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  Allen Rajesh Sanders (DM15206) Coca-Cola Versus Pepsi cola 1.   Why was it that concentrate producers have been so profitable? The main role of a concentrate producer was to blend the raw materials i.e. ingredients together, package it in a plastic container and then send it to the bottler. They added artificial sweeter in the case of Diet Coke. The entire process required minimal investment in terms of infrastructure but the profits were much larger in comparison. 2.   Evaluate the Philip Morris acquisition of seven-up. In 1978 Phil Morris acquired Seven-up due to its high brand rating and strong distribution network but this decision backfired and resulted in heavy losses which eventually lead to them quiting the brand in 1985. At the time of purchase there was wide spread consumption and similarly there was wide availability, this resulted in extremely high competition. There was also the risk of market saturation at the time. This was a risk the company was willing to take. But from management’s point of view it  was a well calculated and thought out decision. 3.   What is happening in the soft drink industry? How do the major developments affect smaller competitors? In 1980 Coca-cola began buying up smaller bottling plants. It was shortly after this that Coca-cola enterprise was established with the aim of putting together as many bottling plants as possible. This was shortly followed by the Pepsi group with the formation of Pepsi bottling group (PBG). The bottle consolidation that happened soon after caused the smaller bottling companies to eventually sell out to the bigger ones. As a result smaller concentrate producers had difficulty in tying up deals with bottling plants and in a sense it was a dead end for them. 4.   Why was coke able to dominate the world soft drink industry by 1950? Why was coke so extraordinarily profitable? How was Pepsi able to gain share in the 1950s? In the 1960s and early 1970s? After the Pepsi challenge? Consider each period separately, and be specific.    Coca-cola in the early days followed the franchise bottler system. The aim was to have a bottle available at arm’s reach for the customer. Several innovations like open -top coolers, fountains etc helped Coca- cola dominate the softdrink industry by the 1950’s      1950: The introduction of the 26 ounce bottle and expansion of their presence in supermarkets from 10,000 in 1945 to 32,000 in 1962.    1963: Targeted the youth & young at heart including similarly themed advertising. This helped reduce the ratio to 2: 1.    1970: Improvements made with the bottlers over a period of time eventually made them bigger than Coca-colas bottlers. Cost of the concentrate was 20% lesser than Coke. Pepsi also introduces variation like Mountain dew, Diet Pepsi etc.     Pepsi challenge: The various marketing exercises conducted by Pepsi helped them pass Coke by 1.4% in food stores market share for the first time. 5.   What should Pepsi do next?    In terms of throat capacity both Pepsi and Coca Cola have taken major strides in the right direction over the years by their various acquisitions. E.g. In 2000 Coke had over 200 different brands in Japan alone.    So the next stage of this battle will be fought on the optimization front. Pepsi as a brand would have to improve its entire operational strategy. Right from the sourcing of raw ingredients to the eventual rollout including the bottlers licensing agreements. 6. Was the Pepsi Challenge a good idea? Yes it was. The main aim of the Pepsi challenge was not only to prove Pepsi was superior to coke in terms of taste but also to draw consumers away from local brands who were otherwise reluctant. The blind tests in most cases resulted in positive outcomes which eventually lead to Pepsi passing Coke in by 1.4% market share in food store sales. Due to the success there was a repeat of the Pepsi challenge down the line.
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