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Cola Wars Continue: Coke and Pepsi
Transcript of Cola Wars Continue: Coke and Pepsi
Why, historically, has the soft drink industry been so profitable?
Soft drinks industries have so profitable because of their market strategies, the cost of the their products/bottlers, and competition with one another.
Pepsi mentioned they would not have been as successful without Coca-Cola and Coca-Cola without Pepsi.
Coca-Cola, was very popular during World War II, offering soldier soft drinks at lower prices. Soft drinks industries constantly adapt to changes with bottling companies, competition and different cultures worldwide.
They also grew the company from primarily CSD to include non CSD, diet soda with less sugar options, and eventually to snack foods.
Feleshia M. West and Cameron S. Guidry
Compare the economics of the concentrate business to that of the bottling business. Why is the profitability so different?
According to 2009 comparative cost of a typical U.S. concentrate producer/bottler, concentrate producers have a net income of 32% while bottlers have a net income of only 8%. Cost of goods sold is $0.22 per case of concentrate and $2.67 per case of bottles.
Concentrate producers blend raw materials, ingredients, and packaging the mixture and ship it to the bottling company.
The most significant costs were advertising, promotions, record research and bottler support.
Bottlers purchase concentrate and add carbonated water and a sweetener, bottled/canned the result and deliver it to the stores.
How has the competition between Coke and Pepsi affected the industry's profit?
Coke and Pepsi are the two top competitors in the CSD industry.
Coke was formulated in 1886 while Pepsi started in 1893.
Since the beginning of the soft drink industry the battle has been between Coke and Pepsi.
The two companies were so big it was hard for other CSD companies to compete with them, much less do well.
In 1950, Coke's market share was 47% while Pepsi was 10%.
Hundreds of regional CSD companies made up the rest of the 43%.
Now, Coke makes up 41.9% and Pepsi makes up 29.9% followed by DPS at 16.4% and other is 11.8% of the market.
Can Coke and Pepsi sustain their profit in the wake of flattening demand and growing popularity of non-CSD?
Coke and Pepsi can sustain their profits by taking
advantage of the non-CSD market that has earnings of:
Water: 4.5 billion
Juice: 2.5 billion
Energy drinks: 218 million
Tea: 706 million
Sports drinks: 843 million
* Health complications
* High-fructose corn syrup
* Natural vs artificial sweeteners
Q: What is the next step for Coke and Pepsi's due to the decline in the U.S. CSD market?
A: To invest more money, to help build up their market presences in other countries.
Q: What other markets could Coke and Pepsi go into?
A: Alcoholic Refreshment Beverage Market
Q:How do at-home soda makers compare to the price of Coke/Pepsi?
A: It cost $.25 per can to make one can of soda versus an average of $1.00 to buy one can of Coke/Pepsi.
It would only cost $75 to make 300 cans of soda, compared to $270 to buy 300 cans of Coke/Pepsi product.