Cola Wars

Bottler Consolidation and spin-off.

Relations b/w coke and its franchised bottlers had been strained since the contract renegotiation of 1978. Coke struggled to persuade bottlers to cooperate in marketing and promotion program, upgrade plant and equipment and support new product launches.

The cola war had weakened the independent franchised bottlers, thus at a july 1980 dinner with coke’s fifteen largest domestic bottlers, CEO Goizueta announced a plan to refranchise bottling operations. Coke began Buying up poorly managed bottlers, infusing capital and quickly selling them to better performing bottlers.

Coke’s Bottler acquisitions had increased its long term debt to approximately $1 billion.

In 1986, on the intitative of Doug Ivester, who later became CEO, the company created an independent bottling subsidiary, Coca Cola Enterprises (CCE) and sold 51% of its shares to pubic while retaining the rest.

By 2000, CCE was Coke’s largest bottler with annual sales of more than $14.7 billion, handling 70% of coke’s North America Volume.

In the late 1990s, Pepsi also adopted the model. In april 1999 the Pepsi Bottling Group (PBG) went public with Pepsi retaining a 35% equity.By 2000, PBG produces 55% of PepsiCo beverages in North America and 32% worldwide.

Adapting to The Time

In 2000, U.S sales volume registered only a 0.2% increase. Concurrently, financial crisis in various parts of the world left Coke and Pepsi over invested and under-utilized. Both Coke and Pepsi turned their attention to bolstering domestic markets, diversifying into non-carbonated beverages(Non- carbs) and cultivating international markets.

Balancing Market Growth, market share and profitability in the U.S

* During the early 1990s, Coca Cola and PepsiCo bottlers employed a low price strategy in the supermarket channel in order to compete more effectively with high quality, low price store brands.

As the threat of the low priced brands lessened, both Coke and Pepsi increased...