Cola Wars Case Analysis

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Cola Wars Case Analysis
The soft drink industry is a very profitable industry, full of ongoing competition, rivalry, and growth. With this in mind, one would assume the soft drink industry to be ideal for an incoming product line, but in this particular case, it is not. This soft drink industry consists of some of the most powerful name brands in the world, which makes entering this market as a small and unknown brand very difficult. There are several contributing factors that make a successful entry into the soft drink industry virtually impossible. The barriers to entry are extremely high due to veteran companies like Coca-Cola and Pepsi. According to Exhibit 2, Coca-Cola and Pepsi consume a combined 74.8% of the U. S. soft drink industry. Over the past century, these companies have accomplished an overall market domination, by presenting each other with continuous competition. “The Cola Wars” started in the 1940s when Pepsi started to gain a large portion of the carbonated soft drink industry and became a threat for Coke. Throughout the years, Pepsi has strived to differentiate themselves by bringing in different campaigns that targeted various markets. They also became strong by forming distribution channels with their bottling companies and bringing innovative ideas to the industry and developing economies of scale. Coke returned with various “weapons” such as price cuts and rebates, and arguing the validity of Pepsi’s consumer research. Each company continuously fought for control of the market through the creation of new flavors, buying out smaller companies in an effort to offer a variety of names under each of their brands. These two companies were and still are unstoppable forces in the soft drink industry, and because of their continuous efforts to gain the number one position in the industry, have created very high barriers to entry. By using the Porter’s Five Forces model to analyze the carbonated soft drink industry, it is easy to see...
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