Description
Coke or Pepsi to repeat their success with CSDs in the water segment? Or else a new competitive dynamics will emerge? Can you locate the future battlefields and weapons too?
Peep into the Future
Cola Wars- Possibility of repeating Coke-Pepsi Success
8/27/2011 IIM RAIPUR Alok Ranjan
Question - Is it possible for Coke or Pepsi to repeat their success with CSDs in the water segment? Or else a new competitive dynamics will emerge? Can you locate the future battlefields and weapons too?
A firm is said to have created a competitive advantage over its rivals if it has widen the drift
between the willingness to pay and costs its competitors have achieved. This was exactly the case, when the Cola War began in the late 1970s where Coke and Pepsi were out mastering each other in different market and distribution terrains. The targeting of both the cola giants was well established and segregated in terms of demography, geography, distribution system. The two primary competitors(Coca Cola & Pepsi), Coca-Cola, had been entrenched in the North American beverage market and was most commonly consumed by older generations. While, Pepsi had been typically been targeted to a younger audience. As the „Pepsi Generation? ages, PepsiCo North America was taking every proactive marketing action into the younger audiences to maintain the younger generations of soft drink consumption for decades to come. The domestic market for soft drinks has been traditionally split into 3 major channels: retail (primarily grocery) stores (62%), fountain outlets (25%), and vending machines (13%). Pepsi?s business is divided among those three channels at approximately 55%, 15%, and 30% respectively unlike Coca Cola which primarily channeled the CDs using the fountain outlets Till the mid 1980s the Cola War was in full swing and both Coca Cola and Pepsi where fighting for the throat shares of the beverage markets. With the growing concern for health issues, the sale of CSDs and junk foods was becoming difficult and more regulated. Several of these products were facing new market changes including a health conscious consumer movement. Thus, a great diversification of product lines was observed in both Pepsi and Coca Cola towards a healthy lifestyle . Within the PepsiCo Family was juice lines like Tropicana, Lipton Iced Tea and most recently The Quaker Oats Company, merged in 2001, just on the cusp of the health conscious movement. Brands include Quaker Oats products, Aunt Jemima products, and Rice-a-Roni products have reverberated the company acknowledgements of the healthier lifestyle. New Vision
With the onset of dwindling sales of CSDs the cola makers performed a series of strategic actions to revive the sales figures. To name a few were 1) 2) 3) 4) Build a strong portfolio of brands Increase fountain syrup sales. Leverage the company-owned bottling system. Focus on high-potential, underdeveloped international and domestic markets.
Even though PepsiCo. And Coca Cola are greatest players in the cola industry however, one observable fact is that the entire cola industry is a very small part of a larger industry. The industry
driven by perception, consumer motivations is “Industry of quenching Thirst” which made the coca industry as a unit, a competitor to other liquids like water, juices, iced tea , root beer, etc. which where a major substitute threat to cola drinks. As a result both Coca Cola and PepsiCo. Have been finding means and ways of breaking into Bottled Water Industry. Often , a question is asked that the factors likes Brand Perception, Customers ,Marketing , Product , Operations, Distribution Channels , Economies of Scale, -which contributed to CSDs sales- Will they be able to contribute to the success of Kinley & Aquafina also ,against many local players(geographical guerillas) in a widely unorganized industry.
