Dr. Samuel Kelly
20 September 2016
Cola Wars Continue: Coke and Pepsi in 2010: Porter’s 5 Forces
The Carbonated Soft Drink Industry (CSD) can be examined by learning about the fierce competition between Coke and Pepsi that resulted in an increase of consumption of CSDs of 3% per year annually in the U.S. between 1970 to 1990s. However, a discovery in health issues and the rise of substitute drink options has forced Coke and Pepsi to adopt alternative strategies to remain competent.
The CSD industry can further be understood by applying Porter’s five forces model to the CSD industry.
Rivalry among existing firms propelled the CSD industry to new heights during the 20th century. Coke and Pepsi utilized each other as motivation for implementing new strategies, and according to Roger Enrico, former CEO of Pepsi, “Without Coke, Pepsi would have a tough time being an original and lively competitor.” Pepsi utilized the slogan, “Pepsi Generation” as a marketing campaign in 1963, which targeted the young and the young at heart. They then began producing their bottles at twice the size of Coke’s and launched the “Pepsi Challenge” strategy in 1974 to prove that consumers actually preferred Pepsi to Coke. Coke, meanwhile, began expanding overseas, which would benefit them greatly in the l990s and 21st century when they began more overseas operations.
The threat of entry in the CSD industry discouraged many private labels from entering the industry because Coke and Pepsi had long established their brand and product as the premier items in the industry. In addition, there were high investments costs for concentrate plants that could reach between $50-$100 million, and so these large sunk costs could be difficult to repay if the new private labels were unable to make profits. There was also a great level of shelf space competition because Coke and Pepsi had produced many lines soft drinks that already dominated a large portion of the CSD...