Cola Wars Continue: Coke and Pepsi in 2006 Poter’s 5 Forces Model 1. Suppliers Power: How easy it is for suppliers to drive up prices? Bottlers (Direct Store Doors) & Concentrate Producers (Soda Fountains) -Coke & Pepsi each required closer to 100 plants to provide enough capacity to US. -Franchise agreements with both Coke and Pepsi allowed bottlers to handle the non-cola brands of other concentrate producers. -Bottlers could not carry directly competing brands. -the concentrate producers’ strategy toward can manufactures was typical of their suppliers relationships. metal cans were essentially a commodity, and often two or three can manufacturers competed for a single contract Coke and Cadbury Schweppes had long retained control of national fountain accounts, negotiating pouring-rights contrasts that in some cases (as restaurants chains) covered the entire United States or even the world. Local bottlers or the franchisors’ fountain divisions serviced these accounts. In such cases bottlers received a fee for delivering syrup and maintaining machines. ) CSDs products prices since 1978 are regulated by the 2. Industry Rivalry: What is the number and capability of your competitors?
Pepsi vs Coke Coca- Cola was formulated in 1886 at Atlanta, Georgia. Syrup known as Merchandise 7X. Future of the drink rested with soda fountains. Products: Coke, Diet Coke, Sprite, Fanta, Minute Maid, and others. Total 11. Pepsi-Cola was invented in 1893 in New Bern, North Carolina. Products: Pepsi, Mountain Dew, Diet Pepsi, Pizza Hut, KFC, Frito-Lay. Total 13. And by late 1990s Cadbury Scheweppes had emerged as the clear third-largest player in the US soft drink industry. Both companies try to be better than the other one. So if one of them does something the other one do the same.
Mostly Coke is the first to make the movement. Coca-cola & Pepsi-Cola claimed a combined 74. 8% if the US CSD market in sales volume in 2004. 3 Threat of entry (Potential Entrants)= How easy is it for the new competitors to enter the market? The CSD market is at the 1st place on US society. The cola segment maintained its dominance. The two companies had their good days and bad days and both have dominance in the market. Meanwhile Cadbury Schweppes stay behind them but with a reasonable power against them. Since the Great Depression these two(Coke & Pepsi) had almost the same price per product.
In 2004, Coke had the most consolidated system, with its top bottlers producing 94. 7% of domestic volume. Pepsi’s and Cadbury Schweppes’ top 10 bottlers produced 87. 2% and 72. 9 % of domestic volume of their respective franchisors. Both companies focused on addressing challenges related to performance and evolution, on providing alternative beverages to increasingly health-conscious consumer, on adjusting key strategic relationships, and on cultivating international markets. 4. Buyer Power: How easy is it for buyers to drive prices down?
Pepsi negotiated concentrate prices with its bottling association, and normally based price increases on the consumers’ price index (CPI). From the 1980s to early 2000s, concentrate makers regularly raised concentrate prices, even as inflation-adjusted retail prices for CSD products trended downward. 5. Substitutes: Are your customers able to find a different way of doing what you do? Customer had 3 Potential Brands of CDSs products; each of them had a variety of different products. So customers may choose if they prefer the traditional Coke, a Diet Pepsi or a Dr Pepper.