1. 2304 Media Management - Cola Wars case
After analysis of the CSD
(carbonated soft drinks) and
the bottler industry one can
conclude that the threat of
external forces are less present
in the CSD industry than in
the bottler industry. This
results in higher attractiveness
for the CSD industry.
Group 7a:
Erik Bengtson ebengt@kth.se
Gustaf Sundlöf 21174@student.hhs.se
Richard Gullberg rgul@kth.se
Allison Schiffman 92175@student.hhs.se

2. Presentation outline
• CSD industry analyzed according to Porters
Five Competitive Forces
• Conclusion
• Bottler industry analyzed according to Porters
Five Competitive Forces
• Conclusion and comparison
• Future challenges for the industry

3. Threat of new
entrants
Bargaining power
CSD Bargaining power
of suppliers
industry of buyers
(Coke, Pepsi, etc)
Threat of
substitute products
or services

4. CSD industry analysis
CSD
Products relevant: Carbonated beverages industry
(Coke, Pepsi, etc)
Geographic scope: United States market
Level of rivalry: Saturated market resulting in high
rivalry
Major actors Coca-Cola and Pepsi accounted for 76%
of the US CSD market share in 2000.
(Yoffie, 2004. Cola Wars Continue)

5. Bargaining power of suppliers Bargaining power
of suppliers
Size matters - power of major corporations like Coke and
Pepsi provides a beneficial advantage in negotiations.
Standardized commodity products result in many
suppliers lowering switching costs for CSD companies.
Bargaining power of suppliers -> low
Threat of new entrants Threat of new
entrants
Relatively low capital investment required
Major capital investment needed for market success
(marketing, building brand equity) -> relatively low threat

6. Bargaining power of buyers Bargaining power
of buyers
Concentrate producer -> Bottler -> retailer -> customer
Hence, bottlers are the buyers
Franchise agreements with Coca-Cola and Pepsi
For successful sales to retailers, bottlers are heavily
dependant on the major CSD producer brands -> low
bargaining power
Threat of
Threat of substitutes substitute products
or services
Substitutes: all non-alcoholic beverages (non-CSD)
Given a fixed consumption per capita, substitutes like
bottled water and juices have kept rising, whilst the
CSD industry has slowed down since the late 1990’s.
-> high threat of substitutes

7. Conclusions
Porter analysis indicates multiple beneficial forces
(suppliers, buyers and new entrants).
The CSD market has been a very lucrative and
attractive industry for the past century.
However emerging threats of substitutes and increasing
rivalry within the industry, makes for a uncertain profit
potential given the current strategy.

8. Threat of new
entrants
Bargaining power
Bottler Bargaining power
of suppliers
industry of buyers
Threat of
substitute products
or services

9. Bottler industry analysis
Bottler
industry
Products relevant: bottling service of
CSD concentrate
Geographic scope: United States market
Level of rivalry: Many bottlers of similar size, high exit
barriers due to committed resources resulting in high
level of rivalry.

10. Bargaining power of suppliers Bargaining power
of suppliers
Heavily dependent on CSD producers result in very
high bargaining power of suppliers.
Threat of new entrants Threat of new
entrants
High capital investment to establish bottling plant and
long term contracts for existing bottlers result in low
threat of new entrants.

11. Bargaining power of buyers Bargaining power
of buyers
Buyers sell the bottled products to end customers and
thereby control the exposure of bottled products
directly influencing sales. High bargaining power of
buyers.
Threat of substitutes Threat of
substitute products
or services
No apparent threat of substitutes. Low
Soda Stream?

12. Conclusions and comparison
Profitability differs greatly. Bottler profitability is heavily
affected by both suppliers and buyers high bargaining
power, resulting in low margins. CSD producers are less
influenced negatively by external forces leaving them
with higher margins.
After five-force analysis one can conclude that the CSD
industry is more profitable than the bottling industry.
Attractiveness based on profitability is greater with the
CSD producers.

13. Future challenges for the industry
->1990’s beneficial rivalry
Recently saturated market may decrease profits due to
fiercer rivalry.
Health issues (sugar related diseases) -> substitutes
Environmental issues (plastic bottles) -> bottler margins
decrease due to change of material
”Finding a new pie” to avoid price competition

14. Sources:
Readings:
Porter, M.E., ”The Five Competitive Forces That Shape
Competitive Strategy”, HBR, 2008.
Yoffie, D.B., ”Cola Wars Continue: Coke and Pepsi in the
Twenty-First Century”.
Videos:
Porter, M.E., ”The Five Forces that Shape Strategy”: http://
www.youtube.com/watch?v=mYF2_FBCvXw