7/21/2019 Busmhr 4490 Pp

1/20

Cola Wars ContinueMichelle Anderson, Stacey Blunt, Jennifer Brandeberry

7/21/2019 Busmhr 4490 Pp

2/20

Manufacturing Process

Concentrate Producers

Blend raw materialingredients

Diet CSDs (carbonated soft

drinks), concentrate makersadd artificial sweeteners Package mixture into plastic

canisters Sip containers to bottlers

7/21/2019 Busmhr 4490 Pp

3/20

Bottlers Purcase concentrate !dd carbonated water and

ig"fructose corn s#rup Bottle or can product Deli$er to customer accounts

Manufacturing Process

7/21/2019 Busmhr 4490 Pp

4/20

Competiti$e %orces " ConcentratBusiness

Bargaining Power of

Suppliers

Concentrate re&uiredfew inputs

Threat of New

ntrants

Coke ' Pepsi claimed* of +S CSD sales

$olume in -

Threat of Su

.ealt"coconsum

Bargaining

Buye

Bottlers abargaining

!i"alry

A#ong

ConcentrateProducers

7/21/2019 Busmhr 4490 Pp

5/20

Competiti$e %orces " BottlingBusiness

!i"alry

A#ongBottlers

Bargaining Power ofSuppliers

Concentrate is te maincost component to bottling

process

Threat of New ntrants

Bottler refrancising in/-0s diminised treat of

new entrants

Bargaining

Buye

1etail sector callows comp

2almart to e

press

Threat of Sub

Bottlers frustgrowt of no

popular

7/21/2019 Busmhr 4490 Pp

6/20

Profitabilit#

Concentrate $ndustry

3ittle capital " large plants 4"/million

Most significant costs5ad$ertising, promotion, market

researc, bottling support Coke and Pepsi old * ofmarket

Brand recognition

Bottling $ndus

! lot of capital " plantundreds of millions

Main costs5 concentrs#rup

%rancise contracts5 business can decide bottlers can not carr#competing brands

7/21/2019 Busmhr 4490 Pp

7/20

Concentrate industry #ore profitable due to supplier power Cola wars weakened small, independent bottlers

6 More mone# spent on ad$ertising, product and packagingproliferation,and retail price discounting " iger capitalre&uirements and lower profit margins

7xibit 45

6 1etail price per case continuousl# decreasing8 /-005 9/:- per case8 -5 9:-0 per case

6 Concentrate price per case continuousl# increasing8 /-005 9:- per case8 -5 9/:;4 per case

Profitabilit# cont:::

7/21/2019 Busmhr 4490 Pp

8/20

Profitabilit# cont:::

Bottlers operating profits muc less compared to concentrate po 7xibit

7/21/2019 Busmhr 4490 Pp

9/20

Supplier Power @umber of suppliers5 few large concentrate producers

o Coke (>/:-* -), Pepsi (-:-* -), Dr Pepper Snap-), Ater (//:0* -)

Sie of supplierso Coke and Pepsi claimed * of +:S: CSD market " a$e o Pepsi5 ac&uisition of PB and Pepsi!mericas (0* operao Coke5 ac&uisition of CC7=s @ort !merican operations (-

operations) !bilit# to substitute

o @o oter compan#=s a$e same amount of market sare orecognition as Coke and Pepsi

Cost of cangingo

3ose a lot of market sareo Product uni&ueness

7/21/2019 Busmhr 4490 Pp

10/20

Competiti$e Spirit Ef te Coca"Cola Compan# didn=t exist, we=d pra# for someone to in$e

1oger 7nrico, %ormer C7A of Pepsi

7/21/2019 Busmhr 4490 Pp

11/20

Ge 2ar 2it @o Blood

Competitiono 2itout Pepsi, Coke would a$e a toug time being an orili$el# competitor and inno$ator

o Ge true winner of tis war is te consumer

Endustr# rowto

/- Consumption of CSDs 5 a$erage < gallonsH#earo !$erage consumption grew %& per yearfor te ne't threo Coincidence or B#product of te Cola 2arsI

7/21/2019 Busmhr 4490 Pp

12/20

Staggering %acts

Gimelineo Carefull# 2aged Competiti$e StruggleF

rowto !nnual 1e$enue rowt of around ()& per yearo

Constant +:S: and 2orldwide CSD consumption growt

7/21/2019 Busmhr 4490 Pp

13/20

7/21/2019 Busmhr 4490 Pp

14/20

1ipple 7ffects cont::: rowt of Coke and Pepsi put a s&ueee on smaller concentra

producerso Self space declined " small brands continuousl# canging

Bottler consolidation made smaller concentrate producers incredependent on te Pepsi and Coke bottling networkso

DPS in response formed its own bottler

.ealt concerns about te effects of CSD consumption

Smaller brands a$e slowl# been grabbing more market sareo 7xibit

7/21/2019 Busmhr 4490 Pp

15/20

7/21/2019 Busmhr 4490 Pp

16/20

7/21/2019 Busmhr 4490 Pp

17/20

More recentl#::: Pepsi=s stock up />* compared to ?ust * for Coke " w#I

o Pepsi owns te %rito"3a# snack business %ood business grew at a iger rate compared to be$

businesso Strong results from 3atin !merica and !siao Pepsi is ceaper

Grades at /-N /4 earnings forecast compared to C B+G Pepsi=s expecting earnings to grow * annuall# onl# expects to grow >:;* annuall# (according to ana

Best performing be$erage stock " Dr Pepper Snappleo Sares up nearl#

7/21/2019 Busmhr 4490 Pp

18/20

@ew Cola 2arsI Coca"Cola 3ife5

7/21/2019 Busmhr 4490 Pp

19/20

KuestionsI

7/21/2019 Busmhr 4490 Pp

20/20

2orks Cited ttp5HHmone#:cnn:comH/>H/HHnewsHcompaniesHcoke"pepsi

ttp5HHmone#:cnn:comH/>H/H-Hin$estingHpepsi"earnings"stoc

1otaermel, %rank G: Strategic Management: nd ed: @ew or.ill Erwin, /