- 1. Cola Wars Continue Media Magagement course Ahmed Hassan
Cecilia Teljas Adit Rahman Nataliia Danylchenko Yunyun Han
2. The Five Forces of the Concentrate Business 3. Porters
five-forces
- Highly concentrated industry
- Aggressive growth strategies
- High barriers to exit (major fixed costs)
- Little product differences
- Strategic stakes are high
- Threat of Substitute products
- Extensive substitute products
-
- Juice, Coffee, Tea, Beers, Wine, Milk, Energy drinks d
4. Porters five-forces
- Well established brand names
- Have strong distribution systems
- Huge investments need to be made in market research and bottler
relations
- Bargaining Power of suppliers
-
- Artificial sweetner, caramel coloring, phosphoric and citric
acid, natural flavours, caffine
- Many suppliers are available
- Buyers threaten for backward integration
5. Porters five-forces
-
- Food store, Fountains, Mass merchandiser, Convenient stores,
Vending machine
- Bargaining power for fountain is higher
- Industry products are standardised
- Distributor can influence end users purchase decisions
Bargaining Power of Buyers 6. The Five Forces of the Concentrate
Business HIGH HIGH LOW HIGH HIGH 7. Industry Attractiveness
- 1996-2006 the US average industry ROICwas 14.9 %
- Over the same period ROIC for soft drinkswas 37.6 %
- Soft Drinks second after security brokers and dealers
- Over all consumption has decreased
- Advertisement and marketing costs are high
8. The Five Forces of the Bottlers Business 9. Q 2 10.
Bottlers
- Low Threat from Substitutes
- concentrators are always seeking for bottlers
- Huge investments are required
- Development of special management skills
- Raw materials are easily available in the market
11.
-
- Food store, Fountains, Mass merchandiser, Convenient stores,
Vending machine
- Bargaining power for fountain is higher
- Have to fight for shelf space
- Good relation ships with retailers
- Defend by discounting and other tactics
- New bottler cannot start in a region of an existing
supplier
12. Pretax profit
- Concentrate Producers input in ingredients is small
- The production process is basically simple invloves little
overhead, or labor
- bottlers have to invest at least $25million to $35 million to
build a small bottling plant, and up to $75 million (in 1998) to
build an efficient large plant
13. For selling and delivery
- deals with normal delivery of blended ingredients
- direct store door (DSD) delivery, which involved route delivery
sales people physically placing and managing the CSD brand in the
store
- This is obviously large amount of cost for labor
14. Advertising and marketing
- initiate programs and plays an active role in advertising,
promotion, market research
- send staff to work with bottlers in store to ensure quality of
in-store activities.
- Also participate in advertising costs
15. Economics and Attractive Business
- Concentrate Producers business model is more intensive and
efficient
- takes more risk, as they invest more on fixed assets and rely
much on different relationships
16. The Five Forces of the Bottlers Business LOW LOW HIGH LOW
HIGH 17. What challenges face these companies today?
- Pepsi has long been the biggest challenge of Coke, and vice
versa
- Decline of sales in the US and other markets due to:
-
- the global economic crisis
-
- consumers re-orientation to healthier beverages
-
- plenty of various substitutes and potential entrants
- Competing, substitute and potential entrants brands have to be
prevented
- Negative stereotypes of Pepsi and Coke
- Pepsi and Coca-Cola develop new beverages:
-
- Substantive amounts are invested
-
- Often result in cannibalism
- Differing regulations in different national markets prevent
business synchronizing worldwide
- Protectionism of national brands in certain national markets (
e.g . Brazil)
- Huge amounts spent on advertisements
- Conquering of new markets:
-
- Often lack certified, experienced and reliable local suppliers
and distributors
- Dependence on bottlers (sometimes mutual)
- Tough competition makes Pepsi and Coke engage in increasingly
risky business operations
18. F iveF orcesA nalysis
- 1. Pepsi has long been the biggest challenge of Coke, and vice
versa
- 2. Decline of sales in the US and other markets due to:
-
- the global economic crisis
-
- consumers re-orientation to healthier beverages
-
- plenty of various substitutes and potential entrants
- 3. Competing, substitute and potential entrants brands have to
be prevented
- 4. Negative stereotypes of Pepsi and Coke
- 5. Pepsi and Coca-Cola develop new beverages:
-
- Substantive amounts are invested
-
- Often result in cannibalism
- 6. Differing regulations in different national markets prevent
business synchronizing worldwide
- 7. Protectionism of national brands in certain national markets
( e.g . Brazil)
- 8. Huge amounts spent on advertisements
- 9. Conquering of new markets:
-
- Often lack certified, experienced and reliable local suppliers
and distributors
- 10. Dependence on bottlers (sometimes mutual)
- 11. Tough competition makes Pepsi and Coke engage in
increasingly risky business operations
- We considered the challenges mentioned from the prospective of
the five forces:
-
- Industry competitors (1, 2, 5, 8, 11)
-
- Potential entrants (3, 4)
- At the same time, the five-forces analysis does not take into
account the factor of national states (6, 7)