Cola Wars Case Study

Kool-Aid, a brand that offers flavored drink mix owned by Kraft Foods is part of the soft drink industry. Three main players control the soft drink industry and they are Coke (42.8%), Pepsi (31.1%), and Dr. Pepper Snapple Group (15%). First of all, a soft drink is defined as any drink that contains water, but not alcohol. This includes soda, juice/punch, energy drink, tea, sports drink, and water. There are more than a thousand different soft drinks in the U.S. market, and among the one thousand variety of drinks, the three main players offer about 400 of them (40%). Since the three dominant brands pretty much control the market, most of the small players compete by offering inexpensive drinks that are often only sold in particular retail chain such as Sam’s Choice and Shasta Beverages. They also compete in the newer category of soft drinks such as tea and energy

Do you think that either firm can attain a sustainable competitive advantage in this business?

The soft-drink industry capitalizing on creating the best product. Each product has a different taste, formula, and color to entice the consumer. It is important for the product to remain innovative in order to keep the consumers interested. The suppliers can easily differ, because they do not hold much value or put

The soft drink industry is one of the most highly profitable industries in the USA. Also, the competitive market is a very large market. Americans consumed about 53 gallons of soft drinks per person a year in 2000 by $ 60.3 billion!! Comparing with the market in 1990, since it was 47 gallons. In recent years, the market growth has slowed.

Entry Barriers: Both Coca-Cola and Pepsi have strong entry barriers for new competitors, especially in high-end markets like the US. Because of the two companies’ sizes, market maturity, and good market position, many barriers exist for new entrants.

b) (2 pts.) Does either firm have a dominant strategy? If yes, which firm and what strategy?

see that many brands are competing for shelf space and market share. Even though the

The first order of business in choosing which company comes on top, is to figure out the marketing mix of the two. According to oxforddictionaires.com, the marketing mix is defined as “a combination of factors that can be controlled by a company to influence consumers to purchase its products”. This is then broken down into “product, price, promotion, and place” (Grewal, 33). Using this, we will be able to break down what each company does differently and who is more effective.

give them some control over soft drink profitability. Furthermore, consumers expected to pay less through this

Also soft drink companies diversify business by offering substitutes themselves to shield themselves from competition. Rivalry:

big market share, such as Pepsi Cola, Mt.Dew, and so on. I like to drink Coke

Energy drinks have outperformed the growth in carbonates in the last few years, and present a substantial opportunity for beverage manufacturers to extract further growth from their sales. There are many driving forces of change and critical success factors in the energy drink industry. Companies such as Coke Cola and Pepsi contend with criticism from health officials due to the excessive caffeine in most high-energy drinks. However, before the 2000’s consumers were accustomed to carbonated soft drinks as the traditional beverage. The shift to an energy drink, sports drink, and vitamin enhanced waters increased sales while becoming an alternative beverage choice for a fast-paced mobile society. Therefore, this industry endures many

Answer: Both Companies are acting on a high-tech market. The development and progress in this market is really fast.

The last two topics within Porter’s Five Force Analysis are the threats of substitutes and new entries. The threat of substitutes for PepsiCo and Pepsi products could be considered quite high. In recent years, Americans have been cutting back soda consumption, approximately 1.2% in 2015, and 0.9% in 2014 (Taylor, 2016). Customers have been replacing soft drinks, in particular, with water, coffees, and all natural juices. This also leads the way for the threat of new entries. As people are tending to lean away from traditional soft drinks, the threat of new entrants could be considered moderate. This is because the cost of entry is relatively low as it is not a technology driven industry. Most of the cost of entry would be related to branding and marketing of the new product (Thompson, 1996). In recent years many competitors have entered the market with desirable ingredients and non-soft-drink beverages.

PepsiCo has the potential to encourage consumers into drinking water and eating healthier snacks that they promote. Bottled water is rising and it is a healthy substitute to sugared drinks. Restaurants, clubs and venues are using their beverage to make special drinks. This is where alcohol industries gains more profit to their company. However, with the ability to adjust customer’s demands with new and appealing products it can dominate to success.