Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Presented byTEAM 6
New Challenges
Cola wars continued into the 21st century with new challenges
Was their era of sustained growth and profitability coming to a close or was this slowdown just another blip in the course of the cola giants long and evitable history? Could they boost flagging domestic CSD sales? Would newly popular beverages provide them with new (and profitable) revenue streams?
Concentrate Producer
Blended raw material ingredients, packaged the mixture, shipped those container to the bottler. Key production investment areas - machinery, overhead and labor. A typical manufacturing plant cost - $25 million to $50 million CDAs with retailers like Wal-Mart
Concentrate Producer
Significant costs were for advertising, promotion, market research. Coca-Cola and PepsiCola claimed a combined 74.8% of the U.S. CSD market in sales volume in 2004
Bottlers
Purchased concentrate Added carbonated water and high-fructose corn syrup Bottled or canned the resulting CSD product Delivered it to customer account
Bottlers
Bottling process is capital intensive. Packaging accounted for 40% to 45% of sales, same for concentrate and sweeteners for 5% to 10%. Coke and Pepsi bottlers offered direct store door delivery. Cooperative merchandizing agreements is a key ingredient of soft drink sales.
Profitability
Concentrate producer earn more profit than bottler. Cost of sale is more in bottler.
Retail channel
In 2004, distribution of CSDs in U.S. was through: Super Markets (32.9%) Fountain outlets(23.4%) Vending Machines(14.5%) Mass Merchandisers(11.8%) Convenience Stores &Gas Stations(7.9%) Other outlets(9.5%)
Suppliers to Bottlers
Coke and Pepsi were among the Metal Can industrys largest customers. Major Can producersBall, Rexam, Crown Cork & Seal
EVOLUTION OF COKE
Formulated in 1886 by John Pemberton, a pharmacist in Atlanta, Georgia Sold it at a drug store soda fountains as a potion for mental and physical disorders In 1891, Asa Candler acquired the formula, established a sales force and began brand advertising The formula for Coca-Cola syrup known as Merchandise 7X remained a secret The rest is history
EVOLUTION OF PEPSI
Invented in 1893 in New Bern, North Carolina by pharmacist Caleb Bradham In 1910 built a network of 270 bottlers Declared bankruptcy in 1923 and 1932 Business began to grow during the Great Depression Pepsi lowered price of its 12 oz bottle to a Nickel the same price Coke charged for its 6.5-oz bottle
Fanta (1960)
Sprite (1961) Low calorie cola Tab (1963) NonNon-CSD (Purchased) Minute Maid (fruit juice) Duncan foods (coffee, tea,hot chocolate) Belmont Springs water
Leadership
2001: Steve Reinemund Grow the core add some more Launched new CSD products (Sierra Mist, Mountain Dew code red) Acquisition of Quaker Oats Net income raised by 17.6% per year ROI capital 29.3 (2003) from 9.5 (1996)
Product Launch
Teem (1960) Mountain Dew (1964) Diet Pepsi (1964) Lemon Lime Slice (1984) Caffeine free Pepsi Cola (1987) Sierra Mist (2000) Mountain Dew Code Red (2001) Pepsi One (2005) Diet Coke with Splenda (2005)
Fanta (1960) Sprite (1961) Low calorie cola Tab (1963) Diet Coke (1982) Caffeine free coke (1983) Coca-Cola Classic (1985) New Coke (1985) Cherry Coke (1985) Sierra Mist Free (2004) Coca-Cola Zero (2005)
Expansions
Acquired Pizza hut (1978),
Toco Bell (1986), KFC (1986) Merged with Frito Lay to form PepsiCo Pepsi purchased Quaker Oats (Gatorade) Exclusive deals with Burger king, McDonalds Purchased Minute Maid, Duncan Foods, Belmont Springs water Acquired Planet Java coffee drink brand Acquired - Mad River juices and tea
Marketing Campaigns
Pepsi generation Young at heart Pepsi challenge Smart Spot good for you Americans Preferred Taste No wonder Coke refreshes best
Challenges to Pepsi
Flat demand during 1998 to 2004. Contamination scare at India Obesity Issue Challenges of Internationalization
Challenges to Coca-Cola
Performance & execution: on providing alternative beverages on adjusting key strategic relationships, on cultivating international markets Currency crisis in Asia and Russia Recall in Belgium (public relations disaster) Series of legal problems
Venezuela crisis(1996)
Before After
Strengths
PepsiCo Brands Enjoy a High-Profile Global Presence Pepsi Owns the Worlds 2nd Best-Selling Soft Drinks Brand Constant Product Innovation Aggressive Marketing Strategies Using Famous Celebrities A Broad Portfolio of Products Coke Brands Enjoy a High-Profile Global Presence Four of the top five leading brands Broad-based bottling strategy 47% of global volume sales in carbonates
Weaknesses
Carbonates Market is in Decline Pepsi is Strongest in North America They Only Target Young People Carbonates Market is in Decline Over-complexity of relationship with bottlers in North America Execution ability
Opportunities
Increased Consumer Concerns with Regard to Drinking Water Growth in Healthier Beverages Growth in RTD Tea and Asian Beverages Growth in the Functional Drinks Industry Soft drinks volumes in the Asia-Pacific region forecast to increase by over 45% Brands like Minute Maid Light and Minute Maid Premium Heart Wise are positioned well with the Health-concerned market Use distribution strengths in Eastern Europe and Latin America
Threats
Obesity and Health Concerns Coca-Cola Increases Marketing and Innovation Spending to $400M Globally Relying on North America only is Bad Growing "healthconscience" society PepsiCos Gatorade, Tropicana and Aquafina are stronger brands Boycott in the Middle East Protest against Coke in India Negative publicity in WesternEurope
Key Issues
Who has been losing? Smaller Brands: Because-Entry Barrier, Duopoly Who has been wining the war? 1950: Coke have 47% and Pepsi have 10% 1970: Coke have 35% and Pepsi have 29% 1990: Coke have 41% and Pepsi have 32% 2000:Coke have 44%Pepsi have31.4% other beverage Cadbury Schweppes 14.7% 2006:Coke have 43.1% Pepsi have 31.7% Cadbury Schweppes 14.5%
Key questions
Could they boost flagging domestic CSD sales? Through Product innovation Aggressive marketing and promotion Packaging innovations Would newly popular beverages provide them with new (and profitable) revenue streams? Yes Non carb and Bottled water contribution to Total volume growth: Coke-100%, Pepsi-75 Contamination issue, Obesity issue Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-CSDs? Coke and Pepsi did not just inherit this business they created it. By diversification. Innovation : e.g diet coke
CURRENT UPDATES
PEPSI
CEO SHARE PRICE NET OPERATING REVENUES (2008) (millions of $) UPDATES
INDRA K.NOOYI
$43,251
$31,944
Thank you
Presented By, Shivappa Ganesh Santanu Vijay Savla Mahaveer