Carbonated Soft Drink Analysis

1394 Words Feb 13th, 2011 6 Pages
COKE vs PEPSI
ADVANCED CORPORATE STRATEGY – SCIENCES PO CASE STUDY

EXECUTIVE SUMMARY

1. A profitable industry based in:
- - - A solid business model. Potential and relatively easy to diversify: space for complementary products (leverage brand equity) Good financial muscle.

The soft drink industry is facing new challenges. The carbonated drink market has lost pace but there are several opportunities to overcome the situation.

2. Concentrate producers and Bottlers are extremely interdependent. Although having very different sources of profitability they ultimately rely on the same customers. The fundamental difference between CPs and bottlers is added value. The biggest source of added value for CPs is their proprietary,
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Concentrate producers and bottlers, inextricably linked but…

Concentrate producers Inputs Process Output Few ingredients: caramel coloring, flavors, caffeine… Little capital investment Concentrate

Bottlers Concentrate, sweeteners and packaging Capital-intensive and high speed production lines Product ready to be sold to customers

On one hand CPs support bottlers by: • Investing in advertising, promotion, market research • Negotiating on behalf of bottlers suppliers to achieve a reliable, faster and cheaper delivery

On the other • Bottlers buy concentrate from CPs using a formula that determine a price linked to the consumer price index. • They are allowed to handle concentrates produced by others brands but who are not directly competing brands.

 They are ultimately dependent on the same customers
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…different in terms of profitability
Different sources of value: • oncentrate producers get value from their C secret recipe. Thanks to this un-replicable proprietary they can leverage on the price of the concentrate. • ottlers must handle both with: B -the concentrate producers which grant them exclusive territories (to reduce rivalry) and share some cost savings but asks high price for their product. -their customers, to create strong relations that will ensure higher sells and shelf space, but want to pay less for not switching to other brands. (Direct store door agreements)
Net sales Cost of sales Gross profit

Conc. producer
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