Cola Wars Continue: Coke and Pepsi in 2010
Cola Wars Continue: Coke and Pepsi in 2010
Consider the CSD industry. Have Coke and Pepsi’s profits historically been high? Do you consider it surprising or not surprising given the product they produce?
In the CSD industry, the highest net profit-sales ratio of Coke and Pepsi are 21.1% and 14.3%, and the steadily growth is also surprising.so the profits are high. The content is water, Coke syrup, CO2, and additives, which cost about 10 cents per can, nearly next to nothing.
What are the primary barriers to entry and how important are they?
The barriers are high. They can be up-front advertising, R&D cost, bottling lines equipment, and brand awareness. Firstly, megabrands such as Coke and Pepsi already take about 60% market share, left fierce competition to the other brands. Secondly, On supply-side economies of scale, the megabrands such as Coke and Pepsi already take about 60% market share and the larger volumes of products to spread fixed cost over more units. Thirdly, on demand-side benefits of scale, the impact of brand reputation is huge, for customers are more willing to buy products of megabrands. Coke and Pepsi spent $244,000 and $140,000 on average each year in 2008 and 2009,which could be an unaffordable up-front cost for new entrant.
Who are Coke and Pepsi’s buyers and suppliers? How much power does each have?
①There are two kinds of buyers, one is the bottler, and the other is the retailor. The power of bottler is huge cause they have large numbers of products, while the bargaining power of retailor can be different among the channels. Among the 7 channels, Super-markets and Fountain& Vending have more power, while Mass retailers and Drug stores have relative low power considering the low share.②The suppliers are numerous, such as caramel coloring, phosphoric or citric acid. Coke and Pepsi are mature companies, so the suppliers have little budgeting power. Sweeteners are suppliers to bottlers, and they have low power.
How large is the threat of
Consider the CSD industry. Have Coke and Pepsi’s profits historically been high? Do you consider it surprising or not surprising given the product they produce?
In the CSD industry, the highest net profit-sales ratio of Coke and Pepsi are 21.1% and 14.3%, and the steadily growth is also surprising.so the profits are high. The content is water, Coke syrup, CO2, and additives, which cost about 10 cents per can, nearly next to nothing.
What are the primary barriers to entry and how important are they?
The barriers are high. They can be up-front advertising, R&D cost, bottling lines equipment, and brand awareness. Firstly, megabrands such as Coke and Pepsi already take about 60% market share, left fierce competition to the other brands. Secondly, On supply-side economies of scale, the megabrands such as Coke and Pepsi already take about 60% market share and the larger volumes of products to spread fixed cost over more units. Thirdly, on demand-side benefits of scale, the impact of brand reputation is huge, for customers are more willing to buy products of megabrands. Coke and Pepsi spent $244,000 and $140,000 on average each year in 2008 and 2009,which could be an unaffordable up-front cost for new entrant.
Who are Coke and Pepsi’s buyers and suppliers? How much power does each have?
①There are two kinds of buyers, one is the bottler, and the other is the retailor. The power of bottler is huge cause they have large numbers of products, while the bargaining power of retailor can be different among the channels. Among the 7 channels, Super-markets and Fountain& Vending have more power, while Mass retailers and Drug stores have relative low power considering the low share.②The suppliers are numerous, such as caramel coloring, phosphoric or citric acid. Coke and Pepsi are mature companies, so the suppliers have little budgeting power. Sweeteners are suppliers to bottlers, and they have low power.
How large is the threat of