Case - Cola Wars Continue: Coke and Pepsi in 2006

Only available on StudyMode
  • Download(s) : 97
  • Published : April 17, 2009
Open Document
Text Preview
Definition of the industry
It is far from obvious what industry Coke and Pepsi are in. A broad definition would be the beverage industry, while a narrow definition would be the carbonated soft drink (CSD) industry. I will consider the companies to be in the soft drink (SD) business, which includes water, juices, energy drinks etc while excluding alcoholic beverages. This industry can be thought of as an aggregate of concentration producers and bottlers: suppliers '' [concentration producers '' bottlers] '' Buyers Buyer power

The products are sold through mainly five different retail channels. The buyer power and cost structures of these channels are very different, so the profitability is very different. For example, vending machines are relatively profitable because the buyers (consumers) have no bargaining power and costs are relatively low. On the other hand, fountain outlets shows small profits because competition is fierce and buyers (e.g. McDonald’s and Burger King) are relatively concentrated. Supermarkets constitute about one third of all CSD sales, and their bargaining power is reduced by the fact that they have to stock the products and that the products create a lot of traffic. Overall, buyer power is low. The firms in the industry (essentially a duopoly) are more concentrated, their products must be stocked and they are more likely to integrate forward (e.g. buying fast food chains). Supplier power

There are many different suppliers, but the most important ones are suppliers of packaging (mainly metal cans and plastic bottles) and sweeteners (sugar, corn syrup and artificial sweeteners). As mentioned in the case (and in the previous case), Coke and Pepsi are huge customers of these two industries (they are the largest customers of the metal can industry). A straightforward analysis with the Porter model (as we did in the previous case) suggests very low supplier power. The supplied products are highly standardized Threat of new entrants

The...
tracking img