VS

Cola Wars Continue:

Coke and Pepsi in 2010
Marketing Strategy Jim Prost
Pamela Belluomini, Hristina Bencheva, Julia Kocs, Brianna Randall and Angela Teodoro

Situation Audit
Between 1975 and the mid1990s the most intense battles
in the Coke and Pepsi COLA
WARS were fought over the
$74 billion carbonated soft
drink (CSD) industry

Coke and Pepsi claimed

72% of CSD market sales

The CSD industry achieved an

average annual growth of
approximately 10% in the U.S. and
was dominated by the cola segment

In the early 2000s the per

capita CSD consumption started
to decline from 53 gallons in
2000 (71% of market) to 46
gallons (55% of market) in 2009

The decline in CSD consumption

was mirrored by an increase in
consumer demand for non-CSD
beverages

U.S. Beverage Consumption

60

50

40

Coffee
Beer

Gallons/capita

30
CSD
Milk

20

Bottled Water
10

0
1970

1975

1981

1985

1990

1995

2000

2005

2007

2008

2009

Historical Timeline (Pre-Cola Wars)

1886-John S.
Pemberton
develops original
recipe
18861899
1898-Caleb
Brodham creates
Pepsi

Big name
endorsements
Iconic contour
bottle
Bottling plants in
Europe and the
Philippines
Robert Woodruff
named CEO
19001929
Franchises in 24
states
Files for
bankruptcy

Emerges as cola market

front-runner
C registered trademark
Price raised from a
nickel to a dime
19301959
Second bankruptcy
Acquires sugar
plantation in Cuba
Rebounds by
marketing product
value
Becomes second in
the cola market
Beat Coke
campaign

Diversifies offerings
(Sprite, Tab)
Remains #1 in national
cola sales
19601973
Diversifies offerings
(Mountain Dew)
Merges with Frito-Lay
(PepsiCo) & expands
into the snack food
business

Historical Timeline (Cola Wars and

Beyond)

High-fructose corn syrup replaces sugar

Diet Coke introduced, boosts profits
New Coke fails, Coca Cola Classic
returns
Coca Cola Enterprises established
Maintains lead in cola market share
COLA War Years 1974-1999

The Pepsi Challenge

Pepsi Lite (1 Calorie) introduced
Enters fast-food business
Outpaces Coke in food store sales
High-fructose corn syrup replaces
sugar
Pepsi Bottling Company goes public

In response to federal nutrition

guidelines and public concern with diet
and obesity offers alternative low calorie
beverages
Wins Subway account, retains exclusive
deals with Burger King and McDonalds
Holds big lead over Pepsi in cola market
20002010
In response to federal nutrition
guidelines and public concern with
diet and obesity offers alternative low
calorie beverages
Supplies all Taco Bell, KFCs and
most Pizza Huts
Snack food lines very profitable

4Ps Analysis

PRODUCT

PRICE

Carbonated
soft drinks
Noncarbonated
soft drinks

Pepsi value
proposition
Coke the
premium brand

PLACE

PROMOTION

Retail channels
Fountain
Outlets
Vending
Machines
Mass
merchandise

Investment in
Trademarks
Retail Shelf Space
Ad Campaigns

Problem Statement
Changes in U.S. consumer preferences lead to a decline in CSD
sales and the emergence of non-CSDs.
1. How should Coke and Pepsi respond to these changes in
consumer preferences?
2. In what ways can Coke and Pepsi boost CSD sales while
competing in the growing non-CSD category, thereby ensuring
sustainable growth and profitability?

Critical Issues
Sales

Declining CSD sales, including Cola in the US

Emerge of private labels
Health Issues

Profitability

Price pressure from the mass merchandises

More product variety = increase in distribution
and sales costs

Market
Growth

New products: cannibalism

Each local market is different

U.S. Non-alcoholic beverage volume (%)

120
100
80
Non-Carbs
Water
CSD

60
40
20
0

2000

2009

Strategic Analysis - S.W.O.T

strength
s
opportunities

10

weakness

threats

S.W.O.T - Strengths

Most valuable brand for 13 years

22nd most valuable brand

Worlds largest in beverages: 15bi

dollar brands

2nd largest F&B in the world, 22 bi

dollar brands

Diversification: 500+ brands, 200

countries

Diversification: The power of one

Extensive global dist. network

Extensive global dist. network

Leader in fountain accounts

Leader in non-CSD

Forward integration: power of

supplier and buyer (90%)

Forward integration: 80 %

Strong in emerging markets:

China, Brazil, Eastern Europe
11

Successful marketing campaigns:

celebrity endorsements

S.W.O.T - Weaknesses

Declining market share since 2000

Declining market share in bev.

Negative publicity

Negative publicity

CSD focus: only 32% non-CSD

share

Overdependence on U.S. markets:

50% of total sales

Price pressure from mass

retailers (Wal-Mart) : 40% of U.S.
packaged sales

12

Low market share in fountain

accounts: 20% vs. Cokes 69%
Price pressure from mass
retailers: 12% of revenue(WalMart)

S.W.O.T - Opportunities

Expand non-CSD: juice, sport, energy, bottled water

VitaminWater, Odwalla (Coke), Gatorade, Naked (Pepsi)
Expand and modify CSD line: Stevia
Sprite Green (Coke), Pepsi Next, Trop50 (Pepsi)
Global expansion in emerging markets: India, China, Brazil (Coke)
Russia (Pepsi)
Innovative offerings tailored to local tastes
Sprite Tea (Coke), herb drinks (Pepsi)
Growing nutritious snacks product markets
13

S.W.O.T - Threats

Changing consumer tastes and preferences

Competition with each other
Threat of substitutes
Price pressure from mass retailers
Price pressure from int'l bottlers
Government restrictions in U.S. and abroad

