Coke Vs Pepsi

Coke Vs Pepsi

Coke Vs Pepsi

Why has the soft drink industry been so profitable ?

Initial Thoughts
Monopoly / Duopoly hence higher profits… sales not at MC++   but at a price above it where MR = MC and P > MC…

Game Theory: Duopolist donot allow others to be in business.. they offer very high price and buy them out or destroy them by price competition….or both

After Reading Case:

• Industry :
o Power Balance in favour of Coke and Pepsi – Can suppliers / bottlers..
o Diversification into new drinks … coke shut shop then resumed in these business ….
o Defended own business very hard….against new competitors…
o Vertical integration : Own bottling operations (CCE & PBG)
• Coke :
o Product was patented … fought off counterfiets
o Distribution Focus : Build Nation wide franchised bottling networks
o Woodruff :
 Distribution focus : “in arms reach of desire of customer”
 International focus – 65% of revenues in 2000
 Localisation in international mkts (guarango…)
o World War – No rationing for sugar…. Investments into bottling by govt. / made it the biggest in the world
o Brand Building Initially
o Been at the forefront of innovation initially
 Fountain / Vending Machines / Coolers
o Diet Coke introduction in 1980’s
 
• Pepsi
o Lower Price than coke (1 nickel – 12 ounce Vs 6.5 ounce) ….was also lower than Coke for Concentrate price ….
o Focus on take home sales through supermarkets - Differential Packaging boosted consumption (26 ounce bottles) – grwth tracked supermkt sales
o Better contract for franchised bottling network and bigger facilties for bottling …more consolidated…
o Frito Lays acquisition along with others….
o Marketing Strategies
 Pepsi Challenge
 Pepsi Generation – Young Image -




Compare and analyse the economics of concentrate business to the bottling business
Concentrate – specialization…. Secrecy…. High margins for that…
Bottling….Can be outsourced ….low margin high...