Research Outline

Research outline
I.
Introduction:
- General information about soft drink industry:
The appearance of soft drink market:
The history of soft drinks illustrates important business innovations, such
as product development, franchising, and mass marketing, as well as the
evolution of consumer tastes and cultural trends. By 1772, British chemist
named Joseph Priestley invented a synthetically carbonate water, and the
commercial manufacturing of artificial mineral waters began with Jacob
Schweppe's businesses in Geneva in the 1780s and London in the 1790s.
The first known U.S. manufacturer of soda water was Yale University
chemist Benjamin Silliman in 1807. The first cola drink appeared in 1881.
In the late 1800s, several brands emerged that were still popular a century
later. Pharmacists experimenting at local soda fountains invented Hires
Root Beer in Philadelphia in 1876, Dr. Pepper in Waco, Texas, in 1885,
Coca-Cola in Atlanta, Georgia, in 1886, and Pepsi-Cola in New Bern, North
Carolina, in 1893, among others. At the present day, the soft-drink
industry is predicted to have about five hundred U.S. bottlers with more
than 183,000 employees, and it achieved retail sales of more than $61
billion. The 2 huge companies were accounted for 96.5% of industry sales.
The first position belongs to Coca-Cola with more than 43% of the soft
drink market and Pepsi with 31%, Coke and Pepsi each have bottling
operations in more than 120 countries.
4 biggest trends would happen to the soft drink industry in 2016:

o The growth of energy, water, and sports drinks brands
Focusing solely on carbonated soft drinks is a thing of the past,
PepsiCo CEO Indra Nooyi told in October. Instead, Pepsi and other major
beverage companies are all about developing new healthy beverages
or at least it would be healthier. Next year, Pepsi is launching products
like an organic Gatorade, new Aquafina flavored waters, and healthy
vending machines. On the other hand, Coca-Cola, customers can expect
the roll out of sparkling Minute Maid and sparking Smartwater. In 2016,
healthy beverages will take center stage, especially drinks that
emphasize positive health benefits, instead of cutting calories, sugar, or
sodium.
o Reworking recipes
Core brands like Coke and Pepsi need to be reformulated with fewer
calories or replaced with new versions. Mountain Dew Kickstarts, a new
PepsiCos product launched in 2013, combining aspects of sports drinks
with the established soda brand to create a lower calorie soft drink that
quickly took off. PepsiCo also changing the recipe for reformulated Diet
Pepsi recently. Coke is more adverse to the idea of reformulation, with
the debacle of New Coke still fresh in executives minds even 30
years after the fact. However, newer, health-centric lines like Coke Life
allow for launches of new recipes and easier tinkering without negative
backlash. Ive always seen Coke Life as 1.0, said Coca-Cola COO
James Quincey at Future Smarts. If theres a 1.0, theres going to be a
2.0.
o Smaller cans and bottles
This trend is especially prevalent in North America, but may also extend
to other regions, as the message spreads: Soda isnt bad. Its good.
But too much could be bad, so drink smaller portions. That requires
reformulation and switching customers to lower-calorie offerings, but it
also means finding ways to make more money selling less soda. In
2014, the American Beverage Association pledged to cut calories by
20% by 2025. By serving smaller cans and bottles, beverage companies
could keep their old taste of products without necessarily cutting sugar
from the recipe. In addition, smaller cans mean more profit for the soft
drink industry. Currently, 15% of CoccaColas total sales are in these
newer smaller cans and bottles. This figure should increase over time.
Up to 20%, perhaps? It seems like a win-win situation.
o Attempts at authenticity
As the demonization of sugar increasingly paints big beverage
companies as the enemy, the industry is eager to humanize itself. One
route to authenticity is to attempt to tap into shoppers nostalgia.
PepsiCo recently launched or announced plans to launch a number of
vintage-inspired sodas, including Calebs Kola, 1893, and Dewshine.
Another path is to earn external symbols of approval. Next year,
PepsiCo is launching a line of non-GMO labeled Tropicana, while CocaCola has faced backlash after quietly funding research groups and
nutritionists who supported the company and its views. The rise of craft
beverages additionally gives big companies the chance to cash in on
drinks with hipster credibility. The $1 billion acquisition of craft beer
company Ballast Point Brewing & Spirits by Constellation set a new high
mark for craft beer and will likely have a ripple effect on the pricing
and importance of acquisitions in nonalcoholic beverage companies
going forward.
CocaCola and PepsiCo dominated the soft drink market:
The Coca-Cola Company (KO) and PepsiCo, Inc. (PEP) have dominated the
non-alcoholic beverage industry for ages. Coca-Cola is the worlds largest
non-alcoholic beverage company with more than 500 brands, including 17
brands that generate more than a billion dollars each in revenue. PepsiCo
owns leading brands across its snack foods and beverage portfolio,
including 22 brands that generate more than a billion dollars each in
revenue. According to Beverage Digest, the companies have a combined
share of about 70% of the US carbonated soft drink (or CSD) market. Both
companies have a wide geographic presence in more than 200 countries.
The rivalry between these two companies, popularly called the cola wars,
is legendary. Both have spent huge sums of money on mutually targeted
advertisements over decades.
Coca-Cola and PepsiCo spend enormous amounts of money on innovation,