14

Identification of Alternatives
Investment Strategy

Action

1. Status Quo

Maintain status Quo

Milk CSD

2. Market Development

Focus abroad
Bottler control/ownership
Streamline
Milk CSD

3. Product Development

Diversify lines
Modify CSD, re-position
Develop complements
Milk CSD and discontinue dogs

4. Market Penetration &

Market Development &
Product Development

All of the above

15

Analysis of Alternatives
(2)

Weight

(1)
Status Quo

Market
Development

(3)
Product
Development

(4)
Market
Penetration
+2+3

Profitability

0.15

Sales and market share

0.25

Customer needs

0.25

Brand Image/
Corporate Image

0.20

Corporate Mission & Vision:

6Ps
Performance with Purpose

0.15

2.4

3.5

4.1

4.85

Criteria

Total:
16

Recommendations CSD Market

.

Company image+ healthy choices

Focus on core products:
US Market: Zero/Diet + Lite
Global market: leverage Classic brand
Access to distribution overseas

17

Recommendations non-CSD Market

.

18

Sports and energy drinks

Re-ignite/innovate bottled water
Engage the green consumer
Control of production and distribution
Healthy+ convenient choices for busy
lifestyles

Implementation

Cost control measures (plants, process management, consolidation)

AdsCSD
aimed at re-capturing gender/generational market share
Diet/Zero
and other lower-calorie CSD products in EU + Asia
Market
Remove questionable ingredients from products sold in the US
Pursue high visibility sponsorships

Non-CSD

19

Health education campaign on non-CSD products

Improve image + environmental-friendly packaging
NonCSR
reports and CSR transparency
Market
research: innovation + product development opportunities
CSD
Access to distribution

Market

Budget
Total Sales

Net profit/sales
25
20

Pepsi
Coca-Cola

Coca-Cola
Pepsi

15
10
5
0
2000

$30mm
2005

2007

2008

$43mm

2009

Non CSD shares

%
20

4
3
2
1
0

Non CSD
shares

Where are they now?

21

The Coca-Cola Company

Overview
Still a beverage focused company: 70% of their revenue comes
from CSD sale
#57 in Fortune 500
International market corresponds 59% net revenue
Reached 1.9 billion servings each day
Present in +200 countries
#3 best global brand - $79.2 billion value
1.4%in sales growth

22

The Coca-Cola Company

Portfolio
+500 non-alcoholic beverage brands
Acquired Zico Pure Premium Water
Launched Coca-Cola life in Argentina & Chile: 1st reducedcalorie cola sweetened w/ a blend of sugar and stevia

23

Pepsi Co
Overview
It is a diversified company: beverages, snacks and breakfast
#43 in Fortune 500
52% of their net revenue comes from food
US is still responsible for 51% net revenue
38% more revenue than Coca in 2011, but only 12bi came from Soda

24

Pepsi Co
Portfolio
Product mix: 63% food 37% beverage
22 brands that generates 1bi in retail sales each

25

In March 2011 Pepsi feel from the n.2 spot

Ever since, Coca-Cola has reigned supreme with Classic in the No.1
sales spot and Diet Coke as No.2.

1.6
billion
case

927
million

892
million

26

Can
friends?

27

and

ever be

28

Thank you
Q&A
29

Media Credits

30

Pepsi or Coke http://www.the-exponent.com/wp-content/uploads/2013/02/coke-or-pepsi.jpg

Coke vs Pepsi http://createmeaning.com/wp-content/uploads/2011/02/Coke-vs-Pepsi5.jpg
Coke Logo http://www.dafont.com/forum/attach/orig/3/6/36145.jpg
PespsiCo Logo http://hdwallpapersrc.com/wp-content/uploads/2013/09/New-Pepsi-Logo.jpeg
Strength: http://workingwahm.com/wp-content/uploads/2011/11/iStock_000011272144XSmall.jpg
Weakness: http://truecourseblog.files.wordpress.com/2012/08/istock_000011329650xsmall.jpg
Opportunities: http://img104.job1001.com/upload/adminnew/2014-03-24/1395635680-HHEWT3O.JPG
Threats; http://www.gfi.com/blog/wp-content/uploads/2009/06/bomb-300x206.png
Coke logo w/ bottle: http://www.fishlakerelay.com/sponsors/coke-bottle-round/
Pepsi & Coke bottle: http://blog.livedoor.jp/clock510/tag/%E7%93%B6?p=3
Logo history: http://www.create.net/blog/76487-andys-design-tips-how-to-design-a-logo.html
Logo history:
http://www.core77.com/blog/object_culture/will_the_real_coca-cola_logo_story_please_stand_up_14264.asp
Pepsi cap:
http://www.houzz.com/photos/5345407/Pepsi-Cola-Bottle-Cap-Metal-Sign---Tin-Signs---RetroPlanet-com--where are they now: http://nowiknow.com/soda-jerks/
Pepsi & Coke friends: http://eyugho.deviantart.com/art/Coke-and-Pepsi-332534678
Coke bottle cap: http://suncruiserdogsnmore.com/our-menu/
Coke bottle cap and Pepsi bottle cap:
http://money.cnn.com/gallery/news/companies/2013/03/21/greatest-business-rivalries.fortune/2.html
Pepsi obesity:
http://calorielab.com/news/2009/02/18/americans-trans-fats-peanut-plant-closed-redesigned-pepsi-logo/
Coke obesity: http://dalandofatblog.blogspot.com/2011/05/addictive-coke-addictive-diet-coke.html
llustration: http://jamesdawsonmartin.com/blog/category/free-articles/