The Soda IndustryThe Soda IndustryBrought to You By:Brought to You By:

Heather TerryHeather Terry

Bernie MelchorBernie Melchor

Gerard YparraguirreGerard Yparraguirre

Poyeh HadjianPoyeh Hadjian

Anthony KimaniAnthony Kimani

Nicholas MucksNicholas Mucks

IntroductionIntroduction

Natural Mineral Water and CarbonationNatural Mineral Water and Carbonation The first modern sodasThe first modern sodas The ABAThe ABA Economic EffectsEconomic Effects

Dominant Economic ForcesDominant Economic Forces• 1. Market Size1. Market Size• 2. Competition2. Competition • 3. Stage in Life Cycle3. Stage in Life Cycle • 4. Number of Companies in the Industry4. Number of Companies in the Industry• 5. Industry Profitability5. Industry Profitability

Dominant Economic ForcesDominant Economic Forces

Market SizeMarket Size• The soft drink industry has been The soft drink industry has been

dominated 3 Companiesdominated 3 Companies1.1. Coca Cola : 44%Coca Cola : 44%2.2. Pepsi : 31%Pepsi : 31%3.3. Cadbury Schweppes: 15%Cadbury Schweppes: 15%4.4. Cott: 3.1%Cott: 3.1%5.5. Hansen: 0.3%Hansen: 0.3%

Dominant Economic ForcesDominant Economic Forces

CompetitionCompetition

• Competition is increasingly fierce among the big competitors. The Competition is increasingly fierce among the big competitors. The leaders in the industry are Coca Cola, Pepsi and Cadbury leaders in the industry are Coca Cola, Pepsi and Cadbury SchweppesSchweppes

• Coca Cola, the market leader has over 350 different brands in over a Coca Cola, the market leader has over 350 different brands in over a hundred and eighty countries. Their most popular brands are Coke, hundred and eighty countries. Their most popular brands are Coke, Diet Coke, Fanta, Sprite, Coke Zero and many moreDiet Coke, Fanta, Sprite, Coke Zero and many more

• Pepsi, the second largest and Coca-Cola’s biggest competitor also Pepsi, the second largest and Coca-Cola’s biggest competitor also has an array of soft drinks in its name. The most popular are Pepsi, has an array of soft drinks in its name. The most popular are Pepsi, Diet Pepsi, Mountain Dew, Mirinda, Pepsi One and many more Diet Pepsi, Mountain Dew, Mirinda, Pepsi One and many more

Dominant Economic ForcesDominant Economic Forces

Stage in Life CycleStage in Life Cycle • The life cycle of popular soft drinks like Pepsi, The life cycle of popular soft drinks like Pepsi,

Coke, Sprite, etc. is in the Coke, Sprite, etc. is in the maturity stagematurity stage, the , the popularity of these products is still strong, popularity of these products is still strong, however; there is an increasing trend towards however; there is an increasing trend towards healthier soft drinkshealthier soft drinks. .

Dominant Economic ForcesDominant Economic Forces

Reasons For the Maturity StageReasons For the Maturity Stage Recently, there has been a growing demand for alternatives to Recently, there has been a growing demand for alternatives to

sugar-heavy soft drinks. “Regular” soft drinks today contain high sugar-heavy soft drinks. “Regular” soft drinks today contain high fructose corn syrup, and have been blamed for contributing to fructose corn syrup, and have been blamed for contributing to various diseasesvarious diseases

A study from Harvard shows that soft drinks may be responsible for A study from Harvard shows that soft drinks may be responsible for the doubling of obesity in children over the last 15 yearsthe doubling of obesity in children over the last 15 years

• As the soda pop fight rages on companies are increasingly relying As the soda pop fight rages on companies are increasingly relying on new products like non carbonated beverages like Fruit punch, on new products like non carbonated beverages like Fruit punch,

Lemonade, Iced tea, etc. to take them to the next levelLemonade, Iced tea, etc. to take them to the next level..

Dominant Economic ForcesDominant Economic Forces

Industry ProfitabilityIndustry Profitability • The soft drink industry will remain profitable as long as companies likeThe soft drink industry will remain profitable as long as companies like

Coca-Cola and Pepsi continue to develop new products to remain Coca-Cola and Pepsi continue to develop new products to remain

competitive, improve technology (especially in production) to reduce costcompetitive, improve technology (especially in production) to reduce cost

per unit per unit

• According to People’s Daily Newsletter; Coca-Cola made a profit According to People’s Daily Newsletter; Coca-Cola made a profit

of $2.71Billion last year in the first six months, Pepsi did as well,of $2.71Billion last year in the first six months, Pepsi did as well,

taking into consideration of its size compared to Coca-Cola by taking into consideration of its size compared to Coca-Cola by

bringing home an estimated $1.27 Billion just in the first six bringing home an estimated $1.27 Billion just in the first six

months.months.

