Cola Wars Continue: Coke and Pepsi in 2010

 

Cola Wars Continue: Coke and Pepsi in 2010

The article looks into the struggle for the world’s market for beverage between two multinational corporations, Coke and Pepsi, reported having lasted between 1975 and the mid-1990’s. It also shows how the competitive relationship between Coke and Pepsi deteriorated, characterized by declining Carbonated Soft Drink (CSD) consumption in the early 2000’s. The economics of the CSD industry in the US is addressed, looking at the factors that led to the successful growth of both companies since the 1970s. These factors included improved availability, the introduction of varieties and declining prices. These factors are said to have favored CSD sales compared to the alternatives such as beer, coffee, and milk. There were four significant players reported to have been part of the production and distribution of CSDs. These were Concentrate producers, bottlers, retailing channels, and finally the suppliers (Yoffie, 2011). The roles of each are demonstrated showing what factors gave each company an advantage. For instance, the efficient concentrate producer team is reported to have allowed Coke and Pepsi to own 72 % of the US CSD market share combined in 2009, rising above over a dozen other worthy competitors. The bottlers’ role included buying the concentrate, adding carbonated water and syrup as well as bottling.

 

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The article then shifts to the evolution of the US soft drink industry, demonstrating the history of Coca-Cola starting with its formation in 1886, its secret formula, and counterfeit versions. The history of Pepsi-Cola is also explained since its establishment in 1938. The case then describes how Pepsi gained on Coca-Cola through changes in management and vigorous campaigns making Pepsi bottlers larger by 1970. Both companies started to experiment with new flavors in 1960’s such as Fanta and sprite by coke, and mountain dew and Teem by Pepsi as the battle gained pace. The article highlights the competition marked with events such as the Pepsi challenge in 1974 in Dallas, Texas, changing the Coke formula in 1985, and the introduction of new CSD brands. The problems of Coke bottlers during the 1980s due to increased advertising costs are also addressed showing the struggle Coke underwent to prevent their total collapse. Despite the bottler challenges, sales volumes kept rising through the 1980s and early 90s. Health concerns brought up by the federal nutrition guidelines in 2005 showed CSDs sugars to cause diabetes. These concerns led to a massive drop in sales and were labeled as a risk factor to the Coke business. Marketing was increased for both Coke to deal with the drawback while Pepsi rebranded. Both companies also increased investments in non-CSDs such as bottled water. The decreased sales in the US would see both companies extend to overseas markets in Asia and Africa with various adjustments to tailor to local tastes since the early 2000s. This took the ‘wars’ to an international level. The article also highlights both of the companies’ move to bring the bottlers under direct control in 2009 wondering whether it is a significant shift in the cola wars or just another round of rivalry. The case has various exhibits showing statistics including the US beverage industry consumption between 1970 and 2009. The US Soft Drink market share by unit case volume between the same period, the financial data for Coca-Cola and Pepsi between 1975 and 2009 among several other exhibits are published in the case. (Yoffie, 2011).

 

References

Yoffie, D. B. (2011). Cola Wars Continue: Coke and Pepsi in 2010 (TN).

 

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