Coca Cola Pepsi Cola

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Coca Cola Pepsi Cola SWOT

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Coca Cola & Pepsi Cola Submission Date:14/04/2009

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CONTENTS

1. 2. 3. 4.

Executive Summary .4 Aims and Objectives 4 Methodology .4 History of Coca Cola and Pepsi Cola .5 4.1.Coca Cola International 5 4.1.1.History: 5 4.2.Pepsi International 5 4.2.1.History .5

5. 6. 7. 8. 9. 10. 11.

Target Market .6 Major Segments ..6 Factors Effecting Sales ...6 Per Capital Income .6 Competitors 7 Weather 7 Major Customers Need ......7 11.1.Major Competitors .7 11.2.Threats From Competitors 8

12. 13 14. 15. 16. 17.

Expanding Target Market .8 Consumer Has Got Choice .8 Attractive Brand Name ..8 Brand Differentiation .8 Coca Colas Brand .8 Pepsis Brand9 -2-

18.

SWOT Analysis9 18.1.Strength.9 18.2.Weakness9 18.3.Opportunity..9 18.4.Threat ..9 18.1.1.Brand Equity.9 18.1.2.Wide World Market.10 18.1.3.Brand Attachment 10 18.1.4.Competitive Advantage....10 18.2.1.Strong Competition ..10 18.2.2.Alternative .10 18.3.1.Introduce New Brands ..10 18.3.2.Segment ..11 18.5.Problems & Solution.11

19. Macro Environment of Coke and Pepsi..12 19.1.Demographic Forces.12 19.2.Economical Forces....13 19.3.Natural Forces..........................................................................................................13

19.4.Technology Forces...................................................................................................13 19.5.Political and Legal....................................................................................................13 19.6.Cultural Forces.........................................................................................................1320 Recommendations.14 21 22 References.15 Bibliography.17 -3-

1.Executive Summary Prior versions of the case have been used to teach various subjects, including industry analysis, competitive dynamics, and vertical integration. While this case tries to incorporate some of the essential elements about the history of competitive dynamics and the historical patterns of vertical integration the primary teaching purpose of this case is to discuss the economics of the U.S. soft drink industry. Concentrate producers (CPs) sold syrup and concentrate to franchised of company owned bottlers, and made gross margins of 83% and a pretax profit margin of 30%. The best-know CPs were Coke and Pepsi. Historically, Coke and Pepsi were also major bottlers, but in the mid-to late 1990s, both had divested their bottling operations while maintaining significant equity ownership and indirect control of bottling networks. CPs invested heavily in advertising and marketing. One of the key issues for students to understand is why most of the profits in this industry are earned upstream in the concentrate business. The bottling business was much less profitable than concentrate, particularly in the mid1990s. Bottling profits improved somewhat in recent years, in part because the concentrate manufacturers could no longer squeeze the bottlers without disrupting their own distribution. Bottlers invested in bottling and caning lines, trucks, and warehouses and earned gross margins 40% and pretax profit of 9%. Coke and Pepsi bottlers delivered their products directly to the store which was part of their strategy for differentiation over private label. Private label offered warehousedelivered product. Historically, bottling had been a very good business: Franchised bottling contracts were very generous to the bottler. Coke and Pepsi had given bottles franchises in perpetuity, allowed bottlers the final say on pricing and gave bottlers significant influence over whether to participate in local advertising campaigns promotions new packages and product introductions. In additions bottlers could carry allied brands as long as they did not compete with Coke or Pepsi brand. 2. Aims and Objectives The target of this research is to identify and discuss the two global companies, Coca Cola and Pepsi Cola, which succeed to be the most known soft drinks companies in the world. 3. Methodology In this research, lots of methods were used to find out information about , Coca Cola and Pepsi Cola and general soft drinks industry situation. British Library, London School of Economys Library and school library were visited and collected data. In addition, Financial Times and The Times Newspapers were searched worldwide by online. -4-

