cola wars - Caitlin Vodopia Strategic Mgt Individual Case 1...

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Caitlin Vodopia Strategic Mgt Individual Case 1 Cola Wars Continue: Coke and Pepsi in 2006 1. Historically, the soft drink industry has been very profitable because U.S. and worldwide carbonated soft drink (CSD) consumption rose steadily year after year from 1975 through the mid 1990s. As shown in exhibit 1 of the case, the gallons of carbonated soft drinks drank as a share of total beverage consumption has steadily increased from just 12.4% in 1970 to its peak of 29.6% in 1996. CSD companies were able to increase revenue by selling more of the same products to their consumers. Also fueling profit growth were the increasing availability of CSDs and the new varieties such as diet and flavored CSDs. CSDs were made available at supermarkets, nationwide retailers such as Wal-Mart, gas stations, fountain locations, and convenience stores, allowing more opportunities for customers to buy the product, thereby increasing profits. New diet and flavored varieties also helped capture not only new customers, but provide substitutes for existing customers if they did not want the traditional cola flavor. This made customers continue to buy more CSD products as opposed to non-CSD products, driving profit growth. The last input to the historical profitability of the CSD industry lies in the declining real prices of CSDs. Although there were many other beverage options available, Americans increased their consumption of CSDs while decreasing their consumption of other beverages, as shown in exhibit 1.
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