32). By contrast, PepsiCo benefitted from its wide product diversification. PepsiCo's product line includes popular snack names, while Coca-Cola has stuck to beverages. That has given PepsiCo the lead in overall sales, $43 billion to $31 billion in 2009 (see Dlugosch, 14 April 2010, p. 1). Question 4: Both companies' vertical involvement in their main global markets was determined by the consideration that contracts between soft-drink concentrate producers and bottlers allow the bottlers to have the last say in retail price, new packaging (but they could use only authorized packaging), selling and advertising in its territory (Martin, 26 March 2004, p. 5). This often causes strain on the relationships between bottlers, that very often are unable to produce and sell in large volumes, and the concentrate producer (Martin ibid). To accelerate revenue growth and be more agile and flexible both companies engage in vertical involvement in their main global markets have partially integrated into the bottling market. Coca-Cola's vertical involvement in their global markets is determined by the consideration to gain more control of manufacturing and distribution of its investment in North America to accelerate growth on the one hand and to convert "passive capital into active capital" on the other hand. An example for this strategy is the company's decision to buy the bulk of its largest bottler ("Coca-Cola Enterprises) (see Ali, 26 February 2010, p. 1). The parent company would buy struggling bottlers and resell them to CCE (see Martin, 26 March 2004, p. 2006). In 2010 and 2011, Coca-Cola acquired CCE's entire North American business. The rest of CCE, which consists of operations in several European countries, would remain independent and acquire Coke bottling operations in Scandinavia and Germany (Coke Near Deal For Bottler, 2009,
p. 1). The Coca-Cola deal follows a similar move by closest rival PepsiCo, which announced in April 2009 that it aimed to subsume its two largest bottlers, "Pepsi Bottling Group" and "Pepsi Americas," to accelerate revenue growth and accomplish more flexibility. PepsiCo expects that the deal will allow it to have greater control over development, distribution and marketing of new products. PepsiCo's desire to own its own bottlers is also to spur its non-carbonated health and wellness products, which are often smaller-volume, slower-moving products (see Ross & Ross, 2009, p. 41). Coca-Cola -- having no snack-food line - began horizontally diversifying the company's beverage lines in 2004 (Sivy, 23 April 2007, p. 1). PepsiCo increased its horizontal portfolio by introducing snack foods products that are better for the health of the consumer and meet the Food and Drug Administration guidelines. The campaign called "Smart Spot" helped the snack division to succeed in these health-conscious times (see Badal, 2007, 37). Question 5: I think it is the different organizational structure that led both companies arrive at different answers to the question of how to maintain respectively reach the position of the number one seller of soda in the world. Coca-Cola's strength has always been in its organizational structure and it was consequent for the company to put all emphasis on improving this structure to meet the challenges of the 21st century. Pepsi-Co was hurt by the economic turndown and suffered not only from a flawed financial hedging strategy that left it paying too much for commodities and recent marketing disasters (see Pepsi gets a makeover, 25 March 2010, p. 2f.) but also from a bad reputation of selling unhealthy snack foods. To help the company's finances, Pepsi-Co decided in 2009 to acquire two independent firms that bottle its drinks and to raise its dividend announced by announcing a big share buyback. To overcome the wide-spread public image, that its high sugar, high salt and high fat snack-food products were harmful to the consumer health, Pepsi-Co on 2 March 2010 unveiled a series of targets to improve the healthiness of Pepsi's wares. The expectation is that integrating two bottling companies will bring greater control over an increasingly diverse drinks portfolio, and promote cross-marketing between the food and drink divisions while at the same time offering a broad repertoire of healthy snack products.
Ali, T. (26 February 2010). The Coca-Cola Company to buy Coca-Cola Enterprises: Vertical Integration Continues. 1-4. Accessed 6 December 2011.