Coca Cola vs Pepsi Co

Industry Background
1886: John Pemberton 1893: Caleb Bradham
Production and Distribution
Concentrate
producer
Bottler Supplier
Retail
Channel
Concentrate
Producers
Customer
Development
Agreements
74.8 % - US CSD
Market in Sales
Coca Cola and
Pepsi
Supporting
Sales Efforts,
Setting
Standards and
Operational
Imrovements
Advertising,
Promotion,
Market
Research,
Bottler Support
Capital Intensive and High Speed
Production Line
Concentrate (45%) + Carbonated Water
+ Sweetener (5%) = Bottles / Cans (45%
+ Labor)
Direct Store Door Delivery
Profits > 40 % | Operating Margin 7 %
Coke 1
st
to build nationwide
franchised bottling network Master
Bottler Contract, 1987
Pepsi Master Bottling Agreement
Bottlers
Suppliers
Raw materials
Caramel coloring,
critic acid,
natural flavors,
caffeine
Packaging and
Sweeteners
Choose suppliers
based on needs
and costs

32.9 % - Supermarkets
23.4 % - Fountain Outlets
14.5 % - Vending Machines
11.8 % - Mass Merchandiser
(Wal-Mart)
7.9 % - Convenience Stores &
Gas Stations
Cash and Profitability : Delivery
Method, Frequency, Drop Size,
Advertising and Marketing
Pepsi Retail Outlets
Coke Fountain Sales
Coke 68 % (Control Retained)
Pepsi 22 % (Local Pepsi
Bottlers) - National Pouring
Rights
Vending Channel Bottlers
Buying, Installing, Servicing,
Negotiating Contracts
Retail
Channels
1950 1963 1965 1970 1978
Alfred Steeles
BEAT COKE
Pepsi Generation
2-to-1 margin
Concentrate Prizes
Equalize
PepsiCo
Teem (1960) , Mountain Dew (1964)
US Market Share - Doubled
1955 1960 1961 1963 1979
Minute Maid, Duncan Foods and Belmonte Springs Water
Americans
Preferred Taste
No Wonder Coke
Refreshes Best
Fanta
Sprite
Low Calorie
Cola Tab
Cold War
Pepsi Challenge, Taste
Pepsi wins Food
Store Sales
Concentrate
Contract
Cold War
1980 - Switch from Sugar to High Fructose Corn Syrup
1981 to 1984 - Marketing Effort Doubled
Sold off NON CSD Business such as Wine, Coffee, Tea
1982 Diet Coke Third Largest Selling CSD
1985 99 year old format changed
Coca Cola Classic and 11 new products

1981 to 1984 - Marketing Effort Doubled
1980s - 13 new products
10 Major Brands | 17 or more Container Types | Market Share
Struggle | Retail Price Discount
Coke Fizzles !!

Bottler consolidation made smaller concentrate producers increasingly dependent on the Pepsi
and Coke bottling networks for distribution of their products
Great reliance on traditional CSD Oriented model
Death of Cokes CEO, Robert Goizueta
Lost a high profile race-discrimination suit
Hit hard by currency crises in Asia and Russia
Contamination scare in Belgium and India
Laid off 7,000 employees from 2001-2004
Paid $ 21 million to Burger King for rigging a marketing test
Investigated by SEC for channel stuffing; eventually settled on the charges in Japan
Failed to execute many plans: JV with P&G, buyout of SoBe and Quaker Oats
Ended up letting Pepsi have a wider range of products
Bottler Consolidation : CCE Anchor Bottler
Annual Growth Annual Growth
Net Income 4.2 % Net Income 17.6 %


Shareholders Return Shareholders Return
-26 % 46 %
Fortune Reversal
too fattening
Coca Cola ZERO | Sierra Mist Free | Pepsi One | Diet
Coke with Splenda
47.3 %
27 %
Search for Sustainable Strategies
Relationships with the Bottlers
Resist control for power from Mass merchandisers
Low Volume-High Margin products VS High Margin-Low Volume products


International Wars

Coke dominated in Western Europe and Latin American countries
Pepsi was strong in the Middle East and Southeast Asia
International markets meant a significant lot to Coke, 80% profits (Pepsi-33%)
Enjoyed a world market share of 51.4%, Pepsi-21.8%, Schweppes-6%


Problems Faced

Antitrust regulation, Price controls, Advertising restrictions, Foreign exchange
controls, Lack of Infrastructure, Cultural differences, Local Competition