Child Labour

Sample details Pages: 17 Words: 5039 Downloads: 5 Date added: 2017/06/26 Category Statistics Essay Did you like this example? What are the causes and consequences of child labour amongst developing countries The child labour as a social and economic phenomenon has many aspects the most important of which seems to be the low level of financial growth that characterizes several countries which are commonly known as developing. This paper illustrates the conditions that created the necessity of the child labour, and at the same time it presents the consequences of this situation as they can be observed through a series of specific facts and other types of empirical evidence that have been collected by the relevant sources of scientific research.. Don’t waste time! Our writers will create an original "Child Labour | Economics Dissertations" essay for you Create order The analysis of the problem, as described above, is followedby the presentation of a number of policies, which could help thelimitation of the problem to the most feasible level. The research done on this specific problem has revealed the existence of a high volume of relevant theories as well as of statistical data that have also been used to support the current paper. . Introduction The problem of the child labour has become a very important subjectof examination and research by the most of the internationalinstitutions especially the last decade. The reason for that is not the absence of this problem in the past but the development of the technology and the communication around the world that gave the opportunity for a series of long-lasting social problems to becomeknown to the international community. The extension and theimportance of the specific problem are severe obstacles towards its elimination. On the other hand, the creation of an international legal framework asit has been expressed by the establishment of authorized bodies and the signing of a series of orders and Conventions, can considered as an important step towards the achievement of a solution. We have to notice though that the best possible policy to thatdirection would have to compromise with the existence and the size ofthe problem avoiding to set targets that could not be achieved. Under the current circumstances, the child labour cannot disappear from the scene; it can just be reduced to a certain level (as this one is formulated by the social and financial conditions of each country). The main aim of this paper is to provide a detailed examination of the problem backed with a series of relevant data and other empirical evidence. The analysis of the current situation, as described in Chapter II, begins with the presentation of the background of the problem followed by statistical data and the views stated in the literature regarding the definition and the observation of child labour amongst developing countries. The policies that can be applied for the limitation of the problem are being presented in Chapter III. The investigation of the facts and the needs that created the phenomenon of the child labour cannot be achieved without the use of the literature (Chapter IV) that has been dealt with the specific matter mainly during the last years. The evidence that has been used to identify and interpret the problem,is presented in Chapter V. Finally, Chapter VI contains brief remarks on the problem as they have been extracted from the research done. II. The child labour in the international community background, definition and areas of children exploitation The period in which child labour appeared as a social reality cannot be defined with accuracy. There are opinions that relate the beginning of the problem with the industrial revolution whereas other ones state that the child labour had first appeared in the nineteenth century. From an investigation that took place in Britain in June 1832, it seems that the phenomenon of child labour was known at that period and referred to children working as laborers mainly to factories butalso to other business activities. The above investigation (as it is analytically presented in Basu, K., 1999, 1088) was supervised by a British Parliamentary Committee and had as main subject the child labour in the United Kingdom at that period. Although Britain was in a rather high rank regarding the child labour which can be explained by the fact that England was under development at that period of time other countries that also had a remarkable industrial development likethe Belgium, the USA and the Japan, presented a similar image regardingthe work of children in the multiple sectors of industry (see also K.Basu, 1999, 1088-89). Moreover, the data collected for the measurement of the relevantpractices during the 19th century showed that child labour did notstart declining in Britain and in United States until the second halfof that century (L.F. Lopez-Calva, 2001, 64). The dimensions of the problem of child labour can create an important concern about the level of the life that a lot of children face but also about the financial situation of a large majority of families around the world. According to data collected by the International Labor Organization (ILO), there are approximately 250 million working children aged between 5 and 14, of which at least 120 million are involved in full-time work that is both hazardous and exploitative (seealso T. I. Palley, 2002). Although the so-called developed countries have shown samples of tolerance regarding the child labour, the areas that seem to cultivate the problem are those with low level of economic and industrial growth. In a relevant research made by D.K. Brown (2001) it seems that the major factor for the existence of the problem is the poverty. The capital market failure of a specific country (as it is expressed tothe every day aspects of life, like the low level of schooling) isconsidered as another important element that co-operates the appearance and the extension of the phenomenon. When speaking for child labour we usually refer to any work by childrenthat interferes with their physical and mental development , i.e. anywork that keeps the child away from childhood related activities(Chandrasekhar, 1997). The above definition although containing ageneral view of the child labour, it cannot be applied under allcircumstances bearing in mind that a lot of differences may appear inthe context of childhood related activities in dependance with the country and the cultural influences. In this case, a more specific description of child labour is considered as necessary. M. Majumdar(2001) divides the child labour into the following categories: a) the household work, b) non-domestic and non-monetary work, c) wage labour and d) commercial sexual exploitation and bonded labour. The child labour can be applied in many areas. As an indicative examplewe can refer to the report of the National Consumers Leage (NCL) which divides the possible areas of child labour into the followingcategories (refering to specific daily activities and regarding thedanger that they include): agriculture (is the most dangerous industryfor the young workers), working alone and late-night work in retail(most deaths of young workers in this industry are robbery-relatedhomicides), construction and work at heights (deaths and serious injuryresult from working at heights 6 feet and above. The most common typesof fatal falls are falls from roofs, ladders and scaffolds or staging),driver/operator of forklifts and tractors (tractor-related accidentsare the most prevalent cause of agricultural fatalities in the U.S.A.),traveling youth crews (defined as youth who are recruited to sellcandy, magazine subscribtions and other items door-to-door or on streetcorners, these youth operate under dangerous conditions and areunsupervised) (Occupational Hazards, Aug2004) III. Policies towards the limitation of the problem A fundamental measure for the limitation of the child labour is thecreation of legislation that would impose a minimum work age and yearsof compulsory education. Although this solution seems rather in itsdesigning, in practice its quite difficult to operate . The needs ofthe everyday life can often surpass the power of the legal rules, which have been structured usually after the examination and the analysis of specific events and cannot confront the problem to its whole area. One of the main problems that a family usually faces is the change inthe working situation of its (adult) members and the financial pressurethat usually follows. Of course, there is always the solution of funding (especially when the general financial market of a country offers such an option) . However, there are occasions that such an alternative cannot operate either because the country do not afford such a plan or the specific family do not have access to this plan. Under these circumstances, it could still be possible for the householdto tap internal assets. The presence of the father in a household, thepresence of an older person in the household or the capacity of the mother to enter into the market in order to work or proceed to another type of work (in a personal enterprise), all the above can be variables that can support the assets of a family even if the latter is suffered from strong financial difficulties (see also D. K. Brown, 2001, 766). Despite the theoretical character of the legislation, there could beother measures , more applicable and feasible to be realized. Aneffort that has such a character is the increased spending on books,supplies, buildings and teacher training as it has been pursued by several governments (D. K. Brown, 772). In cases that the child labour cannot be avoided, there could be somemeasures to both to protect the children and help them to continuetheir school (while keep on working). The design of specific schedules that would allow the children to attend school after their work could be proved very helpful towards this direction. Of course, such a plan contains a lot of requirements that need to be met . As an example we could mention the sufficiency of resources (teachers) that could workfor the extra time needed and at the same time the existence of afinancial strategy (and of the relevant money) for the payment of these resources. On the other hand, a problem that may arise is the lack ofequipment or capital for the premises of the school to be open forextra hours. And we cannot forget the danger that may be related withthe attendance late at night (especially in the case of the paper thedeveloping countries). The phenomenon of the child labor has been examined and analyzed to the highest possible point by the use of the observation and theresearch in accordance with the existing legislation and the general rules that have been introduced from several countries aiming to the limitation of the problem. One of the most important studies regarding the child labour is this ofK. Basu and P. H. Van (1998) who tried to find and analyze the causesof this specific problem. After studying the results of the empiricalevidence they came to the conclusion that child labour was notconnected exclusively with external factors (i.e. employers) but it was mostly the result of internal (in the family) decisions and facts.Towards that direction, K. Basu and P. H. Van examined first the view that child labour has been based on the greed of employers who employthe children and the parents who send the children to work. The above statement is first examined by the fact that in families, which can afford the non-work of children (i.e. when the income of the parents isconsidered as sufficient), the parents try to avoid sending theirchildren to work. This phenomenon appears even in very poor countries.Under the previous aspect, the child labour is connected with thefinancial situation of the family (usually income of parents) and not the interests of the employers. This assumption of the leading familysrole is also backed, according to K. Basu and P. H. Van, by the analysis of late nineteenth-century cencus data for Philadelphia whichwas made by Claudia Goldin in 1979. According to this analysis, when the income of the father is high the probability that the child will enter the labour market is low and