Badea Anamaria, B4, Strategii concurentiale

Cola Wars Continue: Coke and Pepsi in 2006

For more than a century, Coca-Cola and Pepsi-Cola vied for
throat share of the worlds beverage market.
In this Cola wars were fought over $66 billion carbonated soft drink
(CSD) industry in the United States.
From 1975 to 1995, Coke and Pepsi achieved average annual
growth of around 10%. However, in the late 1990s, CSD consuption
dropped and worldwide shipments slowed for both Cola and Pepsi .
As the Cola wars continued into the 21st century, the cola giants
faced a large number of challenges like modifying their bottling, pricing
and brand strategies. Coke and Pepsi have benefited from average growth
of 3% since 1970 in the CSD market .
There are many substitutes to CSDs such as: milk, coffee, bottled
water, beer, juices, tea, wine, sports drinks, and tap water. Non-cola
CSDs included lemon, citrus, pepper-type, orange, root beer and other
flavours.
Within the CSD category, the cola segment mantained its
dominance, altough its market share dropped from 71% in 1990 to 60%
in 2004. CSDs consisted of a flavor base (called concentrate), a
sweetener and carbonated water. The production and distribution of
CSDs involved concentrate producers, bottlers, retail channels and
suppliers.
A concentrate manufacturing process involved little capital investment in:
machinery
overhead
labor
A typical concentrate manufacturing plant cost about $25 million
to $50 million to build (and one big plant could serve the entire US).
Coke and Pepsi bottlers offered direct store door (DSD) delivery.
An arrangement whereby route delivery salespeople managed the CSD
brand in stores by shelf space, stacking.
The supermarket channel - annual CSD sales reached $12.4 billion
in 2004.
Coke continued to dominate the channel, with a 68% share of
national pouring rights, against 22% for Pepsi and 10% for Cadbury
Schweppes.

Badea Anamaria, B4, Strategii concurentiale

Coke struggled more than Pepsi mostly because of its own internal
difficulties and execution failures between. While Coke struggled Pepsi
quitely flourished mostly because Pepsi saw the changing times as an
opportunity to build new brands and products.
Pepsi made joint ventures with South Beach Beverage Co.(SoBe)
and Quaker Oats.
From 1997 to 2004 Pepsi shareholders enjoyed a return of 46 %
while Coke shareholders suffered a return of 26 %.
Starting in the late 1990s the soft drink encountered new challenges
like:
- American CSD market was reaching maturity
- Change in consumer behaviour ;
- Achieving pricing power in the take-home or futureconsumption channels.
Signals that America CSD market was reaching maturity :
sales volume grew at a rate of 1 % or less in the years 1998 to
2004.
adjusting key startegic relationships ;
providing alternative beverages to increasingly healthconscious consumers
-cultivating international markets
Pepsi developed a portofolio of non-CSD products that outsold
Cokes rival product in each key category.
Achieving pricing power in the take-home or futureconsumption,channels:
- In 2001 Coke rolled out its Fridge Pack reconfiguration of the
standard 12 pack of cans that seemed to improve CSD sales.
- In 2004 the company introduced a 1.5 liter bottle in select
markets,aiming to replace the 2 liter version.
Result of this actions: brought clear benefits for CSD but increased
costs for bottlers, which had to produce and manage an overrising
number of stock-keeping units.