Essay on Cola Wars Continued – Coke vs. Pepsi in 2006

1. Using the current ratio, discuss what conclusions you can make about each company’s ability to pay current liabilities (debt).

The company known as Coca-Cola today was started in September of 1919, but the first Coke brand was served as early as 1886. Since that time it has grown to be one of the most globally recognized brand names with a stock value of $167 billion. Coke’s plan has always been developed with the future in mind. Right away the company realized that it was more profitable to manufacture the concentrate used to make carbonated drinks than to bottle it. From that point on they saw the entire world, not simply the originating country, as their desired market. It seems only practical that the company should pursue this agenda until conquered then focus the effort on expanding into different product lines. This logical

The existing concentrate business is largely controlled by Coca-Cola Company (Coca-Cola) and PepsiCo (Pepsi), together claiming a combined 72% of the U.S. carbonated soft drink (CSD) market sales volume in 2009. Refer to Exhibit 1 for an illustration of the CSD industry value chain. For more than a century, Coca-Cola and Pepsi have maintained growth and large market shares through mastering five competitive forces, shown in Exhibit 2, that drive profitability and shape the industry structure.

EVA stands for economic value added. EVA is a value based financial performance measure based

As the above table indicates concentrate business is highly profitable compared to the bottling business. The reasons for this are:

Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the

year. In a “carefully waged competitive struggle,” from 1975 to 1995 both Coke and Pepsi achieved

The case explains the economics of the soft drink industry. There activities that add value to consumer at nearly every stage of the value chain of the soft drink industry. The war is primarily fought between Coca-Cola and PepsiCo as market leaders in this industry; who combined have roughly a ninety percent market share in their industry. The impact of globalization on competition has allowed both of these major players to find new markets to tap which has allowed each continued growth potential.

Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different?

     PepsiCo. Incorporated and The Coca-Cola Company are the two largest and oldest archrivals in the carbonated soft drink (CSD) industry. Coca-Cola was invented and first marketed in 1886, followed by Pepsi Cola in 1898. Coca-Cola was named after the coca leaves and kola nuts John Pemberton used to make it, and Pepsi Cola after the beneficial effects its creator, Caleb Bradham, claimed it had on dyspepsia. The rivalry between the soda giants, also known as the "Cola Wars", began in the 1960’s when Coca-Cola's dominance was being increasingly challenged by Pepsi Cola. The competitive environment between the rivals was intense and well-publicized, forcing both companies to continuously establish and

PepsiCo and the Coca-Cola Company have competed with each other for as long as most people could remember. Pepsi and Coca-Cola are the original sodas that the companies have produced. The two products are similar, but there are minuscule differences that are the deal-breaker for many individuals. When looking at the popular choice of soft drinks between Pepsi and Coke, Coca-Cola would be considered the winner due to its well-known enterprise, taste, and nutritional value.

Essentially, the soft-drink industry is largest beverage industry. It gross millions a year, and has different distribution channels. For example, these soft-drinks are sold in supermarket, Vending Machines, Gas stations, etc. The cost is incomparable to the amount of consumer we currently have in America. If Americans consumer on average 50 gallons in a year. The cost of 2.00 is not missed by the average person. With that said, there is a least likely chance that a person would attempt to duplicate the process at home. The soda making process is too time consuming, and inconvenient when a person can simply can go to the store to purchase. Consumers can either be very loyal to the brand or fickle. Influx in prices can make consumers switch very quickly. However, there are typically incentives associated with loyalty. There are giveaways and contest that entices the customers to keep purchasing. For example, Snapple does this with a real fact on every lid. I personally know people that will buy the product just to read the facts.

For more than a century, Coca Cola and PepsiCo have been the major competitors within the soft drink market. By employing various advertising tactics, strategies such as blind taste tests, and reward initiatives for the consumer, they have grown to become oligopolistic rivals. In the soft-drink business, “The Coca-Cola Company” and “PepsiCo, Incorporated” hold most of the market shares in virtually every region of the world. They have brands that the consumers want, whether it be soft-drink brands or in PepsioCo’s case, snacks. With only one soft-drink market, the two competitors have no choice but to increase sales by stealing the other competitor’s clients. This led to the term, the “cola wars” which was first used

Brand value is the most important resource to the sustained competitive advantage. Coca-Cola is riding on the coattails of its psychological brand value towards a matured segment. This strategy is both successful and advantageous. Development of large distribution channels has kept Coca-Cola relevant over the last thirty years. The resources mentioned have allowed Coca-Cola to create an oligopolistic marketplace with PepsiCo where both firms learn from the mistakes of the other and strengthen operations in areas where one firm may be weak. In the next section, we will perform a market analysis of the softdrink

“History has shown us that America was built on the back of positive rivalries” (StreetAuthority, 2014). Competition increases the growth of industries through regular innovation but they also use other tricks to get an upper hand on each other, for example: Microsoft and Apple, Ford and General Motors, or PepsiCo (NYSE: PEP) and Coco Cola (NYSE: KO) (StreetAuthority, 2014).