advertising and marketing, and on strengthening their distribution
network. Since 2010, Coca-Cola and its bottling partners have invested
more than $50 billion in new facilities, distribution infrastructure,
equipment, and retail customer activations. PepsiCo spent 5.9% of 2013
net revenue on advertising and marketing.
General information about the problem statement of PepsiCo:

Lowest soda consumption since about 1985: The U.S. Food and Drug
Administration and the European Food Safety Authority say aspartame
is safe, and the American Cancer Society says worries about an
increased cancer risk are unfounded. Nonetheless, rumors persist, and
the consumer push for natural ingredients doesnt help. Diet Pepsis
sales volume fell 5.8 percent in 2015 and dropped roughly 11 percent
at retail during the first quarter of 2016, according to data from
Beverage Digest, which first reported the product changes. Sales of Diet
Coke, which is sweetened with aspartame, fell 5.6 percent in 2015 and
5.7 percent at retail in the first quarter of 2016.
Pepsi and Coke are stuck between irreconcilable health concerns. With
obesity such a big problem in the U.S., people are rejecting sugar-laden
sodas. But the trend toward health doesnt include diet drinks because
pop consumers want natural products, not artificial sweeteners. And
natures perfect zero-calorie sugar substitute -- free of any unpleasant
aftertaste -- has yet to be invented.
Pepsi also produces drinks and snacks such as Gatorade, Tropicana,
Aquafina, and Frito. Many of these popular snack foods contain conflict
palm oil. The production of conflict palm oil causes rainforest and
peatland destruction, species extinction, greenhouse gas emissions,
and human rights abuses. Deforestation and destruction of peatlands
(carbon-rich, wet ecosystems) for expansion of palm oil plantations are
threatening irreplaceable ecosystems in Indonesia and Malaysia. At the
current rate of destruction, 98% of Indonesias forest will be destroyed
by 2022, according to the UN Environmental Program.
There was a previous research named PEPSICO, INC. - FINANCIAL AND
STRATEGIC ANALYSIS REVIEW, which showed some information about
financial performance of Pepsi and demonstrated by chart. In addition, this
research analyzed the affection of Pepsis strategy in the same years. The
research gave the overview of not only SWOT but also the key competitors of
Pepsi. Global Data provided an overall view of financial statement in PepsiCo,
so this research just focus on the number but the reason of PepsiCo success.
The biggest successful achieve of this company is what they do to advertise
their products. It must be creativity and satisfy the consumers needs to
attract more purchasing. Jorawar Deol gave overview of soft drink market by
analyzing two big men - CocaCola and PepsiCo through his research named
A COMPARATIVE FINANCIAL ANALYSIS OF SOFTDRINK INDUSTRY. This
research did not mention about the fight of PepsiCo and CocaCola in
advertising.
The purpose of this research is to analysis the success of PepsiCo from the
advertising strategy on around the world. The effective advertising has
brought to Pepsi many opportunities for higher position on market growth and
larger market share. At the present, PepsiCo still standing on a remarkable
place of soft drink market, however, the growth of Pepsi would be influence
by new trend of soft drink - smaller cans, less sugar, so on in future. This
research would point out the important of advertising to PepsiCos revenue.
II.
Literature review:
1. Basic concept:
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How did the soft drink industry evolve over time?

What are some of the major trends affecting the soft drink industry in 2016?

Research outline

4 biggest trends would happen to the soft drink industry in 2016:

CocaCola and PepsiCo dominated the soft drink market:

Coca-Cola and PepsiCo spend enormous amounts of money on innovation,

General information about the problem statement of PepsiCo:

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