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Bel Brand Essay

1832 words - 8 pages

Cola Wars Continue: Coke and Pepsi in the Twenty-First CenturyI. Case issue: Implications of strategic rivalry on cola industrys structure and performance (See Exhibits 1 & 2 for analysis) A. Implications on structure of cola industry 1. Bottlers have been consolidated by concentrate producers (CP), placing smaller CPs at the mercy of Pepsi and Coca-Colas distribution systems (See Exhibit 3) a. Making it tougher for smaller CPs like Cott Corporation to compete and leaving them open to the threat of acquisition b. Exposing Coca-Cola and Pepsi to the risk of anti-trust legal or regulatory action with bottlers’ exclusive territories and policies that forbid carrying competing cola products ...view middle of the document...

Risk of additional state taxes (See Exhibit 3) d. Develop and diversify into healthier beverages and snacks 4. Demand for carbonated soft drinks is elastic so theres not a lot of room for price variationII. Lessons learned/industry recommendations A. Industry should be proactive about growing health concerns in US Market 1. Should continue to lobby FDA to prevent caffeine-warning labels 2. Should promote exercise through sponsoring competitive sports tournaments B. Companies need to refocus energies on advertising to rejuvenate industry and to fuel product demand both domestically and abroad (See Exhibit 3) C. Cola industry leaders, Coca-Cola and Pepsi, should practice game theory to better understand their competitive market environment (See Exhibit 3)\

2. Exhibit One – An Analysis of the Cola Industry Using Porter’s Five Forces Model (p 80)Potential Competitors: Companies that have a door to door distribution channel in place like snack companies could choose to diversify into soda industry Switching costs are low for consumers who risk very little by trying new brands or beverages Barriers to entry are relatively high, though, with large advertising budgets and competitive brand loyalty to big players like Coca-Cola and Pepsi The drinks with high growth and high hype are non-carbonated beverages such as juice drinks, sports drinks, tea-based drinks, dairy-based drinks, and especially bottled waterThe Bargaining Power of Suppliers: Concentrate producers (CPs) negotiate directly with bottlers’ major suppliers – particularly sweetener and packaging suppliers – to encourage reliable supply, faster delivery, and lower prices Coca-Cola and Pepsi are among the metal can industry’s largest customers and maintain relationships with more than one supplier, giving these suppliers less bargaining power due to the availability of alternative suppliers Metal cans make up the majority of the bottlers’ packaged product (60%), followed by plastic bottles (38%) and glass bottles (2%)The Bargaining Power of Buyers: Bottlers own a manufacturing and sales operation in an exclusive geographic territory, with rights granted in perpetuity by the franchiser, subject to termination only in the event of default by the bottler 1980 Soft Drink Interbrand Competition Act preserved the right of CPs to grant exclusive territories to their bottlers, giving less bargaining power to Bottler’s buyers because there is no alternative supplier Bottlers are locked into contracts that grant CPs the right to set prices and other terms of sale Bottlers are allowed to handle the non-cola brands of other Cps at their discretion Bottlers are also given freedom in choosing whether or not to carry new beverages introduced by the CPs but cannot carry directly competitive brands Competition for brand shelf space in retail channels gives some bargaining power back to buyersThreat of Substitute Products: Threat from substitute products are probably second in importance to the cola industry...

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