Cola Wars: Coke and Pepsi in the 21st Century
"Cola Wars Continue: Coke and Pepsi in the 21st Century” explains the economics of the soft drink industry and its relation with profits, taking into account all stages of the value chain of the soft drink industry. By focusing on the war between Coca-Cola and PepsiCo as market leaders in this industry – with a 90% market share in carbonated beverages – the study analyses the different stages of the value chain (concentrate producers, bottlers, retail channels, suppliers) and the impact of the modern times and globalisation on competition and interaction in the industry.
Throughout this analysis, I will assess how the strategic interaction between the two players allowed the …show more content…
We can also trace a parallel analysis to the suppliers of bottlers, for which the soft drink industry companies are the biggest clients. It then becomes clear that both CPs and bottlers would have a vast array of choice, so that they will make their decisions based on prices, which means suppliers will hold a very low bargaining power.
Bargaining power of buyers
Here, buyers can be identified as retailers. Among retailers, we find supermarkets, food stores, convenience stores, restaurants, among others. Retailers are quite dependent on the soft drink industry to keep their profitability levels because of the importance of the weight of soft drinks on the sales volume and total profits. The retailer market can be seen as fragmented and competitive: no retailer would risk not selling diversified soft drinks, allowing Coca-Cola and PepsiCo to establish favourable contracts with them. On the other hand, the soft drink companies need to keep a close and safe relationship with retailers, allowing them to make sure their products are accessible and visible by consumers. Even though the most of the negotiating power is with the industry, some big restaurant chains have a significant power. The only buyers with a dominant power are in fact, fast food outlets, but although they capture most of their profitability in their channel, they accounted for less than 20% of total soft drink sales.