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Cola Wars Continue: Coke And Pepsi In 2010

5585 words - 23 pages

Table of Contents
1 Overview 2 General environmental analysis 3 Industry Analysis
3.1 Industry Structure - U.S. soft drink market share of concentrate producers - Suppliers within the carbonated soft drink industry 3.2 Market Structure - U.S. Liquid Consumption Trend (gallons/capita) - U.S. non-alcoholic refreshment beverage volume 2009 - U.S. soft drink market share – soft drink brands 3.3 Marketing Channels 3.4 Porter’s five forces 4 5 4

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 ...view middle of the document...

2 General environmental analysis (PPP 3)
Sociocultural trends: Starting in the late 1990s, the soft drink industry encountered new
challenges. A great number of consumers started to perceive high-fructose corn syrup as unnatural and unhealthy. As a result the U.S. share of carbonated soft drink consumption of the total beverage consumption fell down from 29% in 2000 to 25.2% in 2009. In 2010, 53% of Americans were concerned that the ingredient posed a health hazard. In addition to the health issues, environmentalists became more vocal in their criticism against the use of plastic bottles (PET).

Political/Legal trends – Tax policy changes: New federal nutrition guidelines, issued in
2005, identified CSDs as the largest source of obesity-causing sugars. As of April 2010, 29 states already taxed sodas and around 12 more states were considering the measure in order to reduce the consumption.

Global trends: As a result of U.S. CSD market saturation, Coke and Pepsi looked abroad for
new growths. Improved access to markets in Asia and Eastern Europe stimulate new demand.

3 Industry Analysis
3.1 Industry structure:
An industry consists of firms offering goods or services that are close substitutes to each other and the companies directly compete with each other. The industry structure refers to the number and size of firms within the industry. The level of competition rises with the number of companies. Because of the small number of firms –Coke, Pepsi and Dr. Pepper- which control a

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large share of 88%, the soft drink industry is a highly consolidated/concentrated (opposite is fragmented) industry.

U.S. soft drink market share of concentrate producers (PPP 4)
In 2009 the U.S. soft drink market is significantly dominated by Coca-Cola and Pepsi, which had a combined total market share of 72% and therefore there is the special case of a duopoly market structure. The two giants are followed by Dr. Pepper Snapple Group (16.4%) and Cott Corporation (4.9%). The Coca-Cola Company had a total market share of 41.9%, PepsiCo, Inc. had a total market share of 29.9%. Compared to 1970, Coke increased its market share by 7.2%, Pepsi gained even 10.1%. Nevertheless, both companies lost minimal market shares over the last years. The remaining 6.9% are shared by other companies.

Suppliers within the carbonated soft drink industry (PPP 5)
The production of CSDs involves three major participants: Concentrate producers They blend raw material ingredients, package the mixture in canisters and ship it to the bottler. Furthermore, they implement, finance and develop marketing programs jointly with bottlers and negotiate customer development agreements (CDAs) with retailers. They employ a large number of people who work with bottlers by supporting sales efforts, setting standards and suggesting operational improvements. Relatively little capital is needed for machinery, overhead and labor. Advertising, promotion, market research,...

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