Cola Wars

Cola Wars Continue: Coke and Pepsi in the Twenty-First Century

I. Case issue: Implications of strategic rivalry on cola industry's 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-Cola's 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

2. Bottlers' profitability is in danger with slim margins and declining growth (See Exhibit

4)

a. CP should come to bottler’s aide with financial assistance, concentrate price

breaks or increased marketing to preserve industry structure

b. Bottlers will have to upgrade their technology to handle expanded product

lines (See Exhibit 2)

c. Bottlers should consider diversifying into snack food distribution through

alliances or CP acquisitions like Pepsi’s Frito-Lay division

B. Implications on performance of cola industry

1. CSDs made up a substantial share of 2000 US Liquid Consumption (See Exhibit 4),

but this doesn’t make them immune to risk

a. Declining stock prices show a corrected over-valuation of companies (See

Exhibit 4)

b. Declining growth rates for carbonated soft drinks and increasing noncarbonated

beverage growth rates further threaten industry performance

(See Exhibit 4)

2. International markets are an important source of revenue (See Exhibit 3), and

improvements in world economies are forecasted

3.