Cola Wars Continue Coke and Pepsi

10915 Words Mar 20th, 2015 44 Pages
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REV: MAY 26, 2011

DAVID B

YOFFIE

RENEE KIM

Cola Wars Contiinue: Coke
C
an nd Pepsi in 20110 oke and Pepsi vied for “t hroat share” o of the world’ss beverage m market. For more than a century, Co
The most intense battles in the so-called colla wars weree fought over the $74 billio on carbonated soft drink (CSD) industry in the Un nited States.1 In a “carefu ully waged co ompetitive strruggle” that llasted from 1975 through the mid-199
90s, both Cok ke and Pepsi achieved average annual rrevenue grow wth of
2
w
CS
SD consumpttion rose steadily year afteer year. Acco ording around 10%, as both U.S. and worldwide to Rog ger Enrico, former CEO off Pepsi:
The warfare must be perrceived as a continuing c baattle without blood. Witho
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To make concentrate for diet CSDs, concentrate makers often added artificial sweetener; with regular CSDs, bottlers added sugar or high-fructose corn syrup themselves. The concentrate manufacturing process involved relatively little capital investment in machinery, overhead, or labor. A typical concentrate manufacturing plant, which could cover a geographic area as large as the United States, cost between $50 million to $100 million to build.8 A concentrate producer’s most significant costs were for advertising, promotion, market research, and bottler support. Using innovative and sophisticated campaigns, they invested heavily in their trademarks over time. While concentrate producers implemented and financed marketing programs jointly with bottlers, they usually took the lead in developing those programs, particularly when it came to product development, market research, and advertising. They also took charge of negotiating
“customer development agreements” (CDAs) with nationwide retailers such as Wal-Mart. Under a
CDA, Coke or Pepsi offered funds for marketing and other purposes in exchange for shelf space.
With smaller regional accounts, bottlers assumed a key role in developing such relationships,
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