Cola Wars Summary

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Cola Wars
Economics of the US CSD industry:
* From the 1970s consumption of carbonated drinks grew by about 3% every year. This was because new diet flavors were introduced, lots of variety. Prices ad also decreased in real terms. * Cola still remained the most popular although its sales reduced from 71% in 1990 to 60% in 2004. * To make these drinks you require concentrate, sweetener and carbonated water. So the drinks go through the concentrate producers, bottlers, retail channels and suppliers before being purchased by the consumers. Concentrate producers:

* They blend all the raw materials and put them in plastic canisters to send to bottlers. Bottlers then add sugar or high fructose corn syrup themselves. * This process required little capital investment, machinery, overhead or labor. * Main costs arose from advertising, marketing, market research and bottler support. They invested in trademarks as well. * They implemented and financed marketing campaigns with the bottlers however they usually took the lead. They also developed CDA with retailers such as wal mart so they would finance marketing in exchange for shelf space. * With smaller regional accounts bottlers took the lead and agreed to pay a part of the promotional expenses. * Concentrate producers normally have a large workforce to deal with bottlers and set standards, discuss operational improvements etc. They also negotiate with the suppliers of bottlers to achieve fast delivery, low prices, and reliability. * The industry used to be fragmented but now coke and pepsi have 74.8% of market share. Cadbury Schweppes and Cott Corporation follow. Bottlers:

* They purchase concentrate added carbonated water and high fructose corn syrup and then sent it off to retail stores etc. * Coke and Pepsi bottlers offer direct store door delivery (DSD) so they deliver it to the retail store, secure shelf space, stack products, position it, set up displays etc. * Bottling...
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