Cola Wars

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Cola Wars

CASE STUDY : COLA WARS CONTINUE : COKE AND PEPSI IN 2006

The case study “Cola Wars Continue: Coke and Pepsi in 2006” focuses on describing Coke and Pepsi within the CSD industry by providing detailed statements about the companies’ accounts and strategies to increase their market share. ‘ Cola war’ is the term used to describe the campaign of mutually targeted television advertisement & marketing campaigns between Coke & Pepsi. Furthermore, the case also focuses on the Coke vs. Pepsi goods which target similar groups of costumers, and how these companies have had and still have great reputation and continue to take risks due to their high capital.

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. History revealed that a highly competitive strategy that was utilized in the past by both companies resulted in cannibalization. Because of this, the report is described from the perspective of both Coca-Cola and Pepsi. This report focuses on increasing the overall share and finding new opportunities in the unrevealed markets.

STRUCTURE OF THE SOFT DRINK INDUSTRY :

1. Concentrated Producers

Main activities includes : Blending new material ingredients , packaging in plastic containers, shipmen

2. Developing the program includes product planning, marketing research, advertising.

3. Main activities includes combine carbonated water and syrup , bottling/ canning, delivery to customers.

4. Focus lies on product management, product positioning, continual brand availability, maintenance.

OVERVIEW OF THE CASE :

Major players of the soft drink industry were –

1. Concentrated producers

2. Bottlers

3. Retail channels

4. Suppliers

Concentrated producers

* Blended raw materials ingredients packed the mixture and shipped these containers to bottlers.

* Key investment in machinery, overhead or labor.

* Significant costs for advertising, promotion and marketing research.

* Coca Cola & Pepsi Co.claimed a combined 76% of the U.S CSD market, in sales.

Bottlers

* Purchasing concentrate.

* Adding carbonated water & high fructose corn syrup.

* Bottled or canned the product.

* Delivery to customer.

* Capital intensive process.

* Direct store door delivery.

* Coopeorative merchandizing agreements, key factor of soft drink sales.

Retail channels

* Super markets

* Vending machines

* Convenience stores

* Gas stations

Suppliers

* Coca cola & Pepsi were among the metal can industry largest customers.

* Major can producers were American National Can, Crown Cork & Seal and Reynolds Metals

THE COLA WAR BEGINS – MARKET CAMPAIGNS

Pepsi| Coca Cola|

“Beat Coke”| “Americans preferred taste”|

“Pepsi Generation”| “No wonder Coke refreshes best”|

“Young at heart”| |

PRODUCT PORTFOLIO DIVERSIFICATION

Pepsi| Coca Cola|

Teem (1960)| Fanta (1960)|

Mountain dew (1964)| Sprite (1961)|

Diet Pepsi (1964)| Low calorie tab (1963)|

Non CSD (Merger)| Non CSD ( Purchased)|

Frito Lay| Minute Maid|

| Duncan Foods|

| Belmont Springs Water|

PEPSI CO. CHALLENGE

Pepsi Co| Coca Cola|

Blind taste test| Rebates|

Eroded Coke’s market share| Retails price cuts|

| Advertisement questioning test validity|

| Re-negotiation of contract with franchisee bottles|

About 70% of Coke’s sales and about 80% of its profits came from outside the U.S – only about 1/3rd of Pepsi leverage sales took place overseas.

PRODUCT LAUNCH

Pepsi| Coca Cola...
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