4. History of Coca Cola and Pepsi Cola 4.1.Coca Cola International 4.1.1.History: Type of the company: Public Website: http://www.cocacola.com Employees: 71000 (2006) The Coca-Cola Company traces its beginning to 1886, when an Atlanta pharmacist, Dr. John Pemberton, began to produce Coca-Cola syrup for sale in fountain drinks. However the bottling business began in 1899 when two Chattanooga businessmen, Benjamin F. Thomas and Joseph B. Whitehead, secured the exclusive rights to bottle and sell Coca-Cola for most of the United States from The Coca-Cola Company. (LONNIE, 2003) The Coca-Cola bottling system continued to operate as independent, local businesses until the early 1980s when bottling franchises began to consolidate. In 1986, The Coca-Cola Company merged some of its company-owned operations with two large ownership groups that were for sale, the John T. Lupton franchises and BCI Holding Corporation's bottling holdings, to form Coca-Cola Enterprises Inc. The Company offered its stock to the public on November 21, 1986, at a splitadjusted price of $5.50 a share. On an annual basis, total unit case sales were 880,000 in 1986. (LONNIE, 2003) In December 1991, a merger between Coca-Cola Enterprises and the Johnston Coca-Cola Bottling Group, Inc. (Johnston) created a larger, stronger Company, again helping accelerate bottler consolidation. As part of the merger, the senior management team of Johnston assumed responsibility for managing the Company, and began a dramatic, successful restructuring in 1992.Unit case sales had climbed to 1.4 billion, and total revenues were $5 billion.(LONNIE, 2003) 4.2.Pepsi International 4.2.1.History Type of the company: Public Website: http://www.pepsi.com Employees: 143,000 (2002) Caleb Bradham knew that to keep people returning to his pharmacy, he would have to turn it into a gathering place. Like many pharmacists at the turn of the century, he had a soda fountain in his -5-

drugstore, where he served his customers refreshing drinks that he created himself. His most popular creation was a unique mixture of carbonated water, kola nuts, vanilla and rare oils, named Brads Drink by his customers. Caleb decided to rename it Pepsi-Cola, and advertised his new soft drink to enthusiastic customers. Sales of Pepsi-Cola started to grow, convincing him to form a company and market the new beverage. In 1902, he launched the Pepsi-Cola Company in the back room of his pharmacy, and applied to the U.S. Patent Office for a trademark. An official patent was awarded on June 16, 1903. At first, he mixed the syrup himself and sold it exclusively through soda fountains. But soon Caleb recognized that a greater opportunity existedto bottle Pepsi-Cola so that people everywhere could enjoy it. (Harvey, 1980)

5.Target Market Cokes commercials basically based on young generations, So, the young generation is the target market of Coke because they want to represent Coke with the youth and energy but they also consider about the old people they take then as a co-target market. (RONALD,1998) 6.Major Segments Major segments are basically those people who take this drink daily and those areas where the demands is higher then the other areas. There are so many people who take this drink daily and those people who take weekly and those who take less often are always there as well. So, their basic segments are those people who take this drink regularly. (RONALD,1998) 7.Factors Effecting Sales There are so many factors, which affects the sale of coke. Here we are discussing three major factors which effects coke. Per capita income Competitors Weather 8.Per Capita Income First we will discuss about Per capita income. This is major factor that affects the sale of this soft drink. Because which every passing year budgets are becoming very strict and tight in order to purchase things. So the disposable incomes of the people are coming down. They spend -6-

heavily on rents, utilities, and education and basic necessities and after that when they get extra money they think about this soft drink .So the decreasing per capita income effects badly in selling and production of this soft drink. 9.Competitors Cokes major competitor is PEPSI and there is no hesitation to say this because every one knows that and all the other cold drinks and water, coffee, tea are the competitors.(WARREN, 2001) 10.Weather Weather is the third major factor in effecting the Cokes selling. This is underdeveloped market so the cokes consumption in summers is 60% and in winters is 40%.(WARREN, 2001) 11.Major Customers Need First of all the majority dont care that what they are going to have. In other words, they dont care before drinking that whether it is Pepsi or coke. They dont actually differentiate between these two brands in order to their tastes. Consumers basically drink what they get. They believe on WHAT COLD THEY SOLD Consumers availability in brands is basically works like: Push availability Pull consumers demand. For this reason Coca-Cola have provided their coolers and freezers in the market. They have maximum number of coolers and freezers in the market. They provide this infrastructure free of cost just to provide child coke to their customer, which they want to be purchase. Their salesman and mechanics regularly visit all the shops where coke has its infrastructure to check that either it is in proper condition or not, if not then they immediately change or repair it. 11.1.Major Competitors Consumers firstly decide that they are going to have a