PepsiCo Flavour/type
The Coca-Cola Company
Dr Pepper Snapple Group
Cola
Pepsi
Coca-Cola
RC Cola
Diet Cola
Diet Pepsi / Pepsi Light Pepsi ONE Pepsi Max
Diet Coke / Coca-Cola Light Tab Coca-Cola Zero
Diet Rite Diet RC Cola
Orange
Tropicana Twister Tango Slice
Fanta Minute Maid
Crush Sunkist
Lemon-lime
Teem Sierra Mist 7 Up (in countries other than US)
Sprite Lemon & Paeroa
7 Up (in US) Schweppes
Other citrus flavours
Mountain Dew Kas Izze
Mello Yello Vault Fresca Lift
Squirt Sun Drop Wink Orangina
Juices
Tropicana Dole
(prepackaged only, under license)
Minute Maid Fruitopia Simply Orange
Mott's Nantucket Nectars Snapple
Iced tea
Lipton
(ready-to-drink products only, under license fromUnilever)
Nestea
(manufactured by Nestle in the US and by a joint venture between Nestle and Coca-Cola elsewhere)
Snapple
Introduction
Water is the most important need for all living things after oxygen. The growing number of cases of water borne diseases, increasing water pollution, increasing urbanization, increasing scarcity of pure and safe water etc. has made the bottled water business just like other consumer items. Scarcity of potable and wholesome water at railway stations, tourists? spots, and role of tourism corp. etc. has also added to the growth of this industry. Early Movers like Bisleri etc. had already sensed the need and made a fortune out of this need. Coca Cola and Pepsi who did not had the core competency for entering this market , bought them and launched the Products under the names of Kinley & Aquafina respectively . Quoting Deepak Jolly, Spokesperson of Coca Cola , “The packaged water market constitutes 15 per cent of the overall packaged beverage industry, which has annual sales of at least $2.6bn. The Indian market is estimated at about Rs 1,000 Crore and is growing at whopping rate of 40 per cent. By 2010, it already reached Rs 4,000 -5,000 Crore with 33 per cent market for natural mineral water”.
Water demand in many countries will exceed supply by 40 per cent within 20 years due to the combined threat of climate change and population growth, so the customers are exposed to many alternates.
Bargaining Power of Customers
HIGH
HIGH
Threat of Substitutes
HIGH
Market Competitors
Kinley, Aquafina are “purified tap water” entering a marke t whe r e natural spr ing wat e r was leader “king
Bargaining power of Suppliers
LOW
Consumers spend 1,900 times more for bottled water than for tap water,
Threat of New Entrants
HIGH
Water Bottle Health Hazard The initial water bottles made by the bottlers were made from a chemical called Bisphenol A (BPA), which was originally developed as a synthetic estrogen. Which was reported to cause breast and prostate cancer, reproductive failures, heart disease, cognitive and behavioral problems, diabetes, obesity and asthma.
Critical Success Factors Working in the Industry
Demand is a progressive in nature: Bottled water fills a void created by government failure to address basic services. In many regions, the failure of governments to provide basic water services has opened the door to private companies and vendors filling a critical need. Technological Superiority: With the advent of the new , better techniques of water purification the entry cost is reduced and hence the companies like PepsiCo and Coke can enter this highly growing industry. Along with imported water treatment technology like activated carbon and ultra violet (UV) disinfection (Aquaguard), reverse osmosis (Reviva) and resins (Zero-B), the water treatment market is estimated to be worth around Rs 700 crore which is big market to exploit . Low Setup Cost & Low Raw Material Cost: The initial setup cost is comparatively low because of cheap technology and cheap raw material availability. In the drought prone regions like Kala Dera Kinley production plant virtually gets water (raw material) free of cost(cess it pays the government a little over Rs 5,000 a year in the three years 2000-2002, and Rs24,246 in 2003) when compared to profits earned. Packaging: The bottled water is famous because of its availability, quality assurance and portability. Packaging plays a critical role in the selling process. Ideally, the mineral water is sold in pouches and bottles of 330 ml, 500 ml, 1 litre , 20-50 litres depending upon the requirements and need.
Consumer based Factors: Wide Acceptance by Consumers The sales figures and market capture of the two giants have backed the acceptance of purified water over natural Spring Water
Sales
Bisleri
Coca Cola'sKinley Pepsi 's Aquafina Other
.
