COLA WARS

CONTINUE:
COKE AND PEPSI
IN 2020
Submitted by:
Abhijit H
Apurva Yandra
Meghna Peethambaran
Selvin Chinnaiah
Shreya Birla
Vishnu M
 Introduction

The Coca-Cola Company is an Founded in 1892

American  multinational  beverage
corporation headquartered in Atlanta

The market share of PepsiCo in India is T. Krishnakumar is the President

49.9%. & CEO of Coca-Cola India
Introduction

Carbonated soft drink manufactured
by PepsiCo

Founded in 1893

Country of origin – United States

The market share of PepsiCo in India is

19.6%.

Ramon Laguarta is the chairman and chief

executive officer of PepsiCo
Introduction
Cola Wars were fought over $74 billion carbonated soft drinks industry in
the US

The competitive struggle lasted from 1945 through the mid 1990s

In the early 2000s, the CSD consumption declined.

Challenges:

○ Could they boost flagging domestic CSD sales?

○ How could they compete in growing non CSD category that

demanded different bottling, pricing and brand strategies?

○ What had to be done to ensure sustainable growth and

profitability?
Economics of the U.S. CSD Industry

The production and

The consumption of CSD
increased from 1970 to
2000s, grew by an
average of 3% per year.
Though there are many
distribution of CSDs
alternatives to CSD like
involved four major
beer, milk, coffee etc,
participants: Concentrate
Americans drank more
producers, Bottlers,
soda than any other
Retail channels and
beverage.
Suppliers.

This growth is fuelled

with the increasing The consumption of CSD
availability of CSD and started to declined from
introduction of diet and 2000s.
flavoured varieties.
Concentrate Producers

The concentrate producer Coke and Pepsi claimed

blended raw material 72% of the US CSD
ingredients, packaged the market’s sales volume in
mixture and shipped to 2009.
bottlers.

Took charge of negotiating

A concentrate producer’s most
They invested heavily in “customer development
significant costs were for
trademarks. agreements” (CDAs).
advertising, promotion, market
research and bottler support.
 Bottlers
 Bottlers were responsible for manufacturing and delivery of the final CSD products.
 US bottlers dropped from 2000 in 1970 to under 300 in 2009.
 Bottler business was capital intensive and large automated plants could cost in the hundreds of millions.
 Bottlers were not allowed to carry direct competitors.
 However, their main cost components were – Concentrate & Syrup.
 Fixed contracts were causing bitter legal disputes between the brands and bottlers
 Various legal revisions such as Cokes Master Bottler Contract, Pepsi’s Master Bottling Agreement and
Franchisee agreements helped ease tensions.
Retail Channels

Distribution channels:- Cost and Profitability

1.Supermarkets Varied Discount Retailers like
2.Fountain outlets 1.Delivery Method Bottlers bought for Walmart and Target sold
2.Drop Size shelf space and they Pepsi and Coke. They
3.Vending Machines relied on impulse could also have their
4. Mass Merchandisers 3.Frequency purchases. private label CSD’s like
5.Convenience Stores 4.Advertising President’s Choice.
and others 5.Marketing
Retail Channels
01
Pepsi focused on sales through
retail outlets while Coca Cola
commanded lead in the
fountain sales.
03
In 2004, Coke won Subway
away from Pepsi while Pepsi
grabbed Quiznos account from
Coke.
02
Pepsi acquired fast food restaurants like
Pizza Hut, Taco Bell and KFC.
Coca Cola acquired its competing chains
like Wendy's , Mc Donald’s and Burger
king
04
In 2009, DPS secured rights for US Mc
Donald's Restaurants. Coke and DPS had long
retained control of national fountain accounts
and negotiating pouring rights in the US.
Suppliers to Concentrate Producers and Bottlers

2%
Concentrate producers required few inputs like caramel coloring, phosphoric
or citric acid, natural flavors and caffeine.

42%
Bottlers purchased two major inputs: Packaging and sweeteners.
56%

Majority of U.S CDSs were packaged in metal cans, plastic bottles and glass
bottles

Coke and Pepsi wer the metal industry’s largest customers. In 1960s and Can Plastic
1970s, both companies took control of their own production. Glass
The Evolution of the U.S Soft Drink Industry
Early History
Coca-Cola was formulated in
1886 by John Pemberton, who
sold it as a potion for mental and
physical disorders.
Beginning of 1942, Coke won
The formula for Coca-Cola exemptions from wartime sugar rationing
syrup is known as for production of beverages that it sold to
“Merchandise 7X”. the military or to retailers that served
soldiers.

01 03 05

02 04

In 1891, Asa Candler During the 1920s and 1930s, Coke

acquired the formula, pioneered open top coolers for use
established a sales force in grocery stores and other
and began advertising of channels and also introduced
Coca-Cola. vending machines.
Early History

Pepsi-Cola was invented in 1893 in New Bern by pharmacist Caleb

01 Bradham. Pepsi adopted a franchise bottling system and by 1910 it
had built a network of 270 bottlers.

Pepsi faced bamkruptcy in 1923 and 1932. In 1938 , Coke filed suit
against Pepsi, claiming that the Pepsi-Cola was an infringement on the 02
Coca-Cola trademark

Pepsi surpassed Royal Crown and Dr.Pepper in the 1940s to become the
03 second largest selling CSD brand In 1950, Coke’s share of the U.S. market
was 46% and Pepsi’s was 10%.
The Pepsi Challenge

In 1974, Pepsi launched Coke was the dominant brand

the “Pepsi Challenge” in in the city and Pepsi was 3rd
Dallas, Texas behind Dr. Pepper

In 1979, Pepsi passed Coke

The Pepsi Challenge
in food store sales for the first
successfully eroded
time opening up a 1.4 share
Coke’s market share.
point lead.

