Cola Wars: Coke and Pepsi in the 21st Century
COLA WARS : COKE AND PEPSI IN THE 21ST CENTURY”
INTRODUCTION
"Cola Wars Continue: Coke and Pepsi in the 21st Century” explains the economics of the soft drink industry and its relation with profits, taking into account all stages of the value chain of the soft drink industry. By focusing on the war between Coca-Cola and PepsiCo as market leaders in this industry – with a 90% market share in carbonated beverages – the study analyses the different stages of the value chain (concentrate producers, bottlers, retail channels, suppliers) and the impact of the modern times and globalisation on competition and interaction in the industry.
Throughout this analysis, I will assess how the strategic interaction between the two players allowed the creation of a “healthy" competition, where both companies need each other in order to remain competitive. Afterwards, I will go on to analyse the way that pricing and output decisions have affected the industry’s profits. Finally, I will discuss how Coca-Cola and PepsiCo could sustain their leadership in a market increasingly dominated by non-carbonated drinks.
WHY IS THE SOFT DRINK INDUSTRY SO PROFITABLE?
The soft drink industry refers to all drinks which do not contain alcohol. However, the original definition referred to carbonated and non-carbonated drinks made from concentrate. In this case discussion, I will take into consideration the US market, where the three major players – PepsiCo, Coca-Cola and Cadbury Schweppes – represent 90% of the market, with PepsiCo and Coca-Cola holding the largest share.
In the soft drink industry, the distribution and production value chain includes producers, bottlers, retail channels and suppliers. Therefore, we can assume that the producers of concentrate (CPs) and the bottlers are interdependent: without each other, the product could not be marketable. As well as this, the entry in the market would imply the development of both CPs and bottlers as much of their operations
INTRODUCTION
"Cola Wars Continue: Coke and Pepsi in the 21st Century” explains the economics of the soft drink industry and its relation with profits, taking into account all stages of the value chain of the soft drink industry. By focusing on the war between Coca-Cola and PepsiCo as market leaders in this industry – with a 90% market share in carbonated beverages – the study analyses the different stages of the value chain (concentrate producers, bottlers, retail channels, suppliers) and the impact of the modern times and globalisation on competition and interaction in the industry.
Throughout this analysis, I will assess how the strategic interaction between the two players allowed the creation of a “healthy" competition, where both companies need each other in order to remain competitive. Afterwards, I will go on to analyse the way that pricing and output decisions have affected the industry’s profits. Finally, I will discuss how Coca-Cola and PepsiCo could sustain their leadership in a market increasingly dominated by non-carbonated drinks.
WHY IS THE SOFT DRINK INDUSTRY SO PROFITABLE?
The soft drink industry refers to all drinks which do not contain alcohol. However, the original definition referred to carbonated and non-carbonated drinks made from concentrate. In this case discussion, I will take into consideration the US market, where the three major players – PepsiCo, Coca-Cola and Cadbury Schweppes – represent 90% of the market, with PepsiCo and Coca-Cola holding the largest share.
In the soft drink industry, the distribution and production value chain includes producers, bottlers, retail channels and suppliers. Therefore, we can assume that the producers of concentrate (CPs) and the bottlers are interdependent: without each other, the product could not be marketable. As well as this, the entry in the market would imply the development of both CPs and bottlers as much of their operations