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The two main beverage manufacturers in the US, Coca-Cola and Pepsi, have operated by distributing product through bottler partners. This arrangement means that the manufacturer and bottler partners must decide how to divide the pie in the channel. Ultimately, this is a competitive game, or a prisoner’s dilemma, resulting in a smaller combined pie since each entity is acting in its own interest. Recently, Pepsi decide to change the game with its bottlers by acquiring the two largest bottlers in their system. The company claims this move will provide them greater control, speed to market, and efficiency. By changing the game with their bottler from a competitive game to a cooperative game, analysts estimate Pepsi could save $150 MM per year in operating costs. The positive outlook on the decision is also reflected in the stock price.
References:
“PepsiCo Nabs Bottlers After Months at Table” - Aug 5, 2009 <
“PepsiCo Offers $6B to Buy 2 of Its Biggest Bottlers” - Apr 20, 2009
<< http://www.foxbusiness.com/story/markets/industries/retail/pepsico-offers-b-buy--biggest-bottlers/>>
“PepsiCo buys bottlers for $7.8bn” - Aug 5, 2009
<< http://www.foodproductiondaily.com/Processing/PepsiCo-buys-bottlers-for-7.8bn>>
“PepsiCo to buy bottlers in deals totaling $7.8B” - 8/4/2009
<< http://www.usatoday.com/money/industries/food/2009-08-04-pepsico_N.htm>>
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