coca vs pepsi
COLA WARS CONTINUE: COKE AND PEPSI IN 2006
The case is about the rivalry between two of the biggest companies in the world, Coca Cola and Pepsi. It is a battle which started in the early 1990s and which still characterizes the soft drink industry; but, as a former CEO of Pepsi said, it is a “battle without blood”: Coca Cola could not exist without Pepsi and the other way round. They mutually force each other to adapt their strategy to customers’ new needs, to apply competitive prices and to face the new challenges in a more innovative way, in order to keep their market share.
Till the 90s both companies could maintain high margins relatively easily as the demand for carbonated soft drinks (CSD) was still growing. From then on demand declined and finally got nearly flat. Therefore, both Coca Cola and Pepsi had to adapt their strategy to the new external environment as well as modify their internal structure accordingly. This strategical change resulted in new marketing operations, new acquisitions and new pricing policies, in order to face the reduction of the CSD consumption by diversifying the offer, conquering the customers’ loyalty and gaining new margins on the selling of concentrates to the bottlers.
Despite the mentioned negative trends, the soft drink industry remained an attractive industry for both concentrate producers (CP) and bottlers. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution: so, because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in the definition of the soft drink industry. In 2004, CPs earned on average 30% pretax profits on their sales, while bottlers earned on average 9% profits on their sales. The difference in their revenues can be easily explained by the analysis of their costs: concentrate production does not require particular on-going investments, but rather an initial effort to create a
The case is about the rivalry between two of the biggest companies in the world, Coca Cola and Pepsi. It is a battle which started in the early 1990s and which still characterizes the soft drink industry; but, as a former CEO of Pepsi said, it is a “battle without blood”: Coca Cola could not exist without Pepsi and the other way round. They mutually force each other to adapt their strategy to customers’ new needs, to apply competitive prices and to face the new challenges in a more innovative way, in order to keep their market share.
Till the 90s both companies could maintain high margins relatively easily as the demand for carbonated soft drinks (CSD) was still growing. From then on demand declined and finally got nearly flat. Therefore, both Coca Cola and Pepsi had to adapt their strategy to the new external environment as well as modify their internal structure accordingly. This strategical change resulted in new marketing operations, new acquisitions and new pricing policies, in order to face the reduction of the CSD consumption by diversifying the offer, conquering the customers’ loyalty and gaining new margins on the selling of concentrates to the bottlers.
Despite the mentioned negative trends, the soft drink industry remained an attractive industry for both concentrate producers (CP) and bottlers. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution: so, because of operational overlap and similarities in their market environment, we can include both CPs and bottlers in the definition of the soft drink industry. In 2004, CPs earned on average 30% pretax profits on their sales, while bottlers earned on average 9% profits on their sales. The difference in their revenues can be easily explained by the analysis of their costs: concentrate production does not require particular on-going investments, but rather an initial effort to create a