Coca-Cola Analyze

1、Page 2Why soft drink industry profitable?Why the profitability different?How Coke and Pepsi compete?Can they sustain their profit?Page 3Why, historically, has the soft drink industry been so profitable?Page 4OligopolyNet profit/ SalesPage 5First mover Coca-ColaPage 6nMachinerynOverheadnLabornMateria

2、lCaramel coloringPhosphoric or citric acidNatural flavorsCaffeinePage 7nAmid the top most important clients to retailersnLargest customers for metal cans manufacturesnHuge marketing/ marketing inputnCompetitions between suppliersPage 8n beern Milkn Coffeen Bottled watern Juicesn Tean Powdered drinks

3、n Winen Sports drinksn Page 9nExclusive contract with distributorsnHigh consumption need in the marketPage 10BACDEFPage 11Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different?Page 122. Compare the economics of the concentrate busin

4、ess to that of the bottling business: Why is the profitability so different? (Hint: think about Barrier to entry; substitutes; suppliers, buyers, rivals, etc.)MissionBackgroundIn order to explain this question more clearly, please allow me to give a metaphor between cola war and real war.In army, so

5、me troops position is at front-line, like sales in cola business. And other troops position is at base or logistic line, like the concentrate business or bottling business in cola-biz.Page 13Net Profit MarginGross MarginBarrier to entry is the key to deal with this problem. Another important reason

6、is business secret, the cola-formula.Page 14So it is the second reason why the concentrate industry has higher profitability than the bottling industry because of the interest expense which is from financial leverage.Financial LeveragePage 15In conclusion, duopoly even pure monopoly is a real dream

7、for every firm or industry, just on profit margin section. But for consumers, it is a real nightmare.We should be engaged in a monopoly firm and consume at a competition market.Page 161) How Coke and Pepsi compete?Page 1712OZ6.5OZPage 18n Pepsi Generation: Focus on Young GenerationnOpen a new market

8、nModernize Plants and improve store delivery servicesPage 19Product DiversificationPage 20nLate 1950S: Coke starts the Ad war and focus on the overseas market during the 1960snPepsi win: Focus on the America market, doubled the U.S market share between 1950 and 1970 Page 21Page 22Cost DownPage 23Pag

9、e 24Page 25Page 262) How has the competition between Coke and Pepsi affected the industrys profits?Page 27n Concentrate Producer to build a nationwide franchise bottling networknCoke was the first movernPepsi and Cadbury Schweppes followed suit. n New Franchise agreements nallowed bottlers to handle

10、 the non-cola brands of other concentrate producers.n Bottlers could not carry directly competing brands.Page 28n Throughout the 1980s, the growth of Coke and Pepsi put a squeeze on smaller concentrate producersn Shelf space for small brands declined and were shuffled from one own to another.Page 29

11、n In a five year span, Dr Pepper was sold several times, Canada Dry twice, Sunkist once, Shasta one, and A&W once.n Phillip Morris acquired Seven-UP in 1978 for a big premium, but racked up huge losses in the early 1980s, and then left the CSD business in 1985. Page 30CokePepsiCadbury Schweppes

12、51.4%21.8%6%Page 31Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-CSD?Page 32nIn the wake of flattening demand and the growing popularity of non-CSD, the both beverage giants would still sustain their profits. Page 33Consolidation systemFu

13、rther brandingProduct diversityn Deepen their traditional products as well as introduce a variety of new productsn A wide recognition and brand awareness of their productsn Substantial managerial influence in bottling and the distribution network by anchor bottling modelPage 34n Global soft drink sales growth slowed in 2000s, but emerging markets such as China, India were still growing rapidly. n Large investment overseas to develop new bottling plants, c