Cola Wars Case Essay

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Cola Wars Continue: Coke and Pepsi in the 21st Century

Concentrate Producers and Bottlers were two of the four major participants that were involved in the production and distribution of Carbonated Soft Drinks (CSDs) in the United States. The Concentrate Producers (CPs) were responsible for blending raw material ingredients, packaging the blend in plastic canisters, and shipping it to the Bottler. Using Porter’s Five Forces analysis for the CPs industry, we determined that the Bargaining Power of Buyers was low. In 1987, Coke’s Master Bottler Contract granted Coke the right to determine the concentrate price based on a pricing formula that adjusted quarterly and stated a maximum price for the sweetener used in the …show more content…
This often led to multiple can manufacturers competing for a single contract. Even though Bottlers could not carry directly competitive brands, they were allowed to handle non-cola brands of other CPs and also choose whether or not to market new beverages introduced by those CPs. We believe that the Threat of Substitutes was low since the emerging industries of non-soft-drinks that threatened the CPs would rely on the current Bottlers. The existing networks and relationships between Bottlers and retailers would appeal to the substitutes of the CPs entering the supermarket channel. The Threat of New Entrants is low mainly due to the costly capital investment requirements of the bottling process, such as, plant, high-speed lines, and distributions networks. Another entry barrier was the Soft Drink Interbrand Competition Act, which preserved the right of CPs to grant exclusive territories to bottlers. These close ties enabled the CPs to help Bottlers improve their performance by employing extensive sales and marketing support staff that worked with them to set standards and to suggest operating procedures. CPs ensured reliable supply, faster delivery, and lower prices by negotiating directly with the Bottlers’ major suppliers, which in relation benefited the Bottlers. Lastly, the Competition between Bottlers was high due to the Cola Wars. They competed in building strong relationships with retailers who offered them promotions and
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