During this period, Coke This arrangement brought

renegotiated its franchising Coke in line with Pepsi.
bottling contract and its bottlers Pepsi followed with a 15%
approved the new contract in increase of its own.
1978
Cold Wars Heat Up

 In 1980, Roberto Goizueta was named CEO of Coca-Cola , and

Don Keough became its president. Coke switched from using sugar
to high fructose corn syrup, a lower priced alternative.

 Diet Coke was introduced in 1982 and became within few years not
only the most popular diet soft drink in the U.S , but also the
nation’s 3rd largest selling CSD.

 In April 1985, Coke announced that it had changed the 99 year old
formula. 3 months later the company brought back the original
formula under the name Coca-Cola classic
Cold Wars Heat Up
 New CSD brands proliferated in the 1980s. Coke introduced 11 new products,
including Caffeine-Free Coke (1983) and Cherry Coke (1985). Pepsi introduced
13 products, including Lemon-Lime Slice (1984) and Caffeine free Pepsi-Cola
(1987)

 Philip Morris acquired Seven-Up in 1978 for a big premium, racked up huge
losses in the early 1980s and then left the CSD business in 1985.

 In the 1990s, Cadbury Schweppes emerged as the third largest concentrate

producer and the main competitor of the 2 CSD giants.

 It bought the Dr. Pepper/7UP companies in 1995, and continued to add such well
known brands as Orangina (2001) and Nantucket Nectars (2002).

 In 2008, Cadbury’s beverage business was spun off into an independent company,
Dr. Pepper Snapple Group
Bottler Consolidation and Spin Off

When two of the largest

On July 1980, Goizueta
bottling companies
announced a plan to
came up for sale in
refranchise bottling
1985, Coke bought
operation
them for $2.4billion

Coke began to replace

These acquisitions
its 1978 franchise
placeed one third of
agreement with what
Coke’s volume in
became the 1987
company owned
Master Bottler Contract
operations.
Bottler Consolidation and Spin Off

In April 1999, the

Coke’s bottler In late 1980s, Pepsi Pepsi Bottling Group
acquisitions had acquired MEI (PBG) went public, DPS in 1998 bought
increased its long term Bottling for $591 with Pepsi retaining & merged 2 large
debt to approx $1 million, Grand a 35% of equity U.S bottling
billion. In 1986, the Metropolitan’s stake in it. companies. In 2009,
company created an bottling operation By 2009, Coke produced 94%
independent bottling for $705 million and PBG produced 56% of domestic volume.
subsiiary , Coca-Cola General Cinema’s of PepsiCo’s total Pepsi and DPS
Enterprises (CCE) bottling operations volume produced 89% and
for $1.8billion 79% of domestic
volume resp.
Adapting to the Times

In 1990s variation in the consumption Schools banned soft drinks

pattern, relating to the growing linkage of and Governments imposed
CSD and Health issues taxes.

01 02 03 04

Federal nutrition guidelines Coke and Pepsi tackled this

identified soft drinks as obesity problem with marketing and
causing sugar innovation
 Quest for Altenatives
Both Coke and Pepsi started
Expanding the product mix showed growth
using alternative sweetners

Realizing the market potential

Pepsi replaced
of the non-carbs category

Pepsi developed portfolio of Coke expanded its non –carbs

non CSD products to rival with acquisitions
Coke

Price sensitive customer looked for Environmentalist criticized plastic bottles

cheaper alternatives
Evolving Structures and Strategies

Popularity of alternative beverages let to complication for CSD makers.

Need for change in processes of both concentrate and bottlers.

Bottlers not fully involved in the business and hence facing

trouble.

Coke’s incidence pricing, multi year agreements, 50-50

JVs to support the bottlers

To gain further control, Pepsi acquired two of the 
biggest bottlers, PBG and PepsiAmericas.
Internationalizing the Beverage
Wars

Coke and Pepsi Improved access to Coke flourished and also

looked abroad markets in Asia and relied upon international
for new growth. Eastern Europe markets far more than
stimulated new Pepsi.
demand.

Pepsi chose to focus Coke and Pepsi Overseas markets

on emerging markets aggressively pursued enabled Coke and
like Asia, Middle East non-carbs Pepsi to broaden
and Africa as their opportunities in scope of innovation.
chase strategy global markets. Ex: New product
generated relatively lines, packaging, etc.
less success.
 Learnings
Change in strategy with expansion into new market.

With the decline in consumption of CSD:

1) Pepsi and Coca Cola went into Global expansion
2) Positioning of pepsi as a snack and beverage company
3) Diversification of coca cola
4) Defensive strategy of pepsi5) Offensive stratgey of coke
Thank You