1. Cola War Continues:
Coke and Pepsi in the Twenty first
Century
By Lisa, Jiantong, Johanna, Sofie, Xiaoyi

2. Scope
• Industry = Cola beverage
• Coke and Pepsi mainly
• Global market

3. Concentrate industry-
Threat of New Entry
• Moderate threat of new entry
• Low capital requirements after the initial investment in
production facilities make the barriers to entry low
• even lower for already established soft drinks producers
who are now not producing cola beverage
• high importance of the brand to consumers
• With the ability to find your own market niche entry is
possible.
Conclusion: As there are many, many competitors but no really
strong ones -> A threat of new entrants exists, although should
not be exaggerated

4. Concentrate Industry -
Bargaining power of buyers
Concentration of buyers (bottlers, end-consumers, retailers) relative to
sellers (concentrate producers) – Low, but increasing with concentration
(300 in 2000 and decreasing trend) (weak pwr)
• Industry dependence – yes, can bottle other things, but not
competitors' (weak supl. pwr)
• Differentiation of the purchased item – high between diff. concentrates
(weak pwr)
• Few switching costs – essentially no, but strong relationships? Coke wrote
unfair contracts (p. 3), but at the same time contributed with millions in
marketing and infrastructure support
• Big part of cost structure – yes 65% of profits
• Low profits/bad finances – low profits (9% of sales vs. 35 for concentrate
producers)
• Quality little affected by input product – very much affected
• Input product little effect on costs – very big effect on costs

5. Concentrate Industry -
Bargaining power of suppliers
• Concentration – Don't know, but guessing low (weak pwr)
• Industry dependence – no, can supply to other industries as well
(strong supl. Pwr)
• Switching costs – low (weak supl. Pwr)
• Differentiation – low, ingredients taste the same (weak pwr)
• Substitutability – high (weak pwr)
• Threat of forward integration - low, more likely that Coke/Pepsi
Conclusion: Bargaining power of suppliers is low to moderate, since on the one hand
differentiation between suppliers and the substitutability between them is high, combined with
the fact that Coke & Pepsi are important to their suppliers and the low concentration pf
suppliers make their bargaining power low. On the other hand, suppliers' industry dependence is
very low to moderate (low for coloring, moderate to high for caffeine?), giving suppliers some
bargaining leverage.

6. Concentrate Industry -
Threat of substitutes
• Large threat of substitutes (fanta, sprite, water, tea, lemonade
etc.). coke volume change +0.8, pepsi -0.6 -- dasani +117,
lipton +10 etc etc
• Trend towards increased (beverage) market share for
healthier options
• Although many consumers strongly favor Coke and are more
or less addicted

7. Concentrate Industry -
Rivalry among existing
• Intense rivalry
• equally balanced competitors,
• slow industry growth,
• high costs (marketing)
• low switching costs for the end consumer

8. Bottler Industry - Bargaining
Power of suppliers (low)
Bottlers require
1. packaging: cans, plastic bottles, glass bottles.
2. Sweeteness: High fructose corn syrup and sugar, artificial
sweeteners
reliable supply
faster delivery
lower price
3. there are many local concentrate producers in US, and the cost of
sales is 17%(compare to bottler , it is not high). Cola and pepsi-
cola, the soft drink unit of pepsico claimed a combined 76% of

9. Bottler Industry - Bargaining
power of buyer
• most mass merchandisers have private label CSDs.
• intense competition for shell space due to expanding array of
products and packaging options
• Intense competition for fountain accounts’
• power is currently moderate increasing in future
• Increasing brands of beverages
• In American market, there was chronic excess supply in the
industry,therefore to buyers they have more choice.

10. Bottler Industry - Threat of substitutes
• (a lot, numerous)
1. in 2000, proposition of CSD consumption continue to decline
slightly according to John,C, Maxwell, Beverage Digest FAct book
2001. (1998-30%->1999-29.4%->2000-29%)
2. Bottled water and non-carbonated drink popularity is rising
3. discount retailers, warehouse clubs had their own private label
CSD.
sum up: threat of substitutes is high, because although comsuption
habit is difficult to change at a moment and also the market share is
big, there is a potential threat of substitues to existed companies.

11. Bottler Industry - threat of new
entrants
• 1. High brand loyalty
Coke, pepsi, control 89.3% of Soft drink market
2. DSD system
Coke and pepsi had already have intimate relationship with the
retail channels.
3. Regulations.
The soft drink interbrand competition Act in 1980, make it
impossible for a new bottler to be established in any regions if there
is already a bottler running.
4. Capital intensive and involved specilized, high-speed lines are
barrier for new entrants.

12. Bottler Industry - valry in Ri
existing companies
• 1. Main players: Coke and Pepsi
compete in innovation and marketing.
duopoly competition (Fierce competition) - hamper the profitability
2. The number of US soft drink bottlers had fallen, from over 2,000
in 1970 to less than 300 in 2000.
mostly acquired by and sold to either Coke or Pepsi.
sum up: the rivalry is intense

13. • What challenges face these companies today?
• Changes in consumer behavior tastes and preferences
• A slow growth/ stagnation of growth/ in U.S. sales volume of CSDs
• Financial crisis (Coke and Pepsi bottlers over-invested and under utilized)
• A need for diversification and entry into new markets
• Industry growth rate in new markets bring challenges in terms of coping with:
◦ Cultural differences
◦ Government regulations
◦ High investments in winning grounds
◦ Need to adapt distribution channels to different markets
◦ Need to adapt business model to new markets
◦ Above mentioned points can however be seen both as threats and opportunities
• By changing the underlying structure of the industry, setting the rules of the game
• In beginning spurred business
• By previously going head-to-head in competition and at times, in some
distribution channels, competed with price (i.e. grocery stores) industry profits has
decreased.

15. Sum up
Threat of
New Entrants
Bargaining Rivalry Among Bargaining
Power of Existing Power of
Suppliers Competitors Buyer
Threat of
Substitute
Products or