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Cola Wars

Cola Wars. Bus 497a Spring 2008 TEAM JUPITER. Background. Coke: First formulated in 1886 Pepsi: Invented in 1893 “Cola War” began when Alfred Steele (of Pepsi) became Coke CEO 1980’s Bottler Consolidation began. Key Terms. CSD – Carbonated Soft Drink CP – Concentrate Producers

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Cola Wars

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  1. Cola Wars Bus 497a Spring 2008 TEAM JUPITER

  2. Background • Coke: First formulated in 1886 • Pepsi: Invented in 1893 • “Cola War” began when Alfred Steele (of Pepsi) became Coke CEO • 1980’s Bottler Consolidation began

  3. Key Terms • CSD – Carbonated Soft Drink • CP – Concentrate Producers • Blended raw materials and shipped to Bottlers • Bottlers • Manufacturing of beverages • Distribution • Retail Channels • Supermarkets, Fountain Outlets, Vending Machines, Mass Merchandisers, CV, Gas Stations

  4. Industry Pipeline Formulation Houses Concentration Suppliers Bottlers Distributors End Consumer ****Vertical Integration****

  5. Corporate Level Strategies of the Past • Coke and Pepsi • Single Business • Economies of Scope • Market Power • Multipoint Competition • Vertical Integration • Profitability ****Expansion and Development****

  6. CL Strategies Con’t. • Deployment Strategy • Vertical Integration • Internationalization • Internal Growth

  7. Business Level Strategies • Differentiation, Initially (Uniqueness and Broad Target) • Cost Leadership, Later On (Cost and Broad Target)

  8. What are the key issues? • Decline in overall sales of cola industry • Emergence of New Age Beverages • Coke vs. Pepsi • Companies focused on rivalry rather than on the industry itself

  9. Industry Issues • Major bottlers have been consolidated which puts smaller bottlers at the mercy of Pepsi and Coca-Cola's distribution systems • Bottlers' profitability is in danger with slim margins and declining growth • CSDs made up a substantial share of US Liquid Consumption, but this doesn’t make them immune to risk (limited portfolio, non diversified) • International markets are an important source of revenue and improvements in world economies are forecasted • Growing health concerns for caffeine and sugar consumption threatens industry performance

  10. Decline In CSD Consumption • Consumption declines as consumers find healthier alternatives

  11. Continued Growth • Don’t be fooled; CSD industry continues to grow

  12. Recommended Strategies to Follow (Corporate) • Deployment Strategy • Acquisition of Smaller Beverage Companies • New Relations (contracts) w/ bottlers • Directional Strategy = DEVELOPMENT • Portfolio Strategy = DIVERSIFICATION • Diversification Marketing Product • Old Market, New Product

  13. Recommended Strategies Business Level • Integrated Cost Leadership Differentiation • New Unique Products • Marketed towards niche and board markets • Most cost efficient as possible

  14. Industry Recommendations • Industry should be proactive about growing health concerns in US Market • Companies need to refocus energies on advertising to rejuvenate industry and to fuel product demand both domestically and abroad • Cola industry leaders, Coca-Cola and Pepsi, should take steps to better understand their competitive market environment

  15. 2008 Update (Recent Strategic Movies) • Pepsi • Acquisition of Naked Juice • Acquisition of Fuze • Expansion of existing product lines • Coke • $4.1 Billion acquisition of Glacaeu (Vitamin Water) • Multiple New Age beverages ****PORTFOLIO DIVERSIFICATION****

  16. 2008 Update Con’t. Industry • Strong Performance of New Products

  17. 2008 Update Con’t.

  18. Thank You

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