Cola Wars Continue: Coke and Pepsi in 2006 AGEC 4433 Group 7 Spring 2011.
Cola Wars Continue: Coke and Pepsi in 2006
description
Transcript of Cola Wars Continue: Coke and Pepsi in 2006
![Page 1: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/1.jpg)
Cola Wars Continue: Coke and Pepsi in 2006
AGEC 4433Group 7
Spring 2011
![Page 2: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/2.jpg)
Background• John Pemberton creates Coca-Cola formula in
1886
• Imitation brands followed, along with the creation of Pepsi-Cola in 1893
• Increased consumption and concentration in the Carbonated Soft Drink (CSD) market.
![Page 3: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/3.jpg)
Company Goals
• Boost the domestic demand for CSD products
• Increase Coke’s market share of non- carbonated products in the U.S.
• Capture uncharted markets not catered to by CSD companies.
![Page 4: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/4.jpg)
Central Problem
• Flat growth in Coca-Cola’s market share
– Waning demand for CSDs in domestic market
– Coca-Cola is less competitive in non-carb market due to Pepsi’s successful pursuit of that market
![Page 5: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/5.jpg)
Constraints
• Increased health information concerning obesity deterring consumers
• Market for non-carbonated beverages is dominated by Pepsi
• Untapped market segments reluctant to associate with Coca-Cola
![Page 6: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/6.jpg)
Competitive Analysis
• Barriers to Entry Very High– Coke and Pepsi hold 75% of the market– Economies of Scale: Capital Intensive Industry– Limited bottling and distribution (all owned by
existing concentrate producers) • Rivalry High
– Pepsi and Coke in direct competition, push smaller competitors out
![Page 7: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/7.jpg)
Competitive Analysis• Threat of Substitutes Medium
– Consumers tend to buy on price without differentiation
– Coke and Pepsi market and price strategically to avoid that
• Power of Buyers– Consumers High; price increases lead to
reduced consumption – Bottlers Low; bottling contracts force them to
take higher prices
![Page 8: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/8.jpg)
Competitive Analysis
• Power of Suppliers High– Bottlers unable to negotiate, concentrate
produces get pricing power – Door-to-store format allows Coke to monitor
processes from beginning to end, gives little room for negotiation
![Page 9: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/9.jpg)
Alternatives
• Increase CSD demand – Alternative 1: Marketing Coca-Cola’s socially
conscious initiatives
– Alternative 2: Innovating carbonated products to fit in with health and wellness trends
– Alternative 3: Combined marketing and innovation approach
![Page 10: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/10.jpg)
Alternatives
• Compete more aggressively in non-carb market– Alternative 4: Reformulate and position PowerAde
to better compete with Pepsi’s Gatorade
– Alternative 5: Market PowerAde towards college and professional sports markets
– Alternative 6: New product development
![Page 11: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/11.jpg)
Solution
• Alternative 3: Combined Innovation and Marketing Approach in CSDs
– Develop “green” or natural formula for flagships (Coca-Cola and Diet Coke)
– Advertise with eco-drive marketing strategy
![Page 12: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/12.jpg)
Implementation
• Invest in reformulation for “green” CSD line– Replace high fructose corn syrup with real sugar,
aspartame with stevia (natural no-calorie sweetener)– Substitute artificial dyes, flavors
• New packaging– ‘Planbottle’ and biodegradable can – More visible recycling symbol
• Eco-friendly marketing strategy– Bottle deposit stations (get demographic data)– Product premier on Earth Day
![Page 13: Cola Wars Continue: Coke and Pepsi in 2006](https://reader036.fdocuments.net/reader036/viewer/2022062302/56816780550346895ddc89b2/html5/thumbnails/13.jpg)