The beverage industry has been experiencing tremendous growth for a long time now. This is due to the increased consumption of convenience food in all parts of the world. However, this industry has been dominated by two companies leading to what has been termed as oligopoly by many people. Coca-cola and Pepsi have dominated the market and dictated business trends in the industry. The demand for non-alcoholic beverages has been driven by the taste of the consumer and other demographic issues. However, the profitability of each company depends on the effectiveness of its marketing strategy. The beverage industry produces nonalcoholic and alcoholic beverages, food flavorings, and other spices
Coca Cola and Pepsi
These are the two main players in the beverage industry. Their competition in this industry has dictated the direction the industry has taken for a long time now. The two companies dominate more than 70% of the world beverage market.
Coca-cola and Pepsi have been recording a growth margin that has dictated the growth of the industry. Both companies have been recording increasing sales all over the world although they are involved in stiff competition. The industry has been recording a growth of about 4.2% and is expected to maintain the same growth up to 2012. Research by INFORUM has forecasted a decreasing growth in the industry from the current 5% to 4% by 2012, but the growth is expected to be even. This growth will be dependant on demand which is limited by demographics, labor market equipment, and the risk posed by higher prices due to increasing world inflation which may lead to reduced consumption.
As per the data reviewed above, the industry has been operating at a profit margin. Although their sales and revenues have been fluctuating now and then, they have posted a constant profit margin year after year. Coca-cola has been posting an annual turnover of about $70 billion due to its diversified range of products. Compared to their competitor like Schweppes the two companies have been operating a huge turnover margin. According to current market research data, coca-cola mineral water brand Dasani and Peris Co’s Aquafina, Gatorade, and Tropicana have been the brands that have recorded the highest growth rate in the last two years.
The growth and dominance of the two companies have been achieved by putting in place strategic issues that have enabled them to achieve such a high growth rate. As was mentioned earlier, survival in the beverage market depends on how a company responds to the geographical needs of the world and the satisfying the customer’s taste. The two companies have moved very fast to ensure that they put in place strategies that help them have a competitive edge over the others.
One of the strategic issues that both companies have responded to very well has been putting in place new brands which respond to the needs of the market. They have moved with the health of the market. Both companies have come up with diet drinks in response to the needs of the market.
The growth of the two companies has also been enabled by the way they have responded to the change in marketing. While coca-cola has been busy building its global market empire, Pepsis has been busy acquiring small beverage produces. All these have been growth strategies aimed at positioning themselves in the beverage market. However, coca coal has also been involved in acquisition currently acquiring Glaceau and forming other distribution partners.
Both companies have a large market share in the beverage industry. Coca-cola controls about 41% of the US beverage market with Pepsi having about 25% share in the market as well. However, worldwide Coca-cola has a huge market share with 35% market share in Canada, 56% in Russia, 85% in Brazil, and other countries. Compared to Pepsi, Coca-cola has a large world market share. Coca cola has been able to achieve this by offering diversified products in the beverage market. Coca-cola produced also have a large market share compared to Pepsi products. Diet Coke is currently the leading market brand with a 20% market share compared to Pepsi brand with 13%. However, in recent year, most of the products from Coca-Cola have remained flat with those from Pepsi recording an increased growth. Both companies have been rocked in the Cola Wars. While Pepsi launched Lemon-flavored Pepsi, Coca-Cola responded by producing Diet Coke. (Levy, 2007)
The beverage industry is one of the industries that are responding rapidly to globalization issues. Coca-Cola has adopted a distribution model in which it has centralized production of the raw materials which are then transported to be packaged in individual countries. This has ensured that the company controls its distribution channel. At the same time, coca-cola has also engaged in the acquisition of other small companies which it uses as its distributor. Coca-cola acquires the controlling majority in these companies and but allows them to retain their management under the control of coca-cola
On the other hand, Pepsi seems to be very much keen on merging and acquiring new companies but does not keep very much to the policy of centralized production.
Industry profitability- growth margin
Both companies have some of the most famous brand names in the world. Coca-Cola is perhaps the most known brand in the world. Apart from coca-cola, the company has other brands including Fanta, Sprite, Stoney, Krest, Diet Coke, and others. It also produced food colors and spices. On the other hand, Pepsi is known for its brands Pepsi, Pepsi cola, Pepsi Lemon, and others. Compared to Pepsi, Coca-Cola has some of the most trusted brands in the world.
Investment in research and development
Both companies have made a lot of investment in research and development. They carry out market research to ensure that they respond well to customers’ demand. This has enabled both companies to compete with each other effectively.
I would give three recommendations to the two companies being leaders in the beverage industry.
I would recommend them to be more mindful of the health of their customer. With the current trend in obesity and overweight, I would recommend to them to play a great role in ensuring the health of their drinks.
I would recommend them to be involved in more social corporate responsibility issues to help the community more that they are doing.
I would recommend them to merge in some areas where both find it difficult to position themselves in the market.
Coca Cola Financial information. 2008.
INFORUM (2008): Soft Drink and Ice Manufacturing Growth Even. Industrial analysis.
Levy, E. (2007): Coke, Pepsi Losing Market share. New York Times.
Pepsi Brands. 2008.