Cola Wars Continue: Coke and Pepsi in 2010

MEMO

To:                 Anthony Chan

                      Professor

From:                Shanks Yan

                Student

Date:                January 16, 2018

Re:                Case Study Analysis: Cola Wars Continue: Coke and Pepsi in 2010

Over the past ten decades, Coca-Cola and Pepsi dominated the carbonated soft drinks (CSD) industry, but are now facing significant challenges due to the non-CSD industry.

Giving the numerous sales quantity, and low production cost and competitive price, Coca-Cola and Pepsi gained great profit in past century. Yet, with the rise of non-CSD and the dropping prices of raw materials and new bottling technology, both Coca-Cola and Pepsi will have to shift from CSD to non-CSD.

As concentrate companies became more involved in producing non-CSD, non-CSD requires a smaller and more specialized production process which was challenging for bottlers. In addition, as mass-merchandisers, such as Walmart, insisted on negotiating with the non-CSD concentrate producers directly, this led to the disruption of the traditional bottling process. Due to the different types and size of non-CSDs, some biggest bottlers saw their COGS reach 90% of their sales.

With the negative effects of price wars between Coca-Cola and Pepsi, the CSD industry decreased its profitability. Both companies tried to gain market share by lowering their price. Since Coca-Cola and Pepsi control over 70% of the CSD industry in the U.S., the other smaller CSD brands are forced to do the same to stay competitive in the market.