04/13/2023 Stockholm School of Economics - Media Management 2011 1

The Coke War 2.0

Nadine NordlandSven Ahrens

Anton IsraelssonFredrik Kihlberg

04/13/2023 Stockholm School of Economics - Media Management 2011 2

Five Forces Analysis shows favorable position of CPs1

Suppliers (low)

• Low cost contribution• Commodities• Supplier abundance

Entrants (low)

• Unequal access to bottlers (softdrink intercompetition act)

• Economies of scale/consolidation• Low capital investment upfront

Buyers (low)

• Bottlers• Fountains• Corporate enforcement

Subsitution (low-medium)

• Lack of alternatives• Mature market• Drinking behavior

Competition (high)

• Duopoly Coke/Pepsi

04/13/2023 Stockholm School of Economics - Media Management 2011 3

Bottlers have to bear more marketing expenditure2

Suppliers (high)

• Forced supply• BUT can be useful in negotiations• Franchised bottling networks and

vertical integration

Entrants (low)

• High capital investment upfront• Relationship with retailers needed• Exclusive territories

Buyers (medium)

• Difficult to switch supplier• CSD with high share of sales@retail

Subsitution (medium)

• Non-CSD market growing, costly need for adaption

• Fountain-only not possible

Competition (low)

• Geographical exclusivity• Consolidation, few but

large actors

04/13/2023 Stockholm School of Economics - Media Management 2011 4

The difference in profitability is caused by cost distribution2

So, why is profitability so different in these industries?

• Bottler carries most of the cost• Result of the unequal distribution of power

in the CP-Bottler relationship• High capital investments upfront

04/13/2023 Stockholm School of Economics - Media Management 2011 5

Both challenges and opportunities ahead3

Challenges for Coca Cola and Pepsi?• New beverages• Health trends• Emerging markets• Political instability• Economical crises

Q

A

Effects of the war on the industry?• Revenues positively• Profitability negatively

QA

Factors affecting industry profitability?

• Raw material prices• Price-sensitivity of consumers• Countries with economical crises

Q

A