Premium Essay

Cola Wars: Coke and Pepsi in the 21st Century

In: Business and Management

Submitted By nadiamorais
Words 3841
Pages 16


"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.


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…...

Similar Documents

Premium Essay

Cola Wars

...Cola Wars Case Study DMBA 630 Marketing and Strategy Management in the Global Markeplace Introduction Carbonated Soft Drinks (CSD) have been around for over a century and now accounts for a $60 Billion market with the average American consuming about 53 gallons a year. Coca-Cola was invented in 1886 by John Pemberton as a “potion for mental and physical disorders.” Asa Candler acquired the formula and began marketing it as Coca-Cola. The first bottling franchise was accorded in 1899 for a sum of one dollar. Pepsi-Cola was invented in 1893 by Caleb Bradham a pharmacist from North Carolina. Pepsi also franchised its bottling operations. Pepsi struggled over the years going bankrupt twice within a decade, first in 1923 and again in 1931. Pepsi competed aggressively against coke offering almost twice the amount of Pepsi for the same price in the 1930s. Coca –Cola or Coke on the other hand was the market leader through the early 20th century with numerous imitators popping up trying to clone Coke. Coke fought back in the courts to aggressively deter imitators and counterfeiters. During the 1920s and 1930s, Coke was marketed to multiple market segments making it available to anyone desiring the brand. Eventually Coke sued Pepsi for trademark infringement in 1938 and lost. Pepsi gained market share and became a titan competitor in the market for CSDs beating out all other brands except Coke. Thus began the “Cola Wars” in 1950 with Pepsi’s aggressive “beat......

Words: 3445 - Pages: 14

Premium Essay

Cola Wars Continue: Coke and Pepsi in the Twenty-First Century

...4. ¿Pueden Coke y Pepsi mantener sus ganancias ante una demanda declinante y la creciente popularidad de bebidas no gaseosas?   Este problema lo obtuvieron ambas empresas desde el año de 1990 en el cual llevaban 2 años consecutivos donde el consumo anual por persona había disminuido, fue donde ambas empresas debieron de modificar su estrategia de comunicación en precio, embazado y la estrategia de la marca, así como también incluir en la marca productos de bebidas sin gas, tea, bebidas deportivas y agua embotellada. La estrategia que ellos han tomado en el negocio entero mejorando el proceso de entrega, de productos, de suministros para la producción, ha invertido en promoción y publicidad para impulsar las nuevas bebidas y las ya existentes. Desde el inicio de ambas compañías han luchado por la participación del mercado norteamericano y mundial introduciendo bebidas de sabores para seguir con la tendencia de crecimiento. Sin embargo ambas compañías no se dieron cuenta hasta después de hacer las investigaciones pertinentes que desde el año 1990 los consumidores empezaron a reflejar un cambio en el hábito de beber bebidas con gas y empezaron a tomar otro tipo de bebidas. Lo que paso con esto fue que el crecimiento fuera negativo o muy bajo sin embargo ambas marcas tiene una gran presencia en el mercado por lo cual la diversificación de productos según la tendencia del mercado. Si bien es cierto la competencia ahora es mayor sin embargo la estrategia de comunicación y de la...

Words: 297 - Pages: 2

Premium Essay

Cola Wars Continue: Coke and Pepsi in 2010

...The competition within the $74 billion carbonated soft drink (CSD) industry has been remarkable ever since Coca-Cola was formulated in 1886, and further intensified when Pepsi was introduced in 1893. Ever since then, the CSD industry has been dominated by these two companies, with Coke taking the lead in the early stage, followed by Pepsi doubled its market share between 1950 and 1970 by offering its concentrate at a lower price than its competitor. The CSD industry has been profitable historically due to numerous reasons. Firstly, in the world’s largest market for CSD products, consumption had been growing at a steady rate of 3% annually from 1970 to 2000 in the U.S., marking a high growth stage in the industry life cycle (Appendix B). This allowed both Coke and Pepsi (C&P) to achieve annual sales growth of around 10%, while competing head-to-head against each other and other smaller CSD producers. Competition between C&P reinforced their brand image, as the increase in marketing efforts could be transferred into profit and sales growth when the overall demand was increasing in a growing industry. However, the increasing industry volume was largely obtained by C&P, leaving other smaller firms vulnerable with stagnated growth opportunity. Secondly, according to Porter’s Five Forces analysis in Appendix A, high barrier for new entrants, low bargaining power of suppliers of both concentrate producers and bottlers, moderate buyer’s bargaining power and low degree of threats of......

