A REFRESHING NEW STRATEGY IN THE BEVERAGE INDUSTRY
For the entire document (with exhibits and important disclosures associated with its content, if applicable), view original document (PDF) The changing beverage marketplace has resulted in some major transformations amongst the industry’s chief competitors. The Coca-Cola Company and PepsiCo Inc. have both recognized the changes and have taken action to preserve their success with their all-important systems of bottlers. We expect these changes to be beneficial including the opportunity to focus on innovation and to improve the cost effectiveness of bringing the product to market. In 1899, two lawyers from Tennessee secured exclusive rights to bottle and sell Coca-Cola for only one dollar (www.coke.com). Asa Candler, then President of The Coca-Cola Company, was not convinced that selling the product in bottles was the way to go. No one could have predicted how popular Coca-Cola and its main competitor, Pepsi-Cola, would become. The relationship between company and bottler has always been very important. Today, 54 billion beverages of all types are served every day.1 Products from PepsiCo Inc. (PEP) and The Coca-Cola Company (KO) account for more than two thirds of the sales in the carbonated soft drink (CSD) category.2 These companies have battled with each other for many years and in the process have had to adapt to consumer shifts and increasing complexity concerning product distribution. Once again, the marketplace for non-alcoholic drinks in North America has evolved away from the current model. To achieve longer term profitability and growth, PepsiCo and The Coca-Cola Company have both decided to buy the majority of their North American bottling operations. In this report, we will explain how the market has changed and why we expect PepsiCo and The Coca-Cola Company to be better off in the future. To begin, we need to explain the traditional role of the parent company and its system of bottlers. The parent...
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