this relation operates in a very tight interaction (the higher the wage of the father, the lower thechance of such a fact to get realized). Another empirical evidence that seems to back the views of K. Basu and P. H. Van comes from a research that was made on this issue (connection between the familys decision and the child labour) by D. Vincent who studied working-class autobiographies. The results of his study showed that the children when working avoid to blame their parents but they tend to believe that it was the poverty that imposed their participation in the labour market.K. Basu and P. H. Van examined the issue of the role of the familys decision to the child labour under the assumption that the decision ismade by a parent. They also admit that the results of their study may differ in case that this decision is made by another person (as stated by the theories which ask for the rejection of the unitary model of the household). Regarding the role of the familys decision to the child labour, J. G.Scoville presented a model of the above decision based on the use of mathematical symbols in order to represent the real facts. In his model, there are factors (such as the social or economic class, race,ethnicity, caste or color) that define the family utility function andin this way they can cause important implications to labour market segmentation (J. G. Scoville, 715) Regarding the existence and the extension of the child labour, M.Murshed states that two are the basic issues that need to be examined in order to achieve a comprehensive analysis of the problem. The first issue includes the mechanisms under which the family decides to send a child at work. The second one is the reason for which the employers demand child laborers. In order to explain the first issue, M. Murshed uses the theory ofBeckers, known as A theory of the Allocation of Time, which presents a model for studying the household decision-making process. In the above model Beckers suggests that the decision of the family is based to the needs of the household. Whenever an extra income is consideredas necessary, family decides to send the child at work. In this model both wages of children and adults contribute to family resources. As for the second issue, M. Murshed (179) argues that employer tend to demand child laborers because they are less aware of their rights,less troublesome, more willing to take orders and to do monotonous work without complaining. Another factor is also that children work forlower wages and are not in a labour union because they work illegally. M. Hazan and B. Berdugo (2002, 811) examined the dynamic evolution of child labour, fertility and human capital in the process of development. Their analysis is based on the following assumptions: a)parents control their childrens time and allocate it between labourand human capital formation, b) parents care about the futureearnings of their children, c) the income that is generated by children is given to parents and that d) child rearing is time intensive. According to their findings, in early stages of development, the economy is in a development trap while child labour is abundant, fertility is high and output per capita is low. On the other hand, the increase in the wage differential (between parental and childlabour) decreases fertility and child labour and increases childrenseducation. As a final result, child labour tends to decrease as thehouseholds dependency on child labours income diminishes. The welfare economics approach tries to examine the child labour from the scope of investment and time allocation within the household. According to this theory, the time of the child (the non-leisure one)can be used either for school attendance and/or for work. The family makes a decision for the allocation of the childs time (i.e. for one of the above mention activities) after the calculation of the difference between the marginal benefit of the child labour (i.e.earnings and saved costs of schooling) and the marginal cost (in terms of foregone return to human capital investment). If the first of the above elements is estimated as having a higher price than the second one, then the family decides the participation of the child to the labour market (see also M. Majumdar, 2001). The decision of the parents regarding the entrance of their children tothe labour market can under certain circumstances be unefficient.According to Ballard and Robinson (2000) the above decisions areefficient when the credit market is perfect and the intergenerational altruistic transfers are nonzero. On the other hand, when there are liquidity constraints or the altruistic transfers are at a corner,these decisions are considered as inefficient. A. Bommier and P. Dubois(2004) critically evaluated the views of Ballard and Robinson andargued that the decisions of the parents could be inefficient even ifthe credit markets are perfect and there are altruistic transfers. More specifically, they argued that when parents are not altruistic enough,there is a rotten parents effect in which parents rationally sacrifice some childhood utility and choose a level of child labour that is inefficiently high. V. Evidence related with the phenomenon of child labour The child labour has been the subject of a thorough study and research and there are a lot of theories that have been stated in aneffort to define the causes of the specific problem. Towards thisdirection there have been a number of facts or existing situations thathave been used to explain the relation of the child labour with somespecific factors . One of the most known reasons for the existence andthe increase of the problem is the poverty of the household which is related with the general aspect of the modern way of life (as it hasbeen formulated under the influence of the technology) and also the fact that parents when have a low level of income do not tend to invest in the education of their children in order to achieve a high level of return (education can help to the improvement of the status of life through the increase of the level of consumption). We could also state that the