Cola Wars

INTRODUCTION
The case Cola Wars shows developments in soft drink industry and the importance of Coke and Pepsi in its changes. It describes how the industry evolved into its current structure largely following Coca-Cola’s leadership. What is interesting is determining why the main competitors in the industry have been able to earn above normal during more than 100 years, and why the industry isorganized the way it is.
Cola Wars shows us the reactions of competitors and how they work to create their own industry structure and try to implement strategies to gain more market share.

SUMMARY
During the 1920s and 1930s, Coke pioneered open-top coolers for use in grocery stores and other channels, developed automatic fountain dispensers, and introducing vending machines. Woodruff (the3rd tenure of the company) initiated “lifestyle” advertising for Coca-cola, emphasizing the role that Coke played in a consumer’s life. During the World War II sold soldiers chip bottles wherever they were even getting losses.

Both companies sought to expand its bottling network by using expend machines, negotiating with retailers such as Wal-Mart, winning the rights to sold in companies suchas Pizza Hut, KFC, Mc’Donalds, Burger King’s and Subway.

In 1950s, Alfred Steele (CEO of PepsiCo) encouraged bottlers to focus on take-home sales through supermarkets. In 1963 PepsiCo launches its “Pepsi Generation” marketing campaign, which targeted the young and “Young at heart”. Pepsi also worked with its bottlers to modernize plants and improve store delivery services.

In 1960, bothcompanies began to experiment with new flavors and new packaging options. They also diversified into non-CDS industries (for instance Coke purchased Minute Maid and Pepsi merged with snack-food giant Frito-Lay to form PepsiCo, hoping to achieve synergies based on similar customers’ targets, delivery systems, and marketing orientations.

In 1960s Coke focused primarily on overseas markets,apparently basing its strategy on the assumption that domestic CDS consumptions was approaching a saturation point. Pepsi, meanwhile, battled Coke aggressively in the US and doubled its US share between 1950 and 1970.

In 1986, Coke created an independent bottling subsidiary, Coca-Cola Enterprises (CCE), selling 51% of its shares to the public and retaining the rest. Coke’s bottler acquisitionincreased its long-term debt to approximately $1 billion.

At the same way, Pepsi acquired MEI Bottling. Bottler consolidation made smaller concentrate procedures increasingly dependent on the Pepsi and Coke bottling networks for distribution of their products.

In the late 1990s and starting 2000s, the U.S. and worldwide sales volume decreases. In responding to changing times, both companiessought to retain or recapture their historically high growth and profitability within an apparently new environment. They focused on addressing challenges related to performance and execution, on providing alternative beverages to increasingly health-conscious consumers, on adjusting key strategic relationships, and on cultivating international markets.

New federal nutrition guidelines, issuedin 2005, identified regular CSDs as the largest source of obesity-causing sugars in the American diet. In such a climate, diet sodas offered one path to reviving sales. In the US market, their share of soda CSD volume grew.

The bottling cost and the agreements signed in the past by Coke with them, made some troubles that had to be solve, and in 1987 they signed a new agreement that improved therelationship between Coke and its bottlers. Pepsi didn’t have this problem.

All around the world, Coke wins the market share. About 70% of Coke’s sales and 80% of its profits came from outside the US: only about one-third of Pepsi’s beverages sales took place overseas. Coke enjoyed a world market share of 51%, compared with 21% for Pepsi. Pepsi put relatively little emphasis on its overseas...