Coke and Pepsi - Assignment Example

Coke and Pepsi Question The move away from CSDs is a direct result of increasing health concerns over theuse of sugars and its alternatives. The most logical measure would be to develop more aggressive marketing strategies for CSDs and initiate a gradual move away from sugars and corn syrup sweeteners. Gradual transition is necessary because the companies also need to secure themselves financially, sudden changes may be detrimental to its financial health. For instance, the change may not be well received at first, and during that period heavy losses may be incurred.

The transition must also be well marketed as healthy and environmentally friendly.Question 2In terms of competition for market share, Sodastream hasn’t really threatened the domination of Coke and Pepsi. In the last 2 years, what Sodastream has simply done is to demystify the aura around soda and carbonated soft drinks. By selling syrup directly to its consumers, Sodastream has show the market that there really is nothing “fancy” about CSDs and that the capability to make your own soda at home should be more attractive, and cheaper, than having to buy readymade soda.

Sodastream has always branded and marketed itself as the best environmentally friendly option to Coke and Pepsi’s CSDs. The effect of this has been that the two giants have had to increase their advertising expenditure in order to maintain their positions, keep the status quo as it should be. Sodastream’s recent Super Bowl ad managed to ruffle feathers at Coke and Pepsi because of its insinuation that Coke and Pepsi’s level of environmental consciousness was poor and unfavorable. The ad managed to get more than enough attention, but did not run on CBS, which is a big advertising platform for both Coke and Pepsi.

In summary, Coke and Pepsi have had to be more aggressive in their advertising lest Sodastream continue eating into their market share. If Sodastream is able to continue growing CSDs would still dominate, but competition would be much stiffer. All factors considered, CSDs are not going anywhere anytime soon, regardless of the new entrants.Question 5The focus on emerging markets and new products should intensify, to improve both revenues and profits from new products such as non-carbonated drinks tailored to specific markets.

Exhibit 9 reveals that non-CSD drinks have as much potential as CSDs, it is only that CSDs have been the mainstay of the two companies for a long time. It is interesting to note that in places like Europe CSDs are not as popular as they are in America and Asia. Such markets can be used to sell non-CSD drinks aggressively while still marketing CSDs, creating a win-win scenario for Coke and Pepsi. Exhibit 10 also shows that despite the hype that is normally associated with them, it is CSDs’ gross margin for the brand that is one of the highest in the market.

Its retail margin only beats that of juice, and is lower than all the other major non-CSDs. This shows the potential of non-CSD is huge.Question 6Volumes are lower compared to CSDs, but they are more profitable in general than CSDs. Over time, increasing volumes for this segment ought to improve gross margins in absolute terms. Pepsi has a much stronger presence in the non-CSD market than Coke, while Coke’s CSD presence towers over Pepsi’s. Since there are only two realistic markets here (CSD and non-CSD) both companies only need to improve in their respective weak areas in order to realize higher gross margins.