income of the children can help toameliorate the conditions of life of the family and this could be thereason why the children tend to leave the school and work when their family is under severe financial pressure. This is an opinion that tries to explain the child labour through the life circumstances of a child and aims to smooth the negative consequences of the child labour. Although the poverty is usually presented as the main reason for thechild labour , there are some aspects that need to be taken intoaccount when examining the problem. First of all, we cannot define withaccuracy the financial benefit of a family from a childs work. Of course, child labour can help to the amelioration of the familys financial situation, however it is not obvious how much worse off afamily would be if the children were in school. On the other hand, we could not specify the time needed for the economic development to beachieved in order for the child labour to be abolished. More specifically it seems that there is no consistent threshold of economic development, which preceded the decline of child labour to suggest the implied relationship between economic growth and declice of child labour (M. Majumdar). In such a case, the argument about the poverty criterion of child labour can loose its significant content. We should notice that, no matter which is the financial situation of the family,even in cases of exremely low level of living, the participation of thechild to a work that could characterized as hazardous cannot bejustified as the protection of the childs rights are a priority. Moreover, the child labour although can help temporarily to theconfrontation of the poverty up to a specific point however, it canalso create the basis for the development of property by generatingpoor people to the next generation. If the child returns to school theyhave more chances to a higher level of earnings in the future or at aleast to a job that will secure their living to certain standards(avoiding the condition of poverty). The combination of these two factors could also create a better investment and a greater security of income for the family by eliminating the obstacles of poverty. The relationship between the poverty and the child labour is not absolutely proved. S.E. Dessy and D. Vencatachellum examined the issue using a sample of 83 countries and found that the coefficient of correlation between the incidence of child labour and the logarithm of gross national product is 0.74. In this way, they were directed to the assumption that child labour declines with economic prosperity, as parents feel relaxed regarding the credit constraints. However, at a next level, they found that there are countries with similar levels of gross domestic product per capita that differ in the percentage of child labour. In fact, some of them report no child labour, where as others report a high level. This assumption is also in accordance withthe view of Anker (2000) who stated that although poverty is positively correlated with child labour, there are also other factors that can reduce the school enrolment rate of a country. Hussain M. and Maskus K.E (2003) used a series of data from 64 countries in the period 1960 1980 to investigate a series of testable hypotheses about the causes of child labour. Their research showed that the incidence of child labour is negatively related to parental huma ncapital and education quality, but it is positively correlated with education cost and also that countries with higher amounts of child labour tend to have lower stocks of human capital in the future. They also found that there is a convergence phenomenon between the level and growth of human capital, i.e. the lower the current stock of human capital, the higher is current child-labour use and the fasted is the growth rate of human capital. G. Hazarika and A. S. Bedi (2003), examined the relationship between the schooling costs and the extra household child labour supply and found that these two elements are positively related. Moreover, the intra-household labour of children engaged in market work evaluated as unresponsive to changes in schooling costs. This happens maybe,according to Hazarika and Bedi because parents tend to consider childrens extra household labour and schooling as substitutes while they view intra household child labour activity differently. But if the parents could evaluate the intra-household child labour as an activity that offers more benefits than just an increase of the household consumption, then it could be a relationship between the intra-household child labour and the schooling costs. As for Pakistan(where this research refers) the intra-household child labour and schooling are not substitutes. We should also mention the importance of social norms and the cultureto the appearance and the extension of the child labour. The above analysis has to be done under different variables for the rural areas as opposite to the urban areas. Children that live in the first environment tend to help to the everyday activities in the farm and asa result, their work under these circumstances is presented as justified and necessary. As for the social norms, their role is considered as very important to the financial growth, as they have to power to influence the economic and social behaviour of the vastmajority of people. The most indicative example of their influence isthe fact that in areas where the work of children is accepted by thepeople, then the decision of a parent to send his child to work can bemuch more easy. Another very important aspect of the child labour is that is usually associated with the child abuse. Under this aspect, the reasons for the participation of the children to the labour market can be found in the demand of employers for cheap laborers and in the existence of selfish parents who do not mind sending their children to work if in that way there are more chances for them (parents) to rest. According to K.Basu and P. H. Van, although the child abuse does occur in allsocieties, the phenomenon of the child labour as a mass in most of developing countries is