Pricing Strategy of Soft Drinks Today Essay

We will fundamentally focus on the price strategies adopted by these two profuseness companies, how the change in the scheme of one of them reflects in the scheme of the other. schoolbookbook editionbookmark-start Entry barriers in soft present Market textbookual matterbookmark-end The some(prenominal)(prenominal) factors that make it very difficult for the contender to enter the soft crapulence trade include Network Bottling Both nose candy and PepsiCo have franchisee agreements with their exist bottlers who have rights in a certain geographic empyrean in perpetuity. These agreements prohibit bottlers from taking on rude(a) competing brands for connatural products.Also with the recent consolidation among the bottlers and the backward integration with some(prenominal) degree centigrade and Pepsi buying significant percent 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 capital-intensive effort with clean efficient plant capital requirements in 2009 being more than $ d million. The advertize and marketing spend in the exertion is very broad(prenominal) by gust, Pepsi and their bottlers.This makes it passing difficult for an entrant to compete with the incumbents and gain both visibility. Coke and Pepsi have a long history of heavy advertising and this has earned them huge amount of brand equity and loyal clients all over the founding. This makes it virtually impossible for a new entrant to match this scale in this market place. Retailer ledge Space (Retail Distribution) Retailers enjoy significant margins of 15-20% on these soft drinks for the shelf position they offer. These margins atomic number 18 quite significant for their bottom-line.This makes it tough for the new entrants to convince retailers to campaign/substitute their new products for Coke and Pepsi. To enter into a market with fasten rival behemoths like Pepsi and Coke is not easy as it could curb to price wars which affect the new comer. textbookmark-start SWOT Analysis textbookmark-end Strength Weakness Opportunities Threats textbookmark-start Various cola brands products Available textbookmark-end textbookmark-start Pricing Strategy textbookmark-end textbookmark-start Coke harm textbookmark-end.textbookmark-start Pepsi expense textbookmark-end textbookmark-start Pricing strategy for Buyer and Suppliers textbookmark-end Suppliers The soft drink industry have a negotiating advantage from its suppliers as more or less of the raw materials needed to produce deoxidise are basic commodities like Color, flavor, caffeine or additives, sugar, packaging. The producers of these products have no power over the pricing hence the suppliers in this industry are weak. This makes the soft drink industry a cheap input industry which helps in increasing their gross margin. BuyersThe major channels for the Soft in ebriation industry are food stores, Fast food fountain, vending, convenience stores and others in the order of market share. The profitability in each of these segments clearly represent the buyer power and how different buyers pay different prices based on their power to negotiate. These buyers in this segment are somewhat consolidated with several chain stores and few local supermarkets, since they offer premium shelf quadriceps they command early gearer prices, the net operating profit before 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 granting immunity to negotiate. Coke and Pepsi primarily consider this segment Paid Sampling with low margins. NOPBT in this segment is very low. Vending This channel serves the customers directly with absolutely no power with the buyer. textbookmark-start Effect of competition and Price 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 however in the late 90s decided to depart from the price war, which was not doing industry any good by nurture the prices. Coke was more successful internationally compared to Pepsi due to its early hint as Pepsi had failed to concentrate on its international business after the world war and prior to the 70s. Pepsi however sought to correct this defect by entering emerging markets where it was not at a agonistical disadvantage with respect to Coke as it failed to make any fresh way in the European market.textbookmark-start Pricing Strategy apply for market capitalization textbookmark-end Price is a very grand part of the marketing mix as it can affect both the supply and demand for soft drinks. The price of soft drinks products is one of the mo st important factors in a customers decision to buy. Price will often be the difference that will push a customer to buy our product over another, as long as most things are fairly similar. For this reason pricing policies need to be designed with consumers and external influences in mind, in order to effectively earn a stable balance between sales and covering the achievement 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 animated onslaught with neither side giving any quarter. Around 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 300 ml as the smallest bottle size. Soon, Pepsi followed and 300 ml became the standard.With large population and low consumption the rur al market delineate a significant opportunity for penetration and market dominance. Competitive pricing was the key. Then the capacity went from 250ml to 300ml, aptly named MahaCola. This nickname gained popularity in smaller towns where good deal would ask for Maha Cola instead of Thums Up. The consumers were divided where some felt the Pepsis mild taste was rather bland. In 1993 Coca-Cola re-entered India after prolonged absences from 1977 to 1993. precisely Coca-Colas entry made things even more complicated and the make out became a three-way battle.That same year, in a move that unconnected many, Parle sold 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 liter returnable glass bottles. RGB 250ml 1989 Rs 8 RGB 300ml 1993 Rs 9 RGB 300ml, 1994 Rs 9 RGB 300ml 1996 Rs 11 embrace bottles 1 liter, 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 (negligible) 2002-03 Rs 5, Rs 11 Pet bottles 500ml, 1 liter, 1. 5 liter, 2 liter 2002-03 Rs 18, Rs 25 Can 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 polity 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 challenge the degree Celsius product. The small size was basically used to target rural market to make new customer habitual to it. textbookmark-start Conclusion textbookmark-end.