Cola Wars

VSCola Wars Continue:Coke and Pepsi in 2010Marketing Strategy Jim ProstPamela Belluomini, Hristina Bencheva, Julia Kocs, Brianna Randall and Angela Teodoro

Situation Audit2

3Historical Timeline (Pre-Cola Wars)41886-18991900-19291930-19591960-19731886-John S. Pemberton develops original recipe1898-Caleb Brodham creates PepsiBig name endorsementsIconic contour bottleBottling plants in Europe and the PhilippinesRobert Woodruff named CEOFranchises in 24 statesFiles for bankruptcySecond bankruptcyAcquires sugar plantation in CubaRebounds by marketing product valueBecomes second in the cola marketBeat Coke campaignEmerges as cola market front-runnerC registered trademarkPrice raised from a nickel to a dimeDiversifies offerings (Sprite, Tab)Remains #1 in national cola salesDiversifies offerings (Mountain Dew)Merges with Frito-Lay (PepsiCo) & expands into the snack food business

Historical Timeline (Cola Wars and Beyond)5COLA War Years 1974-19992000-2010In response to federal nutrition guidelines and public concern with diet and obesity offers alternative low calorie beveragesWins Subway account, retains exclusive deals with Burger King and McDonaldsHolds big lead over Pepsi in cola marketIn response to federal nutrition guidelines and public concern with diet and obesity offers alternative low calorie beveragesSupplies all Taco Bell, KFCs and most Pizza HutsSnack food lines very profitable High-fructose corn syrup replaces sugarDiet Coke introduced, boosts profitsNew Coke fails, Coca Cola Classic returns Coca Cola Enterprises establishedMaintains lead in cola market shareThe Pepsi ChallengePepsi Lite (1 Calorie) introducedEnters fast-food businessOutpaces Coke in food store salesHigh-fructose corn syrup replaces sugarPepsi Bottling Company goes public

4Ps Analysis6

PRODUCTCarbonated soft drinksNon-carbonated soft drinks

PRICEPepsi value propositionCoke the premium brand PROMOTIONInvestment in TrademarksRetail Shelf SpaceAd CampaignsPLACERetail channels Fountain OutletsVending Machines Mass merchandise 6Problem Statement7Changes in U.S. consumer preferences lead to a decline in CSD sales and the emergence of non-CSDs. How should Coke and Pepsi respond to these changes in consumer preferences?In what ways can Coke and Pepsi boost CSD sales while competing in the growing non-CSD category, thereby ensuring sustainable growth and profitability?

Critical Issues8

U.S. Non-alcoholic beverage volume (%)9

Strategic Analysis - S.W.O.T

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strengthsopportunitiesweaknessthreatsS.W.O.T - StrengthsMost valuable brand for 13 yearsWorlds largest in beverages: 15bi dollar brandsDiversification: 500+ brands, 200 countriesExtensive global dist. networkLeader in fountain accountsForward integration: power of supplier and buyer (90%)Strong in emerging markets: China, Brazil, Eastern Europe22nd most valuable brand2nd largest F&B in the world, 22 bi dollar brandsDiversification: The power of oneExtensive global dist. networkLeader in non-CSD Forward integration: 80 % Successful marketing campaigns: celebrity endorsements

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S.W.O.T - WeaknessesDeclining market share since 2000Negative publicity CSD focus: only 32% non-CSD share

Price pressure from mass retailers (Wal-Mart) : 40% of U.S. packaged sales

Declining market share in bev.Negative publicity Overdependence on U.S. markets: 50% of total salesLow market share in fountain accounts: 20% vs. Cokes 69% Price pressure from mass retailers: 12% of revenue(Wal-Mart)

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S.W.O.T - OpportunitiesExpand non-CSD: juice, sport, energy, bottled water VitaminWater, Odwalla (Coke), Gatorade, Naked (Pepsi)Expand and modify CSD line: Stevia Sprite Green (Coke), Pepsi Next, Trop50 (Pepsi)Global expansion in emerging markets: India, China, Brazil (Coke) Russia (Pepsi)Innovative offerings tailored to local tastes Sprite Tea (Coke), herb drinks (Pepsi)Growing nutritious snacks product markets

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S.W.O.T - ThreatsChanging consumer tastes and preferencesCompetition with each otherThreat of substitutesPrice pressure from mass retailersPrice pressure from int'l bottlersGovernment restrictions in U.S. and abroad

