Cola Wars Essay

1319 Words Oct 23rd, 2014 6 Pages
Economics of the US Carbonated Soft Drink (CSD) Industry
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Americans consumed 23 gallons of CSDs annually in 1970 Consumption grew by 3% per year over the next 3 decades Increasing availability of CSDs and introduction of diet and flavored varieties Non-cola CSDs were introduced



Production & Distribution of CSD
1. 2. 3. 4.

Concentrate producers Bottlers Retail channels Suppliers

1. Concentrate Producer
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Blended raw material ingredients, packaged the mixture, shipped those container to the bottler Key production investment areas like machinery, overhead and labor A typical manufacturing plant cost - $25 million to $50 million Customer Development Agreements (CDA) with retailers like Wal-Mart
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ains as “ a potion for mental and physical disorders” In 1891, Asa Candler acquired the formula, established a sales force and began brand advertising The formula for Coca-Cola syrup known as “Merchandise 7X” remained a secret The rest is history

Evolution of Pepsi
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Invented in 1893 in New Bern, North Carolina by pharmacist Caleb Bradham By 1910 built a network of 270 bottlers Declared bankruptcy in 1923 and again in 1932 Business began to grow during the Great Depression Pepsi lowered price of its 12 –oz bottle to a Nickel – the same price Coke charged for its 6.5-oz bottle

The Cola War Begins
Marketing Campaign
“Beat Coke” “Pepsi Generation” “Young At Heart” “American’s preferred taste” “No wonder Coke refreshes best”

Year 1960s – the Armageddon
CSD Mountain Dew (1964) Sprite (1961) Non CSD Duncan foods (coffee, tea, hot chocolate)

The Pepsi Challenge
Blind taste test Rolled out blind taste campaign nation wide Rebates Advertisements that questions tests’ validity

Leadership
2001: Steve Reinemund “Grow the core add some more” 1980 – Roberto Goizueta

Acquisition of Quaker Oats

Use of lower priced corn syrup against sugar Sold non-CSD business

ROI capital 29.3 (2003) from 9.5 (1996)

Expansions
Acquired – Pizza hut (1978), Toco Bell (1986), KFC (1986) Exclusive deals with Burger king, McDonalds

Pepsi purchased Quaker Oats (Gatorade) in 2000

Acquired – Planet Java coffee drink brand (2001)

1996-2004: Reversal of

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