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Industry analysis: soft drinks
Industry analysis: soft drinks
Industry analysis: soft drinks
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By and large, the soft drink industry leaders post high profits every year. Concentrate producers realize higher profits than bottlers in the industry generally (Daft & Marcic, 2001; Wilkinson & Kannan, 2013). That comes off as odd given than the commodities they sell can be generated rather easily (Louis & Yazijian, 1980; Yoffie & Harvard University, 2002). The high profits can be best explained through a Five Forces appraisal, which shows how the varied forces affect the industry’s profitability. The forces are entry barriers, suppliers, rivalry, buyers, and substitute threats.
New players find it rather challenging to enter the market owing to the extant bottling network agreements, high advertisement costs, the brand images of Pepsi and
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The new entrants are unable to gain considerable visibility (Enrico & Kornbluth, 1986; Kourdi, 2015; Louis & Yazijian, 1980). The long-running and heavy advertising expenditure defining Pepsi, Coca Cola and own bottlers have helped them cultivate marked brand equity and large bases of loyal customers that new entrants cannot match. The Pepsi and Coca Cola retailers enjoy marked
FIVE FORCES EXAMINATION OF THE COLA WARS 3 margins that new entrants may find challenging to afford them (Daft & Marcic, 2001; Wilkinson & Kannan, 2013).
Notably, most of the suppliers in the industry supply materials that are necessary in the production of concentrates (Daft & Marcic, 2001; Yoffie & Harvard University, 2002). The materials include elementary commodities such as packaging, additives such as caffeine, sugar, flavor, and color (Daft & Marcic, 2001). By and large, these commodities are elementary. That means that the suppliers have limited or even no power or influence over pricing. The suppliers are distinctively weak (Enrico & Kornbluth, 1986; Kourdi,
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Coca Cola should focus on growing its supplies to food stores. As noted earlier, the food store buyers are considerably consolidated: with numerous supermarkets and chain stores. Given that they provide shelf spaces that are premium, they command depressed, or lower, prices. Coca should be more aggressive in investing in the production of substitutes such juices, coffee, and water in addition to its core products. It should continue challenging its main competitor, Pepsi, on the advertising and differentiation fronts as opposed to pricing
New firms that want to sell beverages can be attracted by higher returns made by the Keurig Dr. Pepper. The new firms can decrease the profit made by Keurig Dr. Pepper. If the profit falls below zero, it can throw Keurig Dr. Pepper firm out of the market. To avoid this, Keurig Dr. Pepper (KDP) must employ unique strategies on how to create a barrier for entry of new rival firms into the market (Stone, 2018). The KDP has to make all necessary steps to maintain their market share. Such steps include utilizing their creditworthiness to acquire bank loans that can help the firm to expand and dominate the market ( Rahman et al., 2015). The organization can also lower prices of their products to create unfair competition with newcomers. The organization has huge capital to avoid low prices to attract many customers and discourage them from buying from recent firms. Keurig Dr. Pepper should also maintain favorable customer loyalty to ensure that customers will not shift and buy other substitutes from brand new business organizations. KDP will also set differentiated beverages for customers in a great way (Rahman et al., 2015). The uniqueness of their products will create a competitive environment with the other products from the rival
Coca-Cola and PepsiCo, for example, are the leading companies in the soft drink sector highly outselling the competition. With an ‘ever-new-launching’ strategy of actually very little differentiating products they try to touch many different target groups – the ‘size’ itself, makes them ‘main-stream’.
In terms of promotional activities, the advertising and giving away of free offers and vacations by Coca cola and Basmati rice by Pepsi, the coca cola’s goal in connecting the youth to the market, the different promotional TV campaigns in India using of celebrities, and the Pepsi sponsorship of cricket and soccer sports. In terms of pricing policies, Pepsi got a quicker market share by their belligerent pricing policies and coca cola’s 15-25% price cut down in the market. In terms of distribution arrangement, the bottling and packaging of products for better distribution around
Control of market share is the key issue in this case study. The situation is both Coke and Pepsi are trying to gain market share in this beverage market, which is valued at over $30 billion a year. Just how is this done in such a competitive market is the underlying issue. The facts are that each company is coming up with new products and ideas in order to increase their market share.