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Identification of Alternatives 15

Investment StrategyAction1. Status QuoMaintain status Quo Milk CSD2. Market Development Focus abroadBottler control/ownershipStreamline Milk CSD3. Product Development Diversify linesModify CSD, re-positionDevelop complementsMilk CSD and discontinue dogs4. Market Penetration & Market Development & Product Development All of the above

15Analysis of Alternatives16

CriteriaWeight(1) Status Quo(2) Market Development(3)Product Development(4) Market Penetration + 2 + 3Profitability0.154434Sales and market share0.253545Customer needs0.252355Brand Image/Corporate Image0.202345Corporate Mission & Vision: 6Ps Performance with Purpose0.151245Total: 12.43.54.14.85

16Recommendations CSD Market17

Recommendations non-CSD Market18

Implementation19

CSD MarketNon-CSD MarketBudget20

$30mm$43mmWhere are they now?21

The Coca-Cola CompanyOverviewStill a beverage focused company: 70% of their revenue comes from CSD sale#57 in Fortune 500International market corresponds 59% net revenueReached 1.9 billion servings each dayPresent in +200 countries#3 best global brand - $79.2 billion value1.4%in sales growth

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The Coca-Cola Company23Portfolio+500 non-alcoholic beverage brandsAcquired Zico Pure Premium WaterLaunched Coca-Cola life in Argentina & Chile: 1st reduced-calorie cola sweetened w/ a blend of sugar and stevia

Pepsi CoOverviewIt is a diversified company: beverages, snacks and breakfast#43 in Fortune 50052% of their net revenue comes from foodUS is still responsible for 51% net revenue38% more revenue than Coca in 2011, but only 12bi came from Soda

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Pepsi CoPortfolioProduct mix: 63% food 37% beverage22 brands that generates 1bi in retail sales each

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In March 2011 Pepsi feel from the n.2 spotEver since, Coca-Cola has reigned supreme with Classic in the No.1 sales spot and Diet Coke as No.2.1.6 billion case927 million892 millionCan and ever be friends? 27

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29Thank you

Q&A

Media CreditsPepsi or Coke http://www.the-exponent.com/wp-content/uploads/2013/02/coke-or-pepsi.jpg Coke vs Pepsi http://createmeaning.com/wp-content/uploads/2011/02/Coke-vs-Pepsi5.jpgCoke Logo http://www.dafont.com/forum/attach/orig/3/6/36145.jpgPespsiCo Logo http://hdwallpapersrc.com/wp-content/uploads/2013/09/New-Pepsi-Logo.jpegStrength: http://workingwahm.com/wp-content/uploads/2011/11/iStock_000011272144XSmall.jpgWeakness: http://truecourseblog.files.wordpress.com/2012/08/istock_000011329650xsmall.jpgOpportunities: http://img104.job1001.com/upload/adminnew/2014-03-24/1395635680-HHEWT3O.JPGThreats; http://www.gfi.com/blog/wp-content/uploads/2009/06/bomb-300x206.png Coke logo w/ bottle: http://www.fishlakerelay.com/sponsors/coke-bottle-round/Pepsi & Coke bottle: http://blog.livedoor.jp/clock510/tag/%E7%93%B6?p=3Logo history: http://www.create.net/blog/76487-andys-design-tips-how-to-design-a-logo.htmlLogo history: http://www.core77.com/blog/object_culture/will_the_real_coca-cola_logo_story_please_stand_up_14264.aspPepsi cap:http://www.houzz.com/photos/5345407/Pepsi-Cola-Bottle-Cap-Metal-Sign---Tin-Signs---RetroPlanet-com---where are they now: http://nowiknow.com/soda-jerks/Pepsi & Coke friends: http://eyugho.deviantart.com/art/Coke-and-Pepsi-332534678Coke bottle cap: http://suncruiserdogsnmore.com/our-menu/Coke bottle cap and Pepsi bottle cap: http://money.cnn.com/gallery/news/companies/2013/03/21/greatest-business-rivalries.fortune/2.htmlPepsi obesity: http://calorielab.com/news/2009/02/18/americans-trans-fats-peanut-plant-closed-redesigned-pepsi-logo/Coke obesity: http://dalandofatblog.blogspot.com/2011/05/addictive-coke-addictive-diet-coke.htmlllustration: http://jamesdawsonmartin.com/blog/category/free-articles/

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