much more related with the poverty that characterises these countries. They refer to the example of England(late eighteenth and early nineteenth century) where parents had to send their children to work because they were obligated from the circumstances (poverty) to do so. VI. Conclusion The existence and the rapid extension of the phenomenon of child labour seems to be connected with the a series of external factors(like the low economic growth or the unadequate social policies of aspecific country) however it can be assumed by the analysis made abovethat it is also directly depended on the childs close social environment, i.e the family. Its for this reason that the measures taken towards its elimination have to be referred into both these areas. The two sides have to co-operate and act simultaneously in order to confront this very important problem. The solution (as it is often presented) of the child labour has to be interpreted under different criteria regarding the specific circumstances that it will have to occur. Although in certain occasions the entrance of the child in the labour market seems to be the only left choice, we have to bear in mind its particular physic and mental weakness (that follows its age) and evaluate the consequences for such a decision. In any case, we have to consider that a workplace that operates normally with the use of adult laborers can have negative effects when the issue refers to a child. Although the problem of the child labour is very important to its nature and its extension, the measures taken to its elimination dont seem to produce any result. The conflict of interests towards its continuation has a great responsibility to it. And these interests refer to different parties (external and internal as mentioned above).This reality must be admitted and the efforts should be directed to the modification of the existing conditions trying not to confront directly the problem but asking the parties involved to participate to its solution by offering them a satisfactory exchange for their help. References Admassie, A., Explaining the high incidence of child labour inSub-Saharan Africa, Development Review, Dec2002, vol. 14, issue 2, p.251 Amin, S., Shakil, Quayes, M., Rives, J. M., Poverty and otherdeterminants of child labor in Bangladesh, Southern Economic Journal,April2004, vol. 70, issue 4, p. 876 Anker, R., The economics of child labor: a framework for measurement, International Labour Review, 2000, 139, 257-280 Baland, J.M., Robinson, J.A., Is Child Labor Inefficient?, Journal of Political Economy, 2000, 108, 663-679 Bommier, A., Dubois, P., Rotten parents and child labor, Journal of Political Economy, Feb2004, vol. 112, issue 1, p. 240 Brown, D. K., Child labour in Latin America: Policy and evidence, World Economy, June2001, vol. 24, issue 6 Dessy, S.E., Explaining cross-country differences in policyresponse to child labour, Canadian Journal of Economics, Feb 2003,vol. 36, issue 1, p.1 Emerson, P. M., Souza, A. P., Is there a child labor trap?Intergenerational persistence of child labor in Brazil, Economicdevelopment cultural change, Jan2003, vol. 51, issue 2, p. 375 Hazan, M., Berdugo, B., Child labour, fertility and economic growth, Economic Journal, Oct2002, vol. 112, issue 482, p. 810 Hazarika, Gautam, Bedi, A.S., Schooling costs and child work inrural Pakistan, Journal of Development Studies, June 2003, vol. 39,issue 5, p. 29 Hussain, M., Maskus, K.E., Child Labour Use and Economic Growth: aneconometric analysis, World Economy, vol. 26, issue 7, p. 993 Kaushik, B., The economics of child labor, Scientific American, Oct2003, vol. 289, issue 4, p.84 Kaushik, B., Van P. H., The economics of child labor, The American economic review, June 1998, vol. 88, no. 3, p. 412-427 Kaushik, B., Child labor: cause, consequence and cure, with remarkson International Labor Standards, Journal of Economic Literature,Sep1999, vol. 37, p. 1083-1119 Latin Trade, Condemned, Oct2004, vol. 12, issue 10, p.68 Lopez-Calva, Child labor: Myths, theories and facts, Journal of International Affairs, Fall 2001, vol. 55, issue 1, p. 59 Majumdar, M., Child labour as a human security problem: evidence from India, Oxford Development Studies, vol. 29, no. 3, 2001 Mattioli, M. C., Sapovadia, V. K., Laws of Labor: core laborstandards and global trade, Harvard International Review, Summer 2004,vol. 26, issue 2, p. 60 Murshed, M., Unraveling child labor and labor legislation, Journal of International Affairs, Fall2001, vol. 55, issue 1, p.169 News, The (Mexico), Child labor in Mexico contributes almost 2 billion dollars to economy, Sep 26, 2001 Occupational Hazards, Group calls for reform of laws governing teen employment, Aug2004, vol. 66, issue 8, p.15 Palley, T. I., The child labor problem and the need forinternational labor standards, Journal of Economic Issues, Sep2002,vol. 36, issue 3, p. 601 Payroll Managers Report, International retailer is fined for child labor violations, May 2005, vol. 5, issue 5, p.2 Professional Safety, DOL issues final child labor rules for restaurant, driving roof, Mar2005, vol. 50, issue 3, p.24 Puskikar, M., Ranjan, R., The Joint Estimation of childparticipation in schooling and employment: comparative evidence fromthree continents, Oxford Development Studies, Feb2002, vol. 30, issue1, p. 41 Scoville, J. G., Segmentation in the market for child labor: theeconomics of child labor revisited, American Journal of Economics andSociology, Jul2002, vol. 61, issue 3, p. 713 Xinhua (China), Half Bangladeshi children malnourished: report, 12/10/2004 Xinhua (China), ISO countries ratify Convention to combat worst forms of child labor: ILO, 24/5/2004 Xinhua (China), Micro credit program launched to stop child labor in Bangladesh, 30/10/2003 Xinhua (China), Over 3 million child laborers in Pakistan, Jul2002 Xinhua (China), Asian countries to co-operate in eliminating child labor, 3/3/2003 Walsh, M., Sager, I., The worlds workers may catch a break, Business Week, 14/3/2005, issue 3924, p.12 World IT Report, India to abolish child labour after 2007, 15/1/2004

Examining Causes of School Violence and Solutions to the...

