Cola Cola Wars

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Topics: Soft drink, Pepsi
Cola Wars Continue: Coke and Pepsi in 2006

other beverage. Within the CSD category, the cola segment maintained its dominance, alihough its market share dropped from 71% n 1990 to 60% in 2004.5 Non-cola CSDs included lemon/lime, citrus, pepper-type, olange, root beer, and other flavors. CSDs consisted of a flavor base (called

"concentrate"), a sweetener, and carbonated water. The production and distribution of CSDs involved four major participants: concentrate producers, bottlers, retail drannels, and suppliers.6 Concentrate Producers The concentrate producer blended raw material ingredients, packaged the mixfure

in

plastic

canisters, and shipped those containers to the bottler. To make concentrate for diet CSDs, concentrate makers often added artificial sweetener; with regular CSDs, bottlers added sugar or high-fructose corn syrup themselves. The concentrate manufacturing process involved little capital investment in machinery, overhead, or labor. A typical concentrate mariu{acturing plant cost about $25 million to $50 million to build, and one plant could serve the entire United States.T

A concentrate producer 's most significant costs were for advertising, Promotion, market research, and bottler support. Using innovative and sophisticated campaigns, they invested heavily in iheir trademarks over time. While concentrate producers implemented and financed marketing Programs jointly with bottlers, they usually took the lead in developing those programs, particularly when it came to product development, market research, and advertising. They also took charge of negotiating "customer development agreements" (CDAs) with nationwide retailers such as Wal-Mart. Under a CDA, Coke or Pepsi offered ftrnds for marketing and other pu{poses in exchange for shelf space. With smaller regional accounts, bottlers assumed a key role in developing such relationships, and paid an agreed-upon percentage*typically 50% or more-of promotional and advertising costs.

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