Report on Cola Wars
The Race to the Top Continues
Description of Case Situation
The carbonated soda drink industry is a $74 billion industry dominated by two mega giants namely Coca-Cola and Pepsi. Before turning into beverage empires, these two companies started as a mere concoction dedicated as medicinal reliefs as both CSD’s are invented by pharmacists. Soon, after a century of battling it out to earn the biggest share in the market, Coke and Pepsi still haven’t been able to settle the score between them. The brands became a household name from the time it hit the soda fountain arena until the middle of 1990 when CSD sales began to drop due to increasing market competing CSD products. By 2009 an average American consumes 46 gallons of CSD annually which is the lowest since 1989. The flagging domestic sales and growing competition among other beverage categories increased their concern and to top it up, bottling, branding and pricing strategies are also facing major challenges.
The neck to neck competition between Coke and Pepsis is also ravaged by declining domestic market making them to seek after alternative acquisitions in order to keep hold of its current market and broaden their horizon at the same time. Pepsi and Coke managed to do buying sprees of other manufacturing companies to spread their market portfolio. Concentrate distribution is also a major issue to be concern about since the number of soft drink bottlers have constantly fallen by more than 2,000 during the 1970’s. As of 2009 there are only about 300 bottling plants remained in the country (Yoffie, David B. & Kim, Renee. May 26, 2011). The Soft Drink Interbrand Competition Act concluded exclusive territorial policies to eliminate intrabrand competition among different brands, limiting the bottling plant’s trade areas. The gradual decline of bottling facilities resulted to several programs initiated by the two companies to minimize its effect to the business. Bottling franchise also compete in terms of shelf space in supermarkets and the struggle to maintain strong branding efforts by employing “direct store door” delivery strategy.
Problem Statement
The aforementioned problems are actually just a result of the major issue and that is the century old competition between the Coke and Pepsi. Their efforts to remain on the top spot spawned corporate decisions that later on resulted to more problems in branding and marketing terms. During the Second World War, Coca-Cola gained a bigger advantage against Pepsi, by supporting the war troops and ensuring each of them access to the soft drink wherever they are. These efforts gained Coke exemptions over sugar regulatory conditions. Pepsi on the other hand surpassed its strongest nemesis by focusing their brand positioning in family values and targeted the youth sector as their market driver. In order to expand their dominions, Coke and Pepsi saw the potential of penetrating the international markets. Standardization of marketing mix was implemented across all territories covering their operations.
This too became a challenge since, different demographics required unique positioning strategy to strengthen brand recognition (Raza, Hassan October 29, 2010). When Coke announced that they will change their formula, it backfired and the angry Americans are protesting to bring the classic Coke back on the market. The problem with Coke before is their traditional business values didn’t get them to develop new products which is what Pepsi is doing. Coke’s reliance to marketing strategy and conventional approach to branding almost had them surpassed by Pepsi. They learned their lesson and came up with innovative approach in marketing. But still the battle for sales and market shares prevailed up to this days. There are ways on how the two companies can end the battle and focus on their core business values.
Analysis
Controlling the market share is the key element in this case study. Both Coke and Pepsi are doing their best to gain market share in industry. Fact is each company is developing new products and to be able to cut more on the market share. The effectiveness and creativity of each company's marketing efforts will determine the winner of the cola wars with regards to profits, sales, and customer loyalty. Not only that the two companies are constructing new strategies to sell their products, but they are also coming with ways to increase market share through other categories in the beverage industry. Coke hired experienced marketing executives that have exemplary track records. The company also implemented programs such as cross training managers which will prevent cliques within the company. Meanwhile, Pepsi has always been more aggressive, they act immediately, and always on the look out for new advertising ideas. Coke and Pepsi have relied on looking for new markets internationally. But, Coke has always been more successful in that effort. Both companies in foreign markets have followed a concept of offering products that consumer needs to be able to gain market share. In some countries, the consumers want a soft drink that has low sugar content without compromising the taste. Pepsi reacted and came up with Pepsi Max. There are successful new products and some that flopped. An effective solution to increase market share is by following consumer demands which is unique in every country. Next is to take action in developing new products that will meet the requirements of that particular area. They have to be always creative and update their marketing strategies. They should be willing to try new things in order to capture their “target markets”. To gain market share, a company has to take one-step ahead by learning what the consumer really wanted.
Recommendation
My recommendation is for both companies to make sure that they always do market research. Market research would allow them to get feedbacks from consumers which will be the basis for their product development. Next is for them to analyze the data as in-depth as possible then create new products based on the acquired data. Once product development started, they have to devise strategies on how they will introduce it to the marketplace immediately. Timing is critical for their business. With all of these factors in my opinion, should be taken into consideration that any company who wanted a bigger share in the market should know their customer more and use that knowledge of the demographics in making decision regarding product development.
Yoffie, David B. and Kim, Renee (May 26, 2011) Cola Wars Continues: Coke and Pepsi in 2010 p.2 Harvard Business School 9-711-462 PDF.
Raza, Hassan (October 29, 2010) Coke's International Marketing Strategy Web Retrieved March 23, 2012 from http://www.scribd.com/syed-hassan-raza-7176/d/40401882-Coke-s-International-Marketing-Strategy
