Industry Analysis Csd
Mohan Shiv
Section #1
Boston College
Carroll School of Management
MM 720 Management Practice I
STRATEGIC ANALYSIS
Professor MCCLEELLAN
Case: Cola wars Continue: Coke and Pepsi in the 21st Century
September
INDUSTRY ANALYSIS OF THE CARBONATED SOFT DRINKS INDUSTRY
Description of the Industry
The industry of Carbonated Soft Drinks (CSD) is highly concentrated. The three major companies, Coca Cola, PepsiCo, and Cadbury Schweppes accounted in 1998 for more than 90% of market share by case volume Exhibit 1-.
Generally, there are 4 participants in the market, involved in the process of production and distribution, namely, concentrate producers, bottlers, retail channels, and suppliers. Porter's 5 forces analysis reveals the following characteristics of the CSD industry:
1- A fierce competition exists among very few players: The industry is an oligopoly, or even a duopoly, given the intense rivalry between Coke and Pepsi, with a combined market share exceeding ¾ in 1998 (44.5% and 31.4%, respectively).
2- The threat of substitutes is reduced by the expansion of products portfolio: CSD have many alternative beverages, such as bottled water, juice and tea, which became more popular. Coke and Pepsi responded, either by launching new non carbonated soft drinks, or by acquiring new brands.
3- Suppliers have less bargaining power: The primary ingredients of CSD are sugar and packaging, which have many substitutes. For instance, sugar can be replaced by corn syrup or other sweeteners, and packaging can be processed using glass, plastic or metal cans. All these commodities exist in excess in the market and are provided by several suppliers. Coke and Pepsi negotiated, on behalf of their bottlers, contracts with suppliers and maintained lasting relationships with them.
4- Different levels of bargaining power exist among the groups of buyers: The retail channels basically include food stores, convenience stores, fountain outlets, and vending. Exhibit 2
Section #1
Boston College
Carroll School of Management
MM 720 Management Practice I
STRATEGIC ANALYSIS
Professor MCCLEELLAN
Case: Cola wars Continue: Coke and Pepsi in the 21st Century
September
INDUSTRY ANALYSIS OF THE CARBONATED SOFT DRINKS INDUSTRY
Description of the Industry
The industry of Carbonated Soft Drinks (CSD) is highly concentrated. The three major companies, Coca Cola, PepsiCo, and Cadbury Schweppes accounted in 1998 for more than 90% of market share by case volume Exhibit 1-.
Generally, there are 4 participants in the market, involved in the process of production and distribution, namely, concentrate producers, bottlers, retail channels, and suppliers. Porter's 5 forces analysis reveals the following characteristics of the CSD industry:
1- A fierce competition exists among very few players: The industry is an oligopoly, or even a duopoly, given the intense rivalry between Coke and Pepsi, with a combined market share exceeding ¾ in 1998 (44.5% and 31.4%, respectively).
2- The threat of substitutes is reduced by the expansion of products portfolio: CSD have many alternative beverages, such as bottled water, juice and tea, which became more popular. Coke and Pepsi responded, either by launching new non carbonated soft drinks, or by acquiring new brands.
3- Suppliers have less bargaining power: The primary ingredients of CSD are sugar and packaging, which have many substitutes. For instance, sugar can be replaced by corn syrup or other sweeteners, and packaging can be processed using glass, plastic or metal cans. All these commodities exist in excess in the market and are provided by several suppliers. Coke and Pepsi negotiated, on behalf of their bottlers, contracts with suppliers and maintained lasting relationships with them.
4- Different levels of bargaining power exist among the groups of buyers: The retail channels basically include food stores, convenience stores, fountain outlets, and vending. Exhibit 2