Brand Identity: They have created the favourable , trusted brand image in the market dominated by regional brands tied to spring water sources. Economies of Scales Achieved: They have built in economies of scale. They?re the market leaders in carbonated soft drinks, an industry six to seven times the size of the bottled water industry. They have nationwide state-of-the-art bottling facilities and blow molding operations. CSDs Distribution Channel, Marketing Support: With expertise in the sales and distribution they have the capability to influence the retailers as well as the end users to consume their water. However unethical, they can force the distribution channel to promote their product or else they could withdraw their CSDs sales from them. They?re experts in beverage advertising and promotion. They?ve established relations with and the power to influence the distribution trade—retailers, wholesalers, food brokers, etc. They support their brands with large advertising and promotion budgets. Conclusion Depending upon all the factors and forces existing in the industry , Pepsi and Coca Cola have a good amount of chance to create the same Competitive Advantage as in the Cola Industry . Definitely the backing from their Brand Image, Bottling expertise , Deep pockets, Marketing & advertisements will play critical role
(1454 words)
REFERENCES
Web Links i. ii. iii. iv. v. vi. vii. http://en.wikipedia.org/wiki/Cola_Wars ( on 25th August ,2011 at 20.52 ) http://www.gits4u.com/water/water16.htm (26th August 2011,18:51 ) http://abcnews.go.com/Politics/Health/story?id=8031551&page=1 (27th August,2011, 21.30) http://articles.timesofindia.indiatimes.com/2002-09-24/india-business/27316239_1_coke-skinley-coca-cola-s-kinley-coca-cola-india (27th August,2011, 21.45) http://abcnews.go.com/Politics/Health/story?id=8031551&page=1 (27th August ,2011, 22.11) Water Woes and Bottle Battles', Nityanand Jayaraman, (www.indiaresource.org ) (27th August 2011,22:30) http://infochangeindia.org/index2.php?option=com_content&do_pdf=1&id=5610 (27th August 2011,22:30)
Documents i. Strategic Marketing Plan for the United States -The Pepsi Carbonated Soft Drink Consumer Demand Promotion Bottled Water : A Perspective on the New Titans - Kathleen J. Ransome
ii.
doc_223317471.pdf
Coke or Pepsi to repeat their success with CSDs in the water segment? Or else a new competitive dynamics will emerge? Can you locate the future battlefields and weapons too?
Peep into the Future
Cola Wars- Possibility of repeating Coke-Pepsi Success
8/27/2011 IIM RAIPUR Alok Ranjan
Question - Is it possible for Coke or Pepsi to repeat their success with CSDs in the water segment? Or else a new competitive dynamics will emerge? Can you locate the future battlefields and weapons too?
A firm is said to have created a competitive advantage over its rivals if it has widen the drift
between the willingness to pay and costs its competitors have achieved. This was exactly the case, when the Cola War began in the late 1970s where Coke and Pepsi were out mastering each other in different market and distribution terrains. The targeting of both the cola giants was well established and segregated in terms of demography, geography, distribution system. The two primary competitors(Coca Cola & Pepsi), Coca-Cola, had been entrenched in the North American beverage market and was most commonly consumed by older generations. While, Pepsi had been typically been targeted to a younger audience. As the „Pepsi Generation? ages, PepsiCo North America was taking every proactive marketing action into the younger audiences to maintain the younger generations of soft drink consumption for decades to come. The domestic market for soft drinks has been traditionally split into 3 major channels: retail (primarily grocery) stores (62%), fountain outlets (25%), and vending machines (13%). Pepsi?s business is divided among those three channels at approximately 55%, 15%, and 30% respectively unlike Coca Cola which primarily channeled the CDs using the fountain outlets Till the mid 1980s the Cola War was in full swing and both Coca Cola and Pepsi where fighting for the throat shares of the beverage markets. With the growing concern for health issues, the sale of CSDs and junk foods was becoming difficult and more regulated. Several of these products were facing new market changes including a health conscious consumer movement. Thus, a great diversification of product lines was observed in both Pepsi and Coca Cola towards a healthy lifestyle . Within the PepsiCo Family was juice lines like Tropicana, Lipton Iced Tea and most recently The Quaker Oats Company, merged in 2001, just on the cusp of the health conscious movement. Brands include Quaker Oats products, Aunt Jemima products, and Rice-a-Roni products have reverberated the company acknowledgements of the healthier lifestyle. New Vision
With the onset of dwindling sales of CSDs the cola makers performed a series of strategic actions to revive the sales figures. To name a few were 1) 2) 3) 4) Build a strong portfolio of brands Increase fountain syrup sales. Leverage the company-owned bottling system. Focus on high-potential, underdeveloped international and domestic markets.
