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David Stout David Stout Nov 4, 2023Nov 4 at 10:39am Manage Discussion Entry Hi Gonzalo, As you mentioned, the CSD industry has been quite profitable due to competitors having economies of scale, massive production capabilities, and global distribution networks. These combined with capital requirements have created high barriers to entry for the industry. Thus, decreasing the threat of new entry in the industry. The profitability of the industry is driven by the lower costs of production (thanks to their strategies to consolidate and renegotiate pricing contracts) that lead the higher margins because of the their ability to sell products at a higher price. I had a different take on supplier power. Given that concentrate producers are suppliers too, I thought a lot of bargaining power between suppliers and firms in the CSD industry. For example, Coke and Pepsi leveraged their size and power to renegotiate the contracts with the concentrate makers and bottlers (i.e., 1987 Master Bottler Contract) that controlled costs on both ends as prices were adjusted according to fluctuations in material costs, CPI, etc. in addition to maintaining favorable and long-term relations with other suppliers that could help predict future financial performance, facilitate supply chain issues, demand, etc. Additionally, I have to disagree with your assessment on the threat of substitution. You said "substitute products have a low threat as well since there are limited alternatives to carbonated soft drinks." However, I think substitution is quite high in the industry considering there is little product differentiation (similar flavors/tastes, quality, price, etc.). While there is brand loyalty, there are many things that contribute to the substitution like pricing, marketing (is it near the register/convenient as I make a quick stop?), health trends, etc. I, too, thought PepsiCo was best positioned to capitalize on current industry trends. Their success in the recent years of the case study speaks to their strategy and competitive advantage at the time (like diversifying industries into the snack industry as growth in the CSD industry stalled thanks to healthier trends, etc.). Unlike, Coke who was having a reversal of fortune as Pepsi was flourishing. I like that you mentioned PepsiCo's commitment to sustainability and social/environmental responsibility as I have not seen many others reference this when it is becoming increasingly important to consumers in the last 20th century/early 21st century. Overall, I enjoyed reading your post. Kudos! Kind regards,
David Danielle Mills Danielle Mills SundayNov 5 at 9:35pm Manage Discussion Entry Hi Gonzalo, I enjoyed reading your response. In your assessment of the ongoing Cola wars, you've presented a balanced view of the rivalry between Coca-Cola and PepsiCo, acknowledging the varying measures of success and the adaptability required to thrive in the industry. Your evaluation of which firm is best positioned to capitalize on current industry trends, with a focus on PepsiCo's diverse portfolio and sustainability efforts, is well-founded and forward-looking. Great response. Christian Cabrera Christian Cabrera SundayNov 5 at 11:40pm Manage Discussion Entry Hi Gonzalo, Great post! Your analysis of Porter's Five Forces model delivers a great comparison of the concentrate business and the bottling business. What interests me most about your post is why you believe that PepsiCo is better positioned to capitalize on on the current industry. I originally thought that Coca Cola was in a better position because of their financial advantage and some better positioning in the weight loss category. With that being said, it is hard to argue with your argument for PepsiCo, with their added diversification with Gatorade, Tropicana, Quaker Oats, and Frito-Lay snacks. I would now lean with PepsiCo. Great post!
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