Words: 1227 - Pages: 5

Premium Essay

Cola Wars Continue Coke and Pepsi in 2006

...were Coke and Pepsi. Historically, Coke and Pepsi were also major bottlers, but in the mid-to late 1990s, both had divested their bottling operations while maintaining significant equity ownership and indirect control of bottling networks. CPs invested heavily in advertising and marketing. One of the key issues for students to understand is why most of the profits in this industry are earned upstream in the concentrate business. The bottling business was much less profitable than concentrate, particularly in the mid- 1990s. Bottling profits improved somewhat in recent years, in part because the concentrate manufacturers could no longer squeeze the bottlers without disrupting their own distribution. Bottlers invested in bottling and caning lines, trucks, and warehouses and earned gross margins 40% and pretax profit of 9%. Coke and Pepsi bottlers delivered their products directly to the store which was part of their strategy for differentiation over private label. Private label offered warehouse-delivered product. Historically, bottling had been a very good business: Franchised bottling contracts were very generous to the bottler. Coke and Pepsi had given bottles franchises in perpetuity, allowed bottlers the final say on pricing and gave bottlers significant influence over whether to participate in local advertising campaigns promotions new packages and product introductions. In additions bottlers could carry allied brands as long as they did not compete with Coke or Pepsi......

Words: 2208 - Pages: 9

Premium Essay

History of Coke and Pepsi

...1. INTRODUCTION 1.1 Brief History History of Pepsi:- Pepsi was first introduced as "Brad's Drink" in New Bern, North Carolina, United States, in 1893 by Caleb Bradham, who made it at his drugstore where the drink was sold. It was later labeled Pepsi Cola, named after the digestive enzyme pepsin and kola nuts used in the recipe. Bradham sought to create a fountain drink that was delicious and would aid in digestion and boost energy. In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore to a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles, and sales increased to 19,848 gallons. In 1909, automobile race pioneer Barney Oldfield was the first celebrity to endorse Pepsi-Cola, describing it as "A bully drink...refreshing, invigorating, a fine bracer before a race." The advertising theme "Delicious and Healthful" was then used over the next two decades. In 1926, Pepsi received its first logo redesign since the original design of 1905. In 1929, the logo was changed again. In 1931, at the depth of the Great Depression, the Pepsi-Cola Company entered bankruptcy – in large part due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Megargel was unsuccessful, and soon Pepsi's assets were purchased by Charles Guth, the President of Loft Inc. Loft was a candy manufacturer with retail...

Words: 9255 - Pages: 38

Premium Essay

Cola Wars Continue: Coke and Pepsi in 2010

...3.4 Porter’s five forces 4 5 4 2 2 2 2 4 Competitive / corporate strategies of Coke and Pepsi 5 SWOT Analysis 6 Questions 6.1 How has the competition between Coke and Pepsi affected the industry’s profit? 6.2 If it has been such a profitable industry, why have so few firms successfully entered this business over the last century? What are the barriers? Why have Coke and been so successful in launching their products? 6.3 Why, historically, has the soft drink industry been so profitable? 6.4 Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different? 6.5 How can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-CSDs? 7 9 11 Exam Case Study Cola Wars Continue: Coke and Pepsi in 2010 1 Overview (Power Point Page (PPP) 2) For more than a century, Coke and Pepsi compete for market share within the world’s beverage market. The most intense battles were fought over the $74 billion carbonated soft drink (CSD) industry in the United States that lasted until the mid-1990s. Coke’s and Pepsi’s revenues grow annually, as the worldwide CSD consumption rose steadily by an average of 3% per year. In the early 2000s, however, domestic CSD consumption started to decline in consequence of the evolving linkage between CSDs and health issues such as obesity. Coke and Pepsi faced new challenges regarding the growth of non-CSD beverages accompanied by the......

Words: 5585 - Pages: 23

Premium Essay

Coke and Pepsi Wars

...Over the years Coke and Pepsi managed their rivalry in the carbonated soft drinks (CSD) industry by following some of the tactics identified below. Both companies came up on the market with the same product coca-cola, two different recipes. Coca-Cola was discovered in 1886 in Atlanta Georgia, by pharmacist John Pemberton, while Pepsi-Cola was formulated 7 years later, in New Bern, North Carolina, by pharmacist Caleb Bradham. Since then the two giants, Coke and Pepsi are on a continuous “battle without blood” over the $74 billion CDS industry in the United States. One of the first tactics identified is that Coke first introduced its product in grocery stores and other channels through open-top coolers. Also, they developed automatic fountain dispensers and introduced vending machines. Pepsi had a rough start, but they were willing to achieve. In this way after bankruptcies in 1923 and again in 1932, they came back and the business started to pick up. Their first move was to price their 12-oz container to a nickel, same as Coke would charge for a 6.5-oz. After that Pepsi started focusing more on take-home sales to target family consumption. With an aggressive marketing campaign, called “Pepsi Generation” Pepsi targeted the young and “young at heart. Not only that, but Pepsi put a special accent on quality by working to modernize their plants and the store delivery. In the 1960s, both Coke and Pepsi experimented with cola and non-cola flavors and new packaging options.......