Even though PepsiCo. And Coca Cola are greatest players in the cola industry however, one observable fact is that the entire cola industry is a very small part of a larger industry. The industry
driven by perception, consumer motivations is “Industry of quenching Thirst” which made the coca industry as a unit, a competitor to other liquids like water, juices, iced tea , root beer, etc. which where a major substitute threat to cola drinks. As a result both Coca Cola and PepsiCo. Have been finding means and ways of breaking into Bottled Water Industry. Often , a question is asked that the factors likes Brand Perception, Customers ,Marketing , Product , Operations, Distribution Channels , Economies of Scale, -which contributed to CSDs sales- Will they be able to contribute to the success of Kinley & Aquafina also ,against many local players(geographical guerillas) in a widely unorganized industry.
PepsiCo Flavour/type
The Coca-Cola Company
Dr Pepper Snapple Group
Cola
Pepsi
Coca-Cola
RC Cola
Diet Cola
Diet Pepsi / Pepsi Light Pepsi ONE Pepsi Max
Diet Coke / Coca-Cola Light Tab Coca-Cola Zero
Diet Rite Diet RC Cola
Orange
Tropicana Twister Tango Slice
Fanta Minute Maid
Crush Sunkist
Lemon-lime
Teem Sierra Mist 7 Up (in countries other than US)
Sprite Lemon & Paeroa
7 Up (in US) Schweppes
Other citrus flavours
Mountain Dew Kas Izze
Mello Yello Vault Fresca Lift
Squirt Sun Drop Wink Orangina
Juices
Tropicana Dole
(prepackaged only, under license)
Minute Maid Fruitopia Simply Orange
Mott's Nantucket Nectars Snapple
Iced tea
Lipton
(ready-to-drink products only, under license fromUnilever)
Nestea
(manufactured by Nestle in the US and by a joint venture between Nestle and Coca-Cola elsewhere)
Snapple
Introduction
Water is the most important need for all living things after oxygen. The growing number of cases of water borne diseases, increasing water pollution, increasing urbanization, increasing scarcity of pure and safe water etc. has made the bottled water business just like other consumer items. Scarcity of potable and wholesome water at railway stations, tourists? spots, and role of tourism corp. etc. has also added to the growth of this industry. Early Movers like Bisleri etc. had already sensed the need and made a fortune out of this need. Coca Cola and Pepsi who did not had the core competency for entering this market , bought them and launched the Products under the names of Kinley & Aquafina respectively . Quoting Deepak Jolly, Spokesperson of Coca Cola , “The packaged water market constitutes 15 per cent of the overall packaged beverage industry, which has annual sales of at least $2.6bn. The Indian market is estimated at about Rs 1,000 Crore and is growing at whopping rate of 40 per cent. By 2010, it already reached Rs 4,000 -5,000 Crore with 33 per cent market for natural mineral water”.
Water demand in many countries will exceed supply by 40 per cent within 20 years due to the combined threat of climate change and population growth, so the customers are exposed to many alternates.
Bargaining Power of Customers
HIGH
HIGH
Threat of Substitutes
HIGH
Market Competitors
Kinley, Aquafina are “purified tap water” entering a marke t whe r e natural spr ing wat e r was leader “king
Bargaining power of Suppliers
LOW
Consumers spend 1,900 times more for bottled water than for tap water,
Threat of New Entrants
HIGH
Water Bottle Health Hazard The initial water bottles made by the bottlers were made from a chemical called Bisphenol A (BPA), which was originally developed as a synthetic estrogen. Which was reported to cause breast and prostate cancer, reproductive failures, heart disease, cognitive and behavioral problems, diabetes, obesity and asthma.
