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CHALLENGES BEFORE PEPSI & COKE

Boosting flagging Domestic CSD


sales
Can Newly popular beverages lead to
new and profitable revenue streams
Era of sustained growth and
profitability coming to end or just
another blip in their long enviable
history

Production and Distribution of CSDs

Concentr
ate
Producers

Bottlers

Retail
Chains

Suppliers

Retail Channels
Distribution

9.5
7.9

32.9

11.8
14.5
23.4

Supermarkets
Fountain Outlets
Vending Machines
Mass Merchendizers
Convenience Stores
and Gas Stations
Other outlets

Retail Channel Wars

Pepsi Retail Outlets


Coke Fountain Outlets
Pepsi Taco Bell, KFC and most of Pizza Hut
Coke Burger King, McDonalds (largest in
terms of sales)
Coke also snatched Subway (largest by no. of
outlets) away from Pepsi in 2004 while Pepsi
grabbed Quiznos from Coke
Coke 68% of the rights while Pepsi had just
22%

Market Share trend for Coke and Pepsi


Chart Title
50

40

30

Coke Market Share


Pepsi Market Share

Axis Title

20

10

0
1950

1966

1970

1975

1980

1985

1990

1995

2000

2004E

Adapting to the Changing


Times(1997-2004)
The demand for core products plateaued
during 1998-2004
Coke struggled to cope with the change due to
its dependency on traditional CSDs
Pepsi due to its diverse portfolio adapted
better to the challenge
Key Challenge: Providing alternate Beverages
to increasing health conscious consumers
( The growth is mainly coming from Non CSD
and Packaged Drinking Water segment)

Cokes struggles in adapting to


changing times

Internal
Issues
Executi
on
Failures

Cut down of the workforce(20% Layoff)


SEC launched investigations into Cokes
accounting policies
Lost a high profile race discrimination suit
Contamination cases against Coke worldwide

Letting Pepsi acquire companies like Quaker


Oats and South Beach Beverage Co. and failing
to diversify in non CSDs
Bailing out of joint venture with P & G
Failure to deal with the contamination scare in
emerging market
Rigged Market Test and had to pay 21mp to
Burger King

How Pepsi overtook Coke


Grow the Core
and Add some
more

Launched new CSDs like Sierra Mist and Mountain


Dew Code Red
Acquisition of Quaker Oats, maker of Sports Drink
Gatorade.

Diversification

Pepsis North American beverage sale grew by 3%

Pepsi shareholders enjoyed 46% return compared to


Surpassed
-26% suffered by Coke shareholders
Cokes financial
returns

Internationalizing the Cola


Wars
As US demand plateaued, Coke and Pepsi
started looking for new markets.
US is by far the largest market for CSDs (33%)
Mexico, Brazil, Germany, China and UK other
significant markets
Improved access to Asian and Eastern Europe
markets
Per capita consumption in other countries a
very small fraction of US per capita
consumption

International Market
Coverage

Coke

Western Europe
Latin America
Largest international producer of
soft drinks
70% of the total sales and 80% of
the profit from outside U.S.

Pepsi

Middle East
South East Asia
Only one-third of beverage sale
comes from overseas
World Market share of 21.8% as
compared to Cokes share of 51.4%

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