sse cola wars_group2b_2011
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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