Critical Success Factors Working in the Industry
Demand is a progressive in nature: Bottled water fills a void created by government failure to address basic services. In many regions, the failure of governments to provide basic water services has opened the door to private companies and vendors filling a critical need. Technological Superiority: With the advent of the new , better techniques of water purification the entry cost is reduced and hence the companies like PepsiCo and Coke can enter this highly growing industry. Along with imported water treatment technology like activated carbon and ultra violet (UV) disinfection (Aquaguard), reverse osmosis (Reviva) and resins (Zero-B), the water treatment market is estimated to be worth around Rs 700 crore which is big market to exploit . Low Setup Cost & Low Raw Material Cost: The initial setup cost is comparatively low because of cheap technology and cheap raw material availability. In the drought prone regions like Kala Dera Kinley production plant virtually gets water (raw material) free of cost(cess it pays the government a little over Rs 5,000 a year in the three years 2000-2002, and Rs24,246 in 2003) when compared to profits earned. Packaging: The bottled water is famous because of its availability, quality assurance and portability. Packaging plays a critical role in the selling process. Ideally, the mineral water is sold in pouches and bottles of 330 ml, 500 ml, 1 litre , 20-50 litres depending upon the requirements and need.
Consumer based Factors: Wide Acceptance by Consumers The sales figures and market capture of the two giants have backed the acceptance of purified water over natural Spring Water
Sales
Bisleri
Coca Cola'sKinley Pepsi 's Aquafina Other
.
Brand Identity: They have created the favourable , trusted brand image in the market dominated by regional brands tied to spring water sources. Economies of Scales Achieved: They have built in economies of scale. They?re the market leaders in carbonated soft drinks, an industry six to seven times the size of the bottled water industry. They have nationwide state-of-the-art bottling facilities and blow molding operations. CSDs Distribution Channel, Marketing Support: With expertise in the sales and distribution they have the capability to influence the retailers as well as the end users to consume their water. However unethical, they can force the distribution channel to promote their product or else they could withdraw their CSDs sales from them. They?re experts in beverage advertising and promotion. They?ve established relations with and the power to influence the distribution trade—retailers, wholesalers, food brokers, etc. They support their brands with large advertising and promotion budgets. Conclusion Depending upon all the factors and forces existing in the industry , Pepsi and Coca Cola have a good amount of chance to create the same Competitive Advantage as in the Cola Industry . Definitely the backing from their Brand Image, Bottling expertise , Deep pockets, Marketing & advertisements will play critical role
(1454 words)
REFERENCES
Web Links i. ii. iii. iv. v. vi. vii. http://en.wikipedia.org/wiki/Cola_Wars ( on 25th August ,2011 at 20.52 ) http://www.gits4u.com/water/water16.htm (26th August 2011,18:51 ) http://abcnews.go.com/Politics/Health/story?id=8031551&page=1 (27th August,2011, 21.30) http://articles.timesofindia.indiatimes.com/2002-09-24/india-business/27316239_1_coke-skinley-coca-cola-s-kinley-coca-cola-india (27th August,2011, 21.45) http://abcnews.go.com/Politics/Health/story?id=8031551&page=1 (27th August ,2011, 22.11) Water Woes and Bottle Battles', Nityanand Jayaraman, (www.indiaresource.org ) (27th August 2011,22:30) http://infochangeindia.org/index2.php?option=com_content&do_pdf=1&id=5610 (27th August 2011,22:30)
Documents i. Strategic Marketing Plan for the United States -The Pepsi Carbonated Soft Drink Consumer Demand Promotion Bottled Water : A Perspective on the New Titans - Kathleen J. Ransome
ii.
doc_223317471.pdf