Cola Wars Continue: Coke and Pepsi in 2010

1221 Words Dec 2nd, 2012 5 Pages
The competition within the $74 billion carbonated soft drink (CSD) industry has been remarkable ever since Coca-Cola was formulated in 1886, and further intensified when Pepsi was introduced in 1893. Ever since then, the CSD industry has been dominated by these two companies, with Coke taking the lead in the early stage, followed by Pepsi doubled its market share between 1950 and 1970 by offering its concentrate at a lower price than its competitor. The CSD industry has been profitable historically due to numerous reasons. Firstly, in the world’s largest market for CSD products, consumption had been growing at a steady rate of 3% annually from 1970 to 2000 in the U.S., marking a high growth stage in the industry life cycle (Appendix B). …show more content…
Capital expenditures for CSD products are minimized for both concentrate producers and bottlers given mass-production scale. However, handling non-CSD products is problematic for bottlers, as production volume remains relatively small comparing to CSDs, which increases handling and warehouse costs. This issue could be addressed by providing financial assistance and assigning specific bottlers with the exclusive national distribution right of certain non-CSD beverages, which shift non-CSD into mass-production products and better leverage their economies of scale, therefore lowers handling costs for bottlers. In terms of marketing, C&P has been emphasizing on their flagship cola brands by allocating most of their marketing budget onto promoting the duo market share leaders. However, as demand for non-CSDs such as sports and energy drinks growing rapidly, it’s crucial for both firms to capture solid market shares and promote their brand image in order to differentiate their products and establish footholds in this growing segment.
Although CSDs demand in the U.S. market has flattened, it remains popular internationally. Emerging markets like China and India with growing middle class population in particular, display higher growth potential than the domestic market. Coke has successfully established its footholds internationally through early expansion, and is recognized as a symbol of the American culture. Its
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