COCA-COLA WARSSofia Kjellström

Lu Lei

Anna Mononen

Lukas Rose

Romain Aubert

CONCENTRATE PRODUCERS:

Rivalry: Intense

Entry Barriers: High

Suppliers’ power: Low

Threat of substitutes:

Low

Buyers’ power: Low

RIVALRY

Highly concentrated industry: DuopolisticCoke Pepsi Cadbury-

Schweppes

44% 31% 15%

Industry growth: Mature for CSD.

Similar products Low-fixed cost Capacity could be expanded easily

Fierce competition: products and company structure are really similar, the major difference comes from their marketing efforts.

THREATS OF SUBSTITUTE

For the concentrate producers, the threat is low because cost of switching are high for bottlers, but increasing due to changes in end-consumer taste.

Low

NEW ENTRANTS

Very high entrance costs to develop distribution and sign contractual agreements

unequal distribution channel access. Even for 3rd and 4th place of CSD, producers

are still very large companies. Brand equity is extremely high. Bottlers are really affiliated to one of two

giants. Current players have enormous financial

power. Barriers are high

SUPPLIERS’ POWER (ARTIFICIAL SWEETENERS, CARAMEL, CITRIC ACID, NATURAL FLAVORS. CAFFEINE...)

More suppliers than producers. Relatively undifferentiated supplies. Suppliers power is quite low.

POWER OF BUYERS: BOTTLERS

Territory exclusivity strengthens their position High market concentration Limited choice of concentrate producers Tight margins: volume requirement Majority of bottling business is owned by

Coca Cola and PepsiCo Low power

MARKET ATTRACTIVENESS: CONCENTRATE PRODUCERS

Gross profit 83% Concentrate price increase higher than inflation CSD consumption is stagnating

Increasing marketing costs CSD market size decreased from USD 10 billion

in 2005 to USD 9.4 billion in 2009*

Still very profitable but not attractive

*https://www.trefis.com/company?article=20065#

BOTTLERS

Rivalry: Weak

Entry Barriers: High

Suppliers’ power: High

Threat of substitutes:

Low

Buyers’ power: Low

BOTTLE PRODUCERS:

RIVALRY

Territorial exclusivity Market consolidation: CCE represents 70% of

Coke’s North America business, PBG represents 54% of PepsiCo’s North America bottling business

Weak rivalry

SUBSTITUTES Limitations on bottling due to product

characteristics Low

High consolidation High capacity requirement – low margin

products High fixed-cost vs. low marginal costs Low

NEW ENTRANTS

SUPPLIERS Raw materials are easily available Help for the packaging from concentrate

producers Suppliers have high bargaining power

BUYERS OF THE BOTTLERS(VENDING MACHINES, CONVENIENCE STORES, FOUNTAINS, GROCERY STORES)

Vending Machines, Fountains: high bargaining power – contractual transactions

Grocery stores: Also high because few buyers Buyers have high bargaining power

MARKET ATTRACTIVENESS: BOTTLERS

Gross profit 35% CSD market size Retail price increase lower than inflation Huge initial investment in production (up to

USD 75m) Complex and inflexible production Highly dependent on concentrate producers’

marketing efforts

Concentrate producers’ business is more attractive

CURRENT STATE OF THE INDUSTRY

Concentrate producers are buying their bottlers: - to be closer to the customers

- own the market- secure the supply chain in times of

financial crisis The carbonates market is the least growing

CURRENT STATE OF THE INDUSTRY

... declining but carbonated drinks still represent 40% of the soft drink market.

Big two coming under pressure....

TODAY’S CHALLENGE

Focus on value-added products: vitamin water, dairy segment, bottled water

Large investment in Asia. (Coke in China, and Pepsi in India)

New competitors need to be considered: Nestlé, Danone.

Q&A

SOURCES http://www.pr-inside.com/the-pepsi-bottling-group-inc-

pbg-r2347878.htm http://www.ajc.com/business/the-pepsi-challenge-for-

446766.html http://www.slideshare.net/xiaoyiliu/sse-cola-wars-

group5?src=related_normal&rel=2947405 http://www.slideshare.net/guest89fff/sse-cola-wars-

group8-presentation http://www.slideshare.net/akula77/sse-cola-wars-group3-

2-presentation http://www.slideshare.net/SSEGroup9/cola-wars-2946604 Euromonitor International :

Global Soft Drinks: Corporate Strategies – Diversification Drives Market Dynamics

Soft Drinks Global Trends and Opportunities