Dominant Economic ForcesDominant Economic Forces

Six Forces Analysis ISix Forces Analysis I

Threat of New EntrantsThreat of New Entrants Economies of ScaleEconomies of Scale Product DifferentiationProduct Differentiation Capital RequirementsCapital Requirements Access to Distribution ChannelsAccess to Distribution Channels

Six Forces Analysis IISix Forces Analysis II

Rivalry Among Existing FirmsRivalry Among Existing Firms Number Number Rate of Industry GrowthRate of Industry Growth Product CharacteristicsProduct Characteristics

Threat of Substitute ProductsThreat of Substitute Products

Six Forces Analysis IIISix Forces Analysis III

Bargaining Power of BuyersBargaining Power of Buyers

Bargaining Power of SuppliersBargaining Power of Suppliers

Relative Power of Other StakeholdersRelative Power of Other Stakeholders

Competitive Position of Major Competitive Position of Major Companies and Competitor AnalysisCompanies and Competitor Analysis

Competitive Position of MajorCompetitive Position of Major Brief overview of some major companies Brief overview of some major companies

in the soda industryin the soda industry

Competitive Position of Major Competitive Position of Major CompaniesCompanies

In terms of 2005 US Market ShareIn terms of 2005 US Market Share

2005 Market Share (United States)according to Beverage-Digest.Com

43.10%

31.40%

14.60%

5.40%

0.30%

5.20%

Coca-Cola Co.

Pepsi-Cola Co.

Cadbury Schweppes

Cott Corp

Hansen Natural

Rest of the industry*

* Combined market share of National Beverage, Red Bull, Big Red, Rockstar, Monarch Co., and Private lavel/other

Competitive Position of Major Competitive Position of Major Companies (cont’d)Companies (cont’d)

Top 3 Companies: Coca-Cola Co., Top 3 Companies: Coca-Cola Co., PepsiCo., and Cadbury Schweppes = PepsiCo., and Cadbury Schweppes = 89.1% of U.S. Market Share89.1% of U.S. Market Share

Redbull energy drink sales surging during Redbull energy drink sales surging during 2004-20052004-2005

Brand recognitionBrand recognition Exclusive ContractsExclusive Contracts

Competitor AnalysisCompetitor Analysis

Brief description of Coca-Cola Co., Brief description of Coca-Cola Co., PepsiCo., Cadbury Schweppes., Cott PepsiCo., Cadbury Schweppes., Cott Corp., and Hansen NaturalCorp., and Hansen Natural

What sets a company apart from the top What sets a company apart from the top competitor, Coca-Cola.,competitor, Coca-Cola.,

Industry TrendsIndustry Trends

Less Soda, more AlternativesLess Soda, more Alternatives Increase in bottled Water ConsumptionIncrease in bottled Water Consumption Energy and Sports DrinksEnergy and Sports Drinks Portable PackagingPortable Packaging

TRENDS: TRENDS: Less Soda, more AlternativesLess Soda, more Alternatives

Increased sales in alternative beverages caused drop in carbonated Increased sales in alternative beverages caused drop in carbonated beverages.beverages.

TRENDS:TRENDS:Simply Water, Simply DeliciousSimply Water, Simply Delicious

1990’s water sales: $5.7 billion1990’s water sales: $5.7 billion

2004’s water sales: $9.2 billion2004’s water sales: $9.2 billion 16% annual growth rate16% annual growth rate Projected to be top selling drink by 2010Projected to be top selling drink by 2010

TRENDS:TRENDS: Energy and Sports Drinks Energy and Sports Drinks

Marketed to teenagers & young adults Marketed to teenagers & young adults image and brand loyalty is everythingimage and brand loyalty is everything

Over 10 billion liters sold in 2005Over 10 billion liters sold in 2005 Pepsi’s Gatorade dominates Sports DrinksPepsi’s Gatorade dominates Sports Drinks Red Bull holds 70% of Energy DrinkRed Bull holds 70% of Energy Drink Energy Drinks estimated to grow 30% by Energy Drinks estimated to grow 30% by

end of 2006end of 2006

TRENDS:TRENDS:Portable PackagingPortable Packaging

PET bottles are small and easy to storePET bottles are small and easy to store Companies fill end of registers with Companies fill end of registers with

portable 8oz bottles to entice sales.portable 8oz bottles to entice sales. Companies increased sales with PET Companies increased sales with PET

bottles by selling their portability and light bottles by selling their portability and light weight qualities.weight qualities.

Key Success FactorsKey Success Factors

MarketingMarketing Targeting younger generationTargeting younger generation Market monopolyMarket monopoly

InnovationInnovation Able to adapt to trend changes and customer Able to adapt to trend changes and customer

needsneeds GlobalizationGlobalization

U.S. market is saturated with soft drinks.U.S. market is saturated with soft drinks. Ability to be successful in global market.Ability to be successful in global market.

Industry Prospects and Industry Prospects and Overall AttractivenessOverall Attractiveness

Factors Making the Industry AttractiveFactors Making the Industry Attractive Mature market; stable and good investmentMature market; stable and good investment Expanding product lines allow for growthExpanding product lines allow for growth

Factors Making the Industry UnattractiveFactors Making the Industry Unattractive Industry is oversaturatedIndustry is oversaturated

Future Prospects of the IndustryFuture Prospects of the Industry Changing consumer tastes will change productsChanging consumer tastes will change products

ConclusionsConclusions

PastPast Present Present FutureFuture