sse cola wars_group8b_2011
DESCRIPTION
A Porter-analysis of concentrates and bottles within the soda industry.TRANSCRIPT
Coca Cola Wars
- An analysis of the soda drink industry in the twenty-first century
Course 2304 Media Management By Group 8b; Dr. Robin Teigland Charles Florman Lindeberg, [email protected]
Karin Rimbäck. [email protected] Sjöblom, [email protected] Waldenor, [email protected]
The Soda Drink Network (dynamic)
• Restaurants• Vending Machines• Supermarkets
• Fountains
Concentrate Industry
Suppliers
• Raw material – i.e. caramel coloring, phospheric, caffeine• Fragmented market• Low risk of forward integration
Low influence on the market
Concentrate Industry
Buyers• Direct buyers – Bottlers
– Number of buyers compared to sellers are high (300 vs. 2 big)– High threat of suppliers to forward integrate– Low threat of buyers to backward integrate
• Indirect buyers – i.e. Supermarkets, Vending machines – High ordering volume– High profit margin in most cases– However, the strong brands leads to a Pull strategy that lowers the
indirect buyers’ influence1.
MEDIATE influence on the market
1. Barbara de Lollis, USA Today
Concentrate Industry
Threat of entry
• High capital requirements (25–50 mn $/plant)• Access to distribution channels – interlocked activities2
• Economies of scale• Product differentiation and strong brands
LOW threat
2. Porter, 1996
Concentrate IndustryThreat of Substitutes
Direct Substitutes - The concentrate blendThe secret blend of the concentrates makes it impossible to copy the Coca Cola or Pepsi taste and therefore the threat is considered to be low.
Indirect Substitutes – The soft drink • Increasing consumption of other beverages such as bottled water, tea, coffee, juice
e.g. • The Concentrate Producers’ diversification and expansion of product portfolio
substitutes less of a threat for existing actors.
MEDIATE influence on the market
Concentrate Industry
Rivalry Among Existing Firms• Extremely concentrated revenues.
Coca Cola and Pepsi Cola claimed 75,5 % of the U.S. CSD market in sales volume in 2000.
• Characteristics of a duopoly• Buyers switching costs between the largest CSD brands are
low
HIGH rivalry
Concentrate Industry - Summary
HIGH rivalry
Buyers MEDIATE Influence
Suppliers LOW
Influence
Threat of entry
LOW Influence
Substitues MEDIATE Influence
Bottling Industry
Rivalry (high)• 7000 bottlers in 1970,
300 bottlers in 2000. High industry concentration.
• Brand identity low
Entrants (low threat)• Entry barriers high due to
capital intensity • Margins very low – not
attractive• Brand identity low (generic)
Buyers (high power)• Some big retailer chains have
much bargaining power (e.g. Wal-mart)
• Shelf space; low power
Supplier (mediate power)• Pepsi & CC (biggest
customers) negotiate with can & sweetener suppliers
• Bottlers have relationships with several suppliers
• However, Pepsi & CC have large supplier power over the bottlers
Substitutes (med./low)• Fountains• Concentrate producers will
always need bottling
Concentrate vs Bottling Industry
Percentage of sales
Sales 100 %COGS (17 %)Gross profit 83 %Selling & delivery (2 %)Marketing (39 %)General/admin (8 %)Pre-tax margin 35 %
Industry Analysis
$ Percentage of sales
Sales 100 %COGS (65 %)Gross profit 35 %Selling & delivery (21 %)Marketing (2 %)General/admin (4 %)Pre-tax margin 9 %
Challenges
• The consumers are getting more health conscious
• The consumers wants a wide variety of products
The Coke war
• The war has made both Coca Cola and Pepsi more profitable.3
3. David B. Yoffie, 2004