Words: 282 - Pages: 2

Premium Essay

Coke vs Pepsi Analysis

...because of its tasty product, focuses on marketing and advertising to make a profit. Coke and Pepsi employed the following technique to make the soft drink industry profitable: marketing (Yoffie 21). Coke and Pepsi have dominated the market on soft drinks by offering a product that people enjoy, at a price that the average Joe can afford, and by utilizing marketing strategies and campaigns. Through effective leadership, an environment was created which enabled success and profitability as well as creative strategies and campaigns. Both Coke and Pepsi developed and deployed aggressive marketing campaigns which began generations ago by fighting trademark infringements and continued with cleaver and aggressive sales techniques. By branching into other flavors and types of drinks via mergers and acquisitions, both Coke and Pepsi generated additional revenue from more than just their core beverage. The fierce competition the two Cola Giants created, ensured profitability and world recognition of the American developed carbonated soda. 2. Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different? The concentrate business has been historically dominated by large magnates such as Coca-Cola and Pepsi. Data, from the case study, detailing the industry breakdown indicates that Coke held 51% of market share in 2003 while Pepsi and Cadbury Schweppes held 22% and 6% of international market shares for that......

Words: 1960 - Pages: 8

Premium Essay

Coke vs Pepsi 100 Year War

...Date: 01-28-2014 Subject: A Hundred-Year War: Coke vs. Pepsi, 1890s – 1990s Case Analysis The cola war between Coca-Cola and Pepsi-Cola is a ongoing battle over the $56 billion soft drink industry. Taking in consideration that the industry in the U.S. is a mature and saturated market, both companies are expanding their brands abroad looking for growth opportunities. As the war between the companies continues, they face several issues about their future in the U.S. and abroad. What strategies can the companies implement to continue their growth in the domestic market? How can the companies respond to the constant changes in the international market conditions? And would the changes in the soft drink industry landscape affect the companies’ profitability? How? Industries like soft drinks, electronics, and others are hypercompetitive, meaning that firms that are in these industries need a fundamental shift in the focus of their strategies to maintain themselves in the future. These firms need to develop temporary advantages to either react to a competitor or to create distance. The goal is to disrupt the status quo by moving to the next innovation quickly. In order for the companies to sustain growth domestically, they need to move on to the next innovation. As was reported in the case, aside from soft drinks, bottled water is the only segment that has shown constant increases in consumption every year since 1975. For the past 23 years, bottled water has......

Words: 633 - Pages: 3

Premium Essay

Case Analysis - Cola Wars Continue: Coke and Pepsi in 2010

...Case Analysis – Cola Wars Continue: Coke and Pepsi in 2010 Coke and Pepsi are two leading companies in the soft drink industry. They contend with each other during decades. The Cola Wars are a campaign of mutually-targeted television advertisements and marketing campaigns since the 1980s between soft drink manufacturers The Coca-Cola Company and PepsiCo. Historically, the soft drink industry has been so profitable. Porter’s Five- Forces Model of industry competition can define and analyze an industry in terms of five main factors. In this industry, competition is quite cruel between rivalries since Coca-Cola and Pepsi are already powerful leaders in the industry. It is basically a duopoly situation in soft drink field. The two companies share the whole market making them a huge profit even the industry itself is flattening. Due to the situation in the industry, there is not any barrier for entering but new company will be extremely risky to enter the market, since both Coca-Cola and Pepsi are mature companies with high reputation during decades. Unless the new enterprise is highly innovative and surely can do a better job than the two industry leaders. Therefore, threat of new entrants is expected to be very low. The threat of substitute products mainly comes from the promotion of a healthy diet, which makes juice, power drinks and other non-CSDs a better choice other than sodas with lots of sweetener and fat. This threat however, has been overcome by the introduction......

Words: 598 - Pages: 3

Premium Essay

Coca Cola Wars Continue: Coke and Pepsi 2010

...demand is a barrier that makes the risk of entry low. Coke and Pepsi have spent numerous amounts of money to gain the brand loyalty of their customers. Because brand loyalty is already established in the CSD industry, the risk of competitors entering is lowered. Due to brand loyalty, both Coke and Pepsi have a high demand for their products. Both companies are able to produce in mass quantities and lower the variable cost for each product. With the variable cost being lowered, they are able to lower their selling price. Another barrier that lowers the risk of entry is franchise agreements that Coke and Pepsi have made with their bottlers. The agreements state that the bottlers are prohibited from developing any new contracts with present or potential competitors. Rivalry among Established Companies The CSD industry is consolidated in regards to its competitive structure. The industry is made of a small amount of large companies meaning the competition in market share is high. Coke and Pepsi together make up 68% of the CSD industry. The rivalry among these two is extremely high. With both companies keeping prices around the same, switching among brands would not have an effect on customers causing the two companies to fight to maintain their market share. Also, with the amount invested in assets and high fixed cost, the exit barriers are high which tends to cause rivalry to be higher. Rivalry among Coke and Pepsi also grew as the industry entered a declining......

