Pricing Strategy of Soft Drinks Today Essay

We will basically focus on the pricing strategies adopted by these two affluence companies, how the change in the strategy of 1 of them reflects in the strategy of the some other. textbookual matter editionbookmark-start introduction barriers in kookie drinking Market textbookmark-end The several factors that make it in truth difficult for the arguing to enter the soft drink market embroil Network Bottling Both one C and PepsiCo nurture franchisee agreements with their be bottlers who have rights in a certain(p) geographic bea in perpetuity. These agreements prohibit bottlers from taking on in the raw competing brands for similar crops. withal with the recent consolidation among the bottlers and the backward integrating with both Coke and Pepsi buying significant portion of bottling companies, it is very difficult for a firm entering to find bottlers willing to distribute their product. The other approach to try and build their bottling plants would be very swel l-intensive effort with new efficient plant capital requirements in 2009 being much than $500 million. The advertizement and marketing spend in the industry is very high by Coke, Pepsi and their bottlers.This makes it extremely difficult for an appetiser to compete with the incumbents and gain either visibility. Coke and Pepsi have a long history of heavy advertize and this has earned them huge amount of brand equity and loyal guests all all everywhere the world. This makes it virtually impossible for a new crank to match this scale in this market place. retail merchant Shelf Space (Retail Distribution) Retailers enjoy significant margins of 15-20% on these soft drinks for the shelf space they offer. These margins are sort of significant for their bottom-line.This makes it tough for the new entrants to convince retailers to digest/substitute their new products for Coke and Pepsi. To enter into a market with entrenched rival behemoths like Pepsi and Coke is not easy a s it could channelize to legal injury wars which affect the new comer. textbookmark-start SWOT analysis textbookmark-end Strength Weakness Opportunities Threats textbookmark-start dissimilar cola brands products Available textbookmark-end textbookmark-start determine Strategy textbookmark-end textbookmark-start Coke harm textbookmark-end.textbookmark-start Pepsi Price textbookmark-end textbookmark-start Pricing strategy for Buyer and Suppliers textbookmark-end Suppliers The soft drink industry have a negotiating return from its suppliers as most of the raw materials needed to catch concentrate are basic commodities like Color, flavor, caffein or additives, sugar, packaging. The producers of these products have no military group over the pricing thence the suppliers in this industry are weak. This makes the soft drink industry a seamy input industry which helps in increasing their unprocessed margin. BuyersThe major channels for the Soft Drink industry are food stores, Fast food fountain, vending, doodad stores and others in the order of market share. The profitability in each of these shares clearly illustrate the buyer bureau and how different buyers pay different prices based on their power to negotiate. These buyers in this segment are or so consolidated with several chain stores and few topical anaesthetic supermarkets, since they offer premium shelf space they neglect crusheder prices, the net operating profit forrader tax (NOPBT) for concentrate producers is high. This segment of buyers is extremely fragmented and hence has to pay higher prices.This segment of buyers are the least profitable because of their large amount of purchases they make, it allows them to have freedom to negotiate. Coke and Pepsi primarily cope this segment Paid Sampling with low margins. NOPBT in this segment is very low. Vending This channel serves the guests directly with absolutely no power with the buyer. textbookmark-start Effect of competition and P rice war on Industry profits textbookmark-end In the early 1990s Coke and Pepsi employed low price strategy in the supermarket channel in order to compete with store brands.Coke and Pepsi save in the tardily 90s headstrong to abandon the price war, which was not doing industry any good by raising the prices. Coke was more successful internationally compared to Pepsi due to its early lead as Pepsi had failed to concentrate on its international pipeline after the world war and prior to the 70s. Pepsi however sought to correct this mistake by entering emerging markets where it was not at a competitive disadvantage with respect to Coke as it failed to make any heady way in the European market.textbookmark-start Pricing Strategy use for market capitalization textbookmark-end Price is a very important part of the marketing commingle as it can affect both the bring and demand for soft drinks. The price of soft drinks products is one of the most important factors in a customers decis ion to buy. Price will practically be the difference that will push a customer to buy our product over another, as long as most things are pretty similar. For this reason pricing policies need to be designed with consumers and external influences in mind, in order to effectively achieve a stable balance among sales and covering the production costs.Till the late 1980s, the standard SKU (Stock Keeping Unit) for a soft drink was 200 ml. In 1989, when Indian government opened the market to multinationals, Pepsi was the first to come in. Thums Up (a product of Parle) went up against the international giant for an intense discharge with neither side giving any quarter. nearly 1989, Pepsi launched 250 ml bottles and the market also moved on to the new standard size. When Coke re-entered India in 1993, it introduced ccc ml as the smallest bottle size. Soon, Pepsi followed and 300 ml became the standard.With large population and low consumption the bucolic market represented a signi ficant fortune for penetration and market dominance. Competitive pricing was the key. and then the capacity went from 250ml to 300ml, aptly named MahaCola. This nickname gained popularity in little towns where people would ask for Maha Cola instead of Thums Up. The consumers were divided up where some felt the Pepsis mild perceptivity was rather bland. In 1993 Coca-Cola re-entered India after prolonged absences from 1977 to 1993. unless Coca-Colas entry made things even more complicated and the fight became a three-way battle.That same year, in a move that baffled many, Parle change out to Coke for a meager US$ 60 million (considering the market share it had). Further, as the demand changed, both Pepsi and Coke introduced 1 cubic decimeter returnable glass bottles. RGB 250ml 1989 Rs 8 RGB 300ml 1993 Rs 9 RGB 300ml, 1994 Rs 9 RGB 300ml 1996 Rs 11 Pet bottles 1 l, 2 liter 1996 Rs 25, Rs 42 RGB 300ml 1997 Rs 7 Pet bottles 1 liter, 2 liter 1997 Rs 20, Rs 38 RGB 200ml, 300ml (n egligible) 2002-03 Rs 5, Rs 11 Pet bottles 500ml, 1 liter, 1. 5 liter, 2 liter 2002-03 Rs 18, Rs 25 tummy 330ml 2002-03 Rs 35.textbookmark-start Penetration pricing textbookmark-end In the past (in 2002-03), Coke had already targeted rural consumers by bringing down the entry price (Rs 5 a bottle) for its product. Now, it has stepped up distribution of its 200-ml (priced at Rs 7 and Rs 8) returnable-glass-bottles. To surmount the penetration policy of Coke, Pepsi too came up with the same Price penetration policy by launching products like Chota Pepsi with the price of Rs 5 to take exception the coke product. The small size was basically employ to target rural market to make new customer habitual to it. textbookmark-start Conclusion textbookmark-end.