Cola Wars

Made by-
Abhas Garg 14P001
Ashish Mahapatra 14P013
Juhi Sahai 14P022
Mrigank Gandhi 14P028
Rishabh Sood 14P039
Sunny Khanna 14P052

Production & Distribution process
Concentrate Producers:
Package the mixture in plastic containers
Blend raw materials (proprietary item)
Containers are shipped to bottler
Machinery, overhead and labour had little investment
Significant costs are incurred in the following - Advertising,
Promotion, MR, bottler support

Bottlers
Retail Channels


US Carbonated Soft Drink (CSD)
Industry
Consumption rose 3% per year in 3 decades
26 gallons per capita in 1970
52 gallons per capita in 2004
Coke and Pepsi achieved average annual revenue growth
of 10%
Late 1990s: per capita CSD consumption declined before
reaching stagnancy
Increasing availability of CSDs More alternatives




Why was the Soft Drink Industry doing
good?


Franchise bottling system
Early global expansion
Industry growth following the post war growth-esp Coke
Steady growth (3%) in consumption- till late 1990s
Competition between major players
Successful experimentation with varied flavors
Non-CSD products
Was non-CSD helpful?
Diversification into non-CSD products

o Diet Soda - Sales share increased from 24.6% (1997)
to 29.1% (2004)
o Growth in volume in 2004 for different categories of
products:
o In 2001, non-carbs and bottled water contributed
100% of Cokes volume growth and 75% of Pepsis
volume growth
50s - 90s : Wars begin
Pepsi upped the game with their Beat Coke motto.
o increased their bottlers.
o offered blind taste tests.
Pepsi emulated many of Cokes counter actions.
Coke focused on overseas markets.
Things began to heat up with increasing advertising
expenses.
Battle for shelf space became fierce.

1996-2004 : Cokes loss is Pepsis
gain
Coke faced a series of legal problems.
Coke had to deal with contamination scares.
Coke suffered from clumsy inactions of M&As.

Pepsi expanded its non CSD category, thus having a
more diversified portfolio.
PepsiCo saw a net income rise of 17.6% compared to
Cokes 4.6%
For the first time, Pepsi surpasses Cokes return on
invested capital.
Competition affecting industry
profitability
Bottlers affected
The Retail CSD price remained flat or decreased.
Due to inflation, concentration cost increased.

Heavy burden of debt on bottlers
Due to restructuring of bottling industry
Due to Low profit margin


Competition affecting industry
profitability
Net profit/Sales for Coca Cola Enterprise v/s Pepsi Bottling Group
1990 1995 2000 2001 2002 2003 2004
Coca Cola
Enterprises
2.40% 1.20% 1.60% -2% 2.90% 3.90% 3.30%
Pepsi Bottling
Group
2.90% 3.60% 4.60% 4.10% 4.20%
Pepsi vs Coca Cola
Pepsi Coca Cola
Pepsi performed better than Coke
in A
Struggling relations between
Coca Cola and bottlers
Operating profit increased by
25% in 2004
International beverage volume
increased by 12% in 2004
70% sales and 80% profits
already from international
markets
Diversification into food industry Broadening base of innovation
67% dependency on CSD
products
80% dependency on CSD
products
Conclusion
Brand wars will continue.

The focus may shift temporarily to non CSD products
while both brands are fighting out health concerns.

Aggressive marketing can position the brands such that
those concerns are erased.

Potential for growth in emerging markets.