CASE STUDY : COLA

WARS
GROUP-2
Abhinav Agarwal (18P002)
Ashish Priyadarshi (18P012)
Bhavika Khurana (18P015)
Nimisha Rustagi (18P032)
Prakhar Raghuvansh (18P035)
Suryansh Chandel (18P052)

Concentrate Producers
Addition of sweeteners
Bottlers
Packaging in plastic cans
Shipment of cans to bottlers
Less labour intensive
By 2004, shift from
fragmented market to few
but major producers
SUPPLY CHAIN
NETWORK
Purchasing of concentrate
Suppliers
Addition of carbonated
water and fructose syrup Provision of packaging and
sweeteners to bottlers
Provision of DSD delivery
Provision of coloring, flavors
Capital intensive market and acids to concentrate
producers
Coke and Pepsi negotiated
with the suppliers on behalf
of their bottling networks
RETAILERS
 Retail Market
• Annual CSD sales reached up to $12.4 bn in 2004
• Bottlers fought for shelf space % Distribution of Point of
Supermarkets • Placed coolers at checkout counters to drive impulse purchases
Sales

• Includes warehouse clubs and discount retailers like Walmart

• Private labeled CSD of retailers were cost inefficient 7.9
Mass • Branded CSDs like Coke and Pepsi were preferred
merchandiser
11.8
32.9

• Pepsi focused on retail outlets

• Coke dominated fountain sales 14.5
Preference of • Competition for national fountain accounts was intense
POS
23.4
• Pepsi acquired Pizza Hut, Taco Bell and KFC
• Coke had exclusive deals with burger King and McDonald’s Supermarkets
Fast-food • Coke snatched Subway account from Pepsi, while Pepsi grabbed Fountain Ouytlets
chains Quiznos from Coke
Vending Machines
Mass Merchandisers
Convenience stores
Other outlets
 TIMELINE OF COLA WARS
In 1938, Coke
filed In 1950, Coke’s Post 1950, growth in 1963, Pepsi
infringement share was 47% supermarkets launched ‘Pepsi
case against & Pepsi’s 10% of pushed Pepsi’s Generation’
Pepsi sales targeting youth
US CSD market

In 1974, Pepsi Pepsi launched

Both doubled In 1960, Coke
their advertising challenge was ‘Mountain dew’
launched ‘Fanta’
spending in launched, eroded and ‘Diet Pepsi’
and ‘Sprite’
1981-84 Coke’s market in 1964.

In 1986, CCE 1998 onwards,

In 1999, PBC, In 1997, Coke CEO
was formed, both struggled due
Pepsi’s bottler Robert Goizueta
consolidated to competition from
went public died
bottler for Coke
healthy beverages
 The Cola War opportunity
• From 1970-
Change in prefrences of beverages in
1998, the
the US
preferences of
consumers
shifted towards
182.5 182.5
artificial drinks
159.3
such as CSD
and away from
114.2
water based
drinks
68 • This shift
presented the
29.1 28.7
ultimate
12.4
water/other similar drinks Beer/coffee/csd/other total CSD as % of total opportunity for
consumption per gallon/capita 1970 2004 the cola war to
grow.
 Threat to Cola Giants
Timeline of growth of CSD (by volume) in the US
The net growth of CSD market
consumption till 1998 was very
high but the growth almost
stagnated post 1998 due to:
1998-2004 3.60%
o Saturation of the market
as per capita
consumption was
already very high,
limited scope for further
growth
1970-1998 220.00%
o Shift in preference of
consumers towards
healthier options
0% 50% 100% 150% 200% 250%
 Adapting to Challenges
• During 2000-04, the demand for the healthier drinks of the Cola giants
grew
• CSD drinks faced negative growth in their market share
• This shows that Cola giants did not allow brand to dilute when consumer
preferences shifted towards healthier options
% Change in annual share during 2000-04

Water Based
40
CSD
30

20

10

0
c p ) t
ke
i (P r C C P C is C
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C P P+ C P iC N G N N
ps pe ri t
e 7U ai
d m rq i d e
on de in
a
an
g r C d re
co pe ew rra Ba nk ra rA af rin se he
a
Pu
d ep sp m to pt as Sp
n p M Si
e Su ga
li de aq
u d ey w tle
-10 ai dr w d G ro es
nt Po l an a l Ar
ou Po st N
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C
-20
Pricing comparison of the cola giants
Profit comparison of Coca Cola, Pepsico and
their bottlers

• The pricing of both 25

companies were same

but profits of bottlers 20

differed
• Coca Cola was a more 15

profitable company
while its bottlers 10

specially CCE were

making less profits 5
• Pepsi bottlers were
making relatively higher 0
profits but due higher 1975 1980 1985 1990 1995 2000 2005

volume of Coca Cola -5

sales, this was not that
coca cola Profit CCE profit
visible pepsico profit PBG(pepsico Bottling)
RECOMMENDATIONS
 Recommendations continued…

• Existing US market is saturated now, both in terms of volume

and per capita consumption
• European market is growing stable but can stagnate if
consumer preference shifts similar to US follow
• Emerging markets like APAC, Africas, China should be
targeted as they currently have very low per capita
consumption, so there is scope of inducing demand
• Cola giants should concentrate on the low cost products like
the glass bottles and should invest more in different variety of
products
• Invest bottling and marketing in these regions
Thank You