 plants required for full distribution across US
Bottlers Contd..
Bottlers cost of goods sold
Packaging 50%
Concentrate 33%
Sweeteners 10%
Lobor 7%
Additional investment in trucks and distribution networks
Bottlers
2000 in 1970
300 in 2000
Original 1899 Coca Cola franchise contract- a fix price contract, even if ingredient cost changed
1987 Master bottler contract used pricing formula that changed quarterly
Franchise agreements of both Pepsi & Coke allowed bottlers
To handle non cola brands of other CPs
Choice to introduce new beverages introduced by CPs
But bottlers could not carry directly competing brands
Soft drink Intrabrand Competition Act, 1980
Exclusive territories
Retail Channels
Distribution of CSDs in US
Food stores 35%
Fountain outlets 23%
Vending machines 14%
Convinience stores 9%
Other outlets 20%
CSDs largest selling product in SUPERMARKETS
Retail Channels Contd.
Coca Cola
Dominated fountain sales- 65% in 2000
Fountain sales for restaurants- profitable
McDonalds
Burger King
Fountain accounts handled by national franchiser companies
Pepsi
Focused on retail outlets
Entered Fast food restaurant business to increase fountain outlets
Pizza hut
Taco bell
Kentuky fried chicken
Suppliers
Raw material for Concentrate
Caramel coloring
Phosphoric/citric acid
Natural flavors
Caffeine
Artificial sweetener
Raw material for bottlers
Packaging
Cans 60%
Plastic bottles 38%
Glass bottles 2%
Sweeteners
Sugar
high fructose corn syrup