Words: 852 - Pages: 4

Premium Essay

Coke and Pepsi in the Twenty-First Century

...Running head: Cola Wars​1 Coke and Pepsi in the Twenty-First Century University of Redlands Deborah Bedgood-Ealy Professor Richard Doyle March 12, 2015 Coca-Cola and Pepsi function in the soft drink industry as dominating players and have remained market leaders for a long time. The key competencies of Coke and Pepsi range from the product, supply chain and distribution, marketing and customer loyalty. Each of them has developed operating procedure. The supply chain forms a major component or a competency that helps these companies form a competitive advantage for themselves (Wheelen & Hunger Page Ref: 332-335). Training of human resources also forms an important element as it helps strengthen the human resource. The main objectives of the training and the requirements are to be communicated to the employees along with details about when and where it has been organized. Several arrangements for the tainting session to be conducted, including the overhead projectors and stationary are to be arranged for in the office of Pepsi and Coke which leads to the strengthening of the human resources as an organizational resource (Page Ref: 246-247) The differences between resources important for competitive advantage and those that should be disinvested from industry/positioning perspective. The most important elements in this industry include the economics, market and competitive factors. The economic factors relate to the global economics......

Words: 2396 - Pages: 10

Premium Essay

Pgdm Mba Material Case Study- Cola Wars Continue Coke and Pepsi in the Twenty-First Century

...9/8/2015 PGDM/MBA Material: Case Study- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century Home Human Resource Marketing Information system management Images You are visitor # Case Study- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century 110,588 Search This Blog Translate Select Language  ▼ Category Assignment Business Communication Business Environment Business Law Case Study Compensation MAnagement E- Business Summary: "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  globalization  on competition and interaction in the industry. Analysis: It is quite clear that there was a “war" between Coca‐Cola and PepsiCo: not only have they been rivals for entrepreneurship For your Information Formates Human Resource Management Human Resource Mangement Human resource Planning Indian Labour Law Industrial Relation Information system Management International......

Words: 1069 - Pages: 5

Premium Essay

Pepsi Cola War

...Summary of Cola Wars Continue: Coke vs. Pepsi in the Twenty-First Century The Soft Drink industry has been assigned as the vehicle for tackling the topic of industry analysis and competitive dynamics. The case covers developments in the soft drink industry through 1993. It describes how the industry evolved into its current structure largely following Coca-Cola’s leadership. What is particularly interesting is determining why the major competitors in the industry have been able to earn above normal returns for close to 100 years, and why the industry is organized the way it is. The case allows us to analyze how the actions and reactions of competitors over time work to create their own industry structure. The case also allows us to examine how prior strategic commitments to particular strategies create competitive positions, which in turn constrain the future competitive moves of firms. Since competitive positioning determines a firm’s long-run performance, we need to thoroughly grasp the essentials of what makes some competitive positions and competitive strategies more viable, and others not, and why. Case Analysis of Cola Wars Continue: Coke vs. Pepsi in the Twenty-First Century 1. Why has the soft drink industry been so profitable? a. Since 1970 consumption grew by an average of 3% b. From 1975 to 1995 both Coke and Pepsi achieve average annual growth of around 10% c. American’s drank more soda than any other beverage d. Head-to-Head Competition between both......

Words: 1150 - Pages: 5

Premium Essay

Cola Wars Continue: Coke and Pepsi 20120

...Product and Brand Strategies Cola Wars Continue: Coke and Pepsi in 2010 1. Why, historically, has the soft drink industry been so profitable? Coca Cola was formulated in 1886 by a pharmacist in Atlanta who started to sell it in drug stores as a ‟portion for mental and physical disorders.“ Five years later the Asa Candler acquired the formula for Coca-Cola syrup which was a well-protected secret of the company. He also granted the first bottling franchise which grew qucikly. In the following years a lot of imitations were fight agressively by court for protecting their carbonated soft-drink (CSD) with its special flavour. Later on Coca Cola was advertised as a ‟lifestyle“ product and the international business began to develop. Pepsi was founded in 1893 and they also adopted a franchise bottling system which built up a big network very quickly. About 20 years later Pepsi went bankrupt and later on they declared bankrupcy the second time. However business went on and Pepsi built up a marketing strategy ‟Twice as much for a nickel, too.“ Pepsi step for step gained market shares and became the second behind Coca Cola. The competition in the soft drink industry began to grow. The soft drink industry consists of bottlers and suppliers. One fact which supports the profitability of the soft drink industry is that there are only two relevant players Coca Cola and Pepsi who have enough power for setting rules. The rivalry between both can be seen as a......

Words: 1704 - Pages: 7