Case | HBS Case Collection | March 1991 (Revised October 1994)
Coca-Cola vs. Pepsi-Cola and the Soft Drink Industry
by Michael E. Porter
Describes the competition between Coca-Cola and Pepsi-Cola. Provides a summary of the history of the soft drink industry prior to World War II, and over the period 1950-1990 in greater detail. Major strategic competitive moves and countermoves are described. Also profiles industry developments, including the Pepsi Challenge, the reformulation of Coca-Cola, and the consolidation of the bottler network. Provides a teaching vehicle for analysis of competitors and strategic rivalry. An updated and revised version of an earlier case.
Keywords: Competition; Industry Growth; Business Strategy; Food and Beverage Industry;
Essay about Case Study on Coke versus Pepsi
1065 Words5 Pages
The case study "Cola Wars Continue: Coke and Pepsi in the Twenty-First Century" focuses on describing Coke and Pepsi within the CSD industry by providing detailed statements about the companies’ accounts and strategies to increase their market share. Furthermore, the case also focuses on the Coke vs. Pepsi goods which target similar groups of costumers, and how these companies have had and still have great reputation and continue to take risks due to their high capital. This analysis of the Cola Wars Continue case study will focus mainly on the profitability of the industry by carefully considering and analyzing the below questions:
Why is the soft drink industry so profitable?
Compare the economics of the concentrate business to the…show more content…
Barriers to entry is another factor that accounts for the high profitability of the soft drink industry. As stated in the case, it is nearly impossible for new concentrate producers or bottlers to enter the industry. The new producers would not require high capital to enter (low cost of capital to produce concentrate), however the entry would be impossible due to patents and the presence of Coke and Pepsi which have nearly century old established names. Meanwhile entering bottling is very capital intensive, and the existing bottlers have exclusive territories in which they distribute their products. Provided the above stated facts it is clear that the soft drink industry is a highly profitable industry. Moreover, in Exhibit 5 it is easily observed that in 2000 the Concentrate Producers (CP) earned 35% profit on sales whereas the bottlers earned 9% profit, which account for a total positive industry profit of 14%. The data listed in the case shows how the soft drink industry in itself is very profitable, however the profitability of the concentrate producers is much higher that that of the bottlers, even though these two businesses should be inseparably linked. Exhibit 5 clearly reflects the profitability of concentrate producers vs. bottlers; even though the dollars per case profit is much higher for the bottlers, the ultimate profit as a percent of sales is higher for the concentrate producers. The cost of goods sold for a CP is equivalent