Media Management 2304Group Assignment

Cola Wars – Case StudyGrop 1aEkaterina (40192@student.hhs.se), Niklas, Maria, Franziska

Concentrate Producer Industry

Is the concentrated industry profitable?

Buy power of Suppliers

Buy Power of Customers

Competitors

Threat of new entries

Threat of substitution

Concentrate Producers’

Five Forces

Raw Material Producer– Suppliers not too differentiated– Low to moderate cost of

switching suppliers (vs. Long-term commitment)

– Possible substitutes in the future (vs. original recipe)

Other suppliers (maintenance, factory equipment, …) standard business product

Buy power of Suppliers

LOW

Concentrate Producers’

Five Forces

Coke and Pepsi reduced the threat of substitutes by including them in their portfolio (tea, juice, water…)Threat that fountain-buyers take on substitutes is reduced by fixing long-term contracts

Threat of substitution

LOW

Concentrate Producers’

Five Forces

Fountain– Few big accounts with rather

high negotiation power– Smaller accounts with low

negotiation power

Bottlers– Tied closely to CP’s– Consolidation of Bottlers– Close contact to retailers is

their competitive advantage

Buy Power of Customers

LOW to MODERATE

CP’s Five Forces

Becoming a CP requires a rather low investment and establishing supplier relationships is possibleCompeting with the big player’s rather impossible High risk of retaliation

Threat of new entries

LOW

Is the concentrated industry profitable?

Buy power of suppliers

Buy Power of Customers

Strong rivalry among

competitors

Threat of new entrants

Threat of substitution

LOW

LOW

LOW

LOW to MODERATE

Attractiveness of CP‘s Industry

Size (of end market as products get pulled through the chain)

– US = mass market– Europe and Asia developed into strong markets

alike

Growth Potential– Consumption is more level in mature markets– Emerging markets options

Forces– Low threat of 5 forces

Bottling Industry

Bottlers’ Five Forces

Concentrate Producer– Duopoly– Long-Term binding contracts– 1/3 of Bottlers’ cost

Packaging Manufacturer– Excess supply– Consolidation of Bottlers– Long-Term commitments (Quality)– ½ of Bottlers’ Costs

Sweetener Producer– Undifferentiated product– 1/10 of Bottlers’ Cost

Buy power of Suppliers

LOW

MODERATE

HIGH

Bottlers’ Five Forces

Fountain sales do not influence Bottlers’ volumes directlyDirect concentrate delivery ( Soda Stream)Environmental Awareness of Consumers

Threat of substitution

MODERATE

Bottlers’ Five Forces

Supermarkets– Consolidation of retailers and

rise of power– Large % of store‘s business

Vending– Invented by CP‘s and owend

Convenience Stores– Consumer Choice– Some bargaining power of big

chains

Other Outlets

Buy Power of Customers

MODERATE to HIGH

Bottlers’ Five Forces

High investments neededDistribution Network is essentialOnly few independent Bottlers left

Threat of new entries

LOW

Bottlers‘ Five Forces

Buy power of suppliers

Buy Power of Customers

Moderate rivalry among

competitors

Threat of new

entries

Threat of substitution

LOW

MODERATE

MODERATE to HIGH

MODERATE to HIGH

Attractiveness of Bottling Industry

Size– Limited geographical area

Growth Potential– Industry Consolidation

Forces– Moderate to High threat of 5 forces

Concentrate vs Bottling Industry

More flexibility for CP‘s (diversified buyers)High dependency of bottlers on CP‘sHigher overall forces for Bottlers which shrinks the marginHigh margin for CP‘s as main player Strong brand image of CP‘s

BUT, attractivness of bottlers industry higher for new entrants as lower entry barriers

Current Challenges

Slower growth of consumption in mature marketsFinancial crisis throughout various marketsRise of other beveragesWin over emerging marketsRising power of retail conglomerates

Build Strategy to Challenges

References

Porter, ME, "What is Strategy"Porter, ME, “The Five Competitive Forces that Shape Competitive Strategy”David B. Yoffie, ”Cola Wars Continue: Cola and Pepsi in the Twenty-First Century”

Question & Answers