Cola Wars Group 4 Yulia Kilinichenko 882 Alyona

Cola Wars Group 4 Yulia Kilinichenko #882 Alyona Devochkina #881 Yana Marchenko #863 Yana Shurygina #898 Dmitriy Chepurnyh #891

Describe the industry’s dominant economic features • Market size and growth rate – Bottlers have been consolidated by Coke and Pepsi either by contractual agreements or franchise. This has led to the reduction of no. of bottlers to 300 in 2009. There are exclusive territory rights for bottlers and most terms are dictated by the CSD players. Therefore growth is limited. • Number of rivals- The number of rivals is more in terms of different brands of bottlers rather than within the same company bottlers. This is to do with exclusive territorial rights. • Scope of competitive rivalry – There is not much to the rivalry in bottling industry in the future unless some major innovation takes place. • Buyer needs and requirements – This factor is aligned with the consumption of soft drinks. So as long as there is a requirement for soft drinks, the bottlers will be needed.

Describe the industry’s dominant economic features. • Product innovation/differentiation – The bottlers have innovated for the last couple of decades, experimenting with different raw materials etc. More innovation would depend on R&D of these firms. • Pace of technological change – Advancing technology in this industry play important role. Bottlers develop and upgrades of facilities and equipment. Coca-Cola was the first concentrate producer to build nation-wide franchised bottling network, a move that Pepsi and Cadbury Schweppes followed. Their geographic territory expands. • Economic of scales- low-cost production efficiency which helped achieve economy of scales for the bottlers.

Summarize porter 5 -forces analysis for bottler • Bargaining power of suppliers: The strength of the suppliers is medium because CSD have consolidated small bottlers. CSD also maintain relations with multiple bottlers and vice versa. It is also true that CSD producers’ sales depend on the bottler’s competitiveness in the market. • Bargaining power of buyers: The strength of buyers is high as there are substitutes available. The switching costs are very low. Also that the markets in the developed nations are saturated. • Threat of substitutes: This threat is relatively low, as bottlers cannot be easily replaced by other marketing channels. Also fountains cannot be available everywhere. Bottling component of sales is very high.

Summarize porter 5 -forces analysis for bottler • Threat of new entry: Barriers for entry are high because bottling is not really a profitable industry. Markets are saturated; it’s hard to gain distribution share/shelf space. Bottling is a very capital intensive industry. Also Coke and Pepsi have exclusive share of territories. • Threat of rivals: There is rivalry among bottlers of different brands rather than same brands because the territory has been exclusively divided by Coke and Pepsi. Also the exit barriers are high, which makes the rivalry intense.

Specify which forces are driving industry change. What will be their impact? • First factor is customer’s attitude towards healthy food and their general lifestyle. • Second factor is differentiation of products. • Third factor is M&A.

First factor is customer’s attitude towards healthy food and their general lifestyle. • Nowadays people are more concerned about their health. There’s a lot of information on the Internet and TV about different products including beverages and ingredients which are used in their production. • So people are aware what is healthy and what’s not. The impact of this trend is clearly negative for CSD producers, because they’ll need to change formulas of their products or find other solutions to make soft drinks less harmful for health.

Second factor is differentiation of products. • Costumers don’t drink same beverages for a year, that’s why Coke introduced new flavors (cherry, vanilla) and alternatives (Diet Coke). • Both Pepsi and Coke realized that in order to boost sales they need to enter new markets, thus they differentiated into non. CSD sectors that offer consumers wider range of products. Thus innovation is a very important force for this industry.

Third factor is M&A. • Coke and Pepsi are competing with each other through expanding their brand portfolio. • They’re acquiring local producers in order to increase market share and offer some alternative products to the consumers. • Companies’ future success dramatically depends on the investments which they’ve made in past.

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