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Copy of Cola Wars: A Strategic Analysis

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by

Alyssia Sanchez Shaw

on 23 July 2014

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Transcript of Copy of Cola Wars: A Strategic Analysis

History
Strategies are always changing
Fighting Back
Industry Analysis
An analysis of the 5 Forces
Strengths & Weaknesses
Opportunities
THREATS
Recommendations
Marketing Strategy Recommendation
Don't listen to me!
Cola Wars Continue
1886
Coca-Cola was created
1899
Coke- 1 Franchise
Pepsi was founded
1893
1910
Pepsi- 270 franchises
Coke- 370 franchises
1919
Coke went public
1923 & 1932
Pepsi went bankrupt twice
Pepsi gained momentum during the Great Depression by decreasing their prices for double the amount
compared to what Coca-Cola was selling. $.05 for 12oz
23g/yr
46g/yr
1970
2010
Pepsi began targeting families by
targeting the fast growing grocery industry.
1975
1990
CSD's achieved average annual revenue growth of 10%
New flavors introduced
1982
Diet Coke
Healthy Mindset Era
Focus on international markets
-Long term contracts
-Consolidation of Bottling Franchises
-Expansion into non-CSD markets
-Focusing on Pepsi as who WE need to BEAT! (vice versa)
-Competing against one firm of relatively equal size
Pepsi
Coca-Cola
"Beat Coke"
"Pepsi Generation"
"Pepsi Challenge"
"America's Preferred Taste"
"No wonder Coke Refreshes Best"
- Pepsi challenge vs. Coca-Cola

-Renegotiation of franchise bottling contracts

-Switching to high fructose syrup (cheaper alternative)

-Diet alternative

-11 new flavors (Pepsi 13)

-Diversification into new non-CSDs

-Bottler Consolidation AGAIN!
Intensity of Rivalry
-Few competitors of equal size

-Degree of differentiation

-Fixed storage costs

-Established reputation

-Low exit barriers
Bargaining Power of Customers
Retail outlets have varying degrees of power
-Convenience stores

-Fast food chains

-Grocery Stores

-Vending Machines

Bargaining Power of Suppliers
Raw materials are basic commodities

Switching Costs

Importance of buyer industry to suppliers

Threat of Substitutes
Switching costs

Perceived price/value: LOW

Many alternatives in numerous categories

Threat of New Entrants
-Top competitors spend lots on advertising

-Customer and brand loyalty

-Retail distribution

-Fear of retaliation

-High costs for investing in bottling company

-High competition in shelf space
The Value Chain
Concentrate
Producers
Bottlers
Suppliers
Retail
Channels
- Blended ingredients

- Packaged mixture

- Delivered to bottler

- Purchased Concentrate

- added carbonated water and
high fructose corn syrup

- shipped to retail channels

- Concentrate ingredients

- Supermarkets (29.1%)
- Fountain Outlets (23.1%)
- Vending Machines (12.5%)
- Mass merchandisers (16.7%)
- Convenience & Gas Stations (10.8%)
- Other (7.8%)
Amazing marketing/advertising
Globalization of the Brand Name
- Brand Value $70,452 billion
according to Bloomberg
Relationships built into the value chain
Health concerns
Increase demand for healthy products
Diversification
Decreasing consumption
of CSDs
Market needs/wants are changing
Government limitations
Schools banning CSDs
International Growth
Marketing strategy must change
Diversification
Coca-Cola is the 'Healthy Choice'
Do not emphasize the cheat day...
But keep it as an option

Irrefutable truth is "the market is changing"
By not changing marketing strategy you risk losing
out on a market that is calling for something healthier.

We have to change with our end consumers

We need to show the customer that the company
is willing to grow along side of them, and not
push them towards unsatisfactory lifestyles.
Diversification is a means of leveraging the company in areas that we know are struggling with areas that we are certain are growing.

Diversification will decrease our risk when entering these new markets and changing our strategic approach!
In conclusion...
History
Five Forces
Value Chain
SWOT Analysis
Final Recommendations
Implications

1995
CSD consumption increased 3% annually
Agenda
-Brief History and Past Strategic Modifications
- Anthony Angelo
-Industry Analysis using the Five Forces Model
- John Price
-Company Value Chain & SWOT Analysis
- April Habeger
-Recommendations & Implications
- Alyssia Shaw
46g/yr
71%
Mkt Share
55%
Mkt Share
- Packaging and sweeteners
Largest CSD market share (34%)
Loyal Customers
Low in Diversification
Focus is on a declining CSD industry
Increase demand for bottled water
Coca- Cola
2008: 254,000
2009: 234,000
Pepsi

Advertising spending data
2008: 145,000
2009: 136,000

Decreasing CSD consumption calls for diversification into areas that we already know are growing
Gross Profit Margins for Selected Beverages
Ready to Drink Coffee
Ready to Drink Tea
Energy
Sports
Juice
Water
CSD

35%
35%
35%
35%
25%
35%
30%

60%
60%
70%
65%
35%
45%
70%

Retail's
Gross Margin

Brand's
Gross Margin
Full transcript