The global market for international soft drink industry is about $ 198 billion out of which the giants like Coca Cola and Pepsi hold a major stake. The marketing and sales trends vary from one country to another depending on the geographic and climatic conditions. Cadbury Schwepps is the third major player in the global soft drink industry. The three giants occupy about 90% of the total market. Over the past few years, the global trends have clearly indicated that the consumption of carbonated and non-carbonated soft drinks has nearly doubled. The western countries such as North and South America and Canada are consuming twice amount of beverage as they did nearly 10 years ago. With the introduction of retail sector and changing preferences of the consumer, one can easily find that the demand of these drinks have risen to a considerable proportion. (Datamonitor, 2005)
you can have a turn on the fortune wheel to win prizes such as Pepsi
Soft drink industry is very profitable, more so for the concentrate producers than the bottler’s. This is surprising considering the fact that product sold is a commodity which can even be produced easily. There are several reasons for this, using the five forces analysis we can clearly demonstrate how each force contributes the profitability of the industry.
The beverage industry is highly competitive and presents many alternative products to satisfy a need from within. The principal areas of competition are in pricing, packaging, product innovation, the development of new products and flavours as well as promotional and marketing strategies. Companies can be grouped into two categories: global operations such as PepsiCo, Coca-Cola Company, Monster Beverage Corp. and Red Bull and regional operations such as Ro...
Considering individuals are becoming more health conscious it would be beneficial for Coca Cola to continue producing even more healthy products. Producing healthier drinks could potentially get their products back in schools. Researching into cheaper materials as well as environmentally friendly alternatives to plastic would be another recommendation. The main concern for Coca Cola is water supply. Without water Coca Cola would not be able to stay in business. It is recommended for Coca Cola to reduce the amount of water it uses. They have already begun a goal to improve water use. “Our 2020 goal is aggressive and builds on the 21.4% water efficiency improvement we’ve made since 2004. We expect to increasingly assess not just the quantity of the water used to grow our product ingredients, but the impact of that use as well” (Improving,
Experimentation with the new market for carbonated beverages on the decline coke has done experiments in new flavors and healthier alternatives to try to stay competitive. As well as investing in “Keurig Green Mountain is a K-Cup maker but has a new Keurig Cold that can deliver Coca-Cola through the new system.” (Cooper, 2014)
The ultimate motive of the event is to grasp the customers’ purchasing power by lowering its products’ prices after specifications development. Previously, I learned that Pepsi products revolve around consumer’s perception value in respect to Coca-Cola pricing strategy. The Pepsi marketing strategy does not focus on eliminating the dominant Coca-Cola drinks. Instead, they adjust their prices competitively to offer cheaper cold drinks with a refreshing feel than the other brands. Pepsi has taken the advantage of increased costs of drink production, which many companies could not afford to lower their prices. As a surviving tool, PepsiCo has diversified its products and competitively lowered its prices with standard tasty drinks. Moreover, its strategy to merge with Wal-Mart made the Pepsi Company to maintain the competitive prices in the drinks industry. The Company maintains current prices by strategically cutting down the production and operation costs in the product
The purpose of this report is to compare financial reports from the two largest soft drink manufacturers in the world. The Pepsi Co. and Coca Cola have been the industry's leaders in their market since the early 1900's. I will use relevant figures to determine profitability, and break down key ratios in profitability, liquidity, and solvency. By breaking down financial statements, and converting them to percentages and ratios, comparisons can be made between competitors regardless of size.
This competitive advantage has been rendered sustainable as other players have found it difficult to catch up with the company's competitive strategy. In spite of this clear advantage, it was noted that the company faces some challenges being the world leader in soft drink distribution. The canning and bottling of the product which is done in many countries have now fallen into the hands of independent companies, thus it becomes hard for a given company to control the quality of the packaging
Thanks to my fascination with PepsiCo and partly because this is an assignment, I went online and search for some of PepsiCo’s most successful and ongoing marketing campaigns and strategies. During my research I noticed several daring marketing strategies Pepsi employed throughout the years. For example, gaining the support of Michael Jackson in the 1980’s and latest gaining the endorsement of global pop star Beyoncé.
How has the competition between Coke and Pepsi affected the industry’s profits? Can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-carbonated drinks? The soft drink industry is a highly profitable industry and its success is due to the large consumption of non-alcoholic beverages through which both concentrate producers and bottlers are profitable. Given the U.S. Industry Consumption Statistics, Exhibit 1, it is clear that, after deducting beer and wine, soft drinks account for about 90 % of the total liquid consumption, while Coke and Pepsi account for about 75 % of the soft drink industry. The high consumption of CSDs is related to the soft drink industry selling to consumers through five principal channels: food stores, convenience stores, vending, fountains and others.