How many times have you or your children been victims of violence or intimidation and how many times have you been left feeling abandoned, demoralized and full of despair because no-one will lift a finger to help. How many times have you seen the offenders caught and let off to continue re-offending in some instances? The truth of the matter is that we are all alone when it comes to dealing with any form of aggressive behavior from children, especially in school. Did you ever wonder why schools have so much violence? But people always want to know what really cause children to fight and argue? It’s really because children take violence into their own hands. Usually the innocent children are the ones involved in the violence. Instead of†¦show more content†¦Since there are so many variables it can be difficult to recognize success or failure (weaver). Secondly, what cause school violence? School violence is in the headlines again with the shootings at Tennessee State U niversity. After hearing news of campus shooting or other violence, students no matter where they go to school – might worry about whether this type of incident could ever happen to them. It is rare that on-campus violence takes place on the scale of what happened at Tennessee State or Virginia Tech. But, why does school violence happen? There is no single reason why students become violent. Some are copying behavior they grew up with, or saw on the streets, or in video games, movies, or TV. Sometimes, people who turn violent are victims of teasing who have hit a limit and feel like they would do anything to make it stop. They may feel isolated and rejected by their peers, or have undergone a break up with a romantic partner. There is one thing experts do agree on through: having access to guns or other weapons makes it easier for some people to lash out against the things or people they do not like. Or if you have witnessed or experienced violence of any kind, not talking ab out it can make feelings build up inside and cause problems. Most education theorists and practitioners agree that schoolShow MoreRelatedSchool Shooting Essay732 Words   |  3 PagesResearch in school shootings have been administered in many categories, including sociology, psychology, and etc.  past studies, and direct later studies in school shootings, offers a sociology stand point for understanding the differences of school shooting incidents, including rampage shootings, mass murders shootings, and examining the mass media dynamic of school shootings; as well as presenting a combination of causes said in the research, including those on the individual, community, and socialRead MoreHigh School Dropout Levels951 Words   |  4 Pageswithin these groups commit violent crimes, and how can we prevent and handle this issue. So, where will the research focus be for these states? It will start by examining the schools within these neighborhoods first, because the education system can give public safety leaders an idea of how this can impact inequality (e.g. high school dropout levels, kids having kids, lack of parental guidance, etc.). Then we need to examine the communities to see what type of living environment is within thoseRead MoreSocial Aspects of American Children Being Born in Poverty Essay1520 Words   |  7 PagesEnvironment, concisely and appropriately describes the current state of children and youth in America. Garbarino suggests that children today are being brought up in a socially toxic environment where violence, divorce, racism, addiction, educational failure, poor physical health, and adult emotional problems are just a few of the toxic social forces converging on children, robbing them of their innocence and dignity. Moreover, he argues, children who are faced with economic distress and poverty areRead MoreAnalysis Of Ender s Game By O rson Scott Card877 Words   |  4 PagesWhile many problems in civilization can be attributed to direct causes, underlying factors manipulate and play a large role towards determining a culture. Psychologists and scholars share a deep curiosity about these factors in order to understand society and its conflict. In his book Ender’s Game, author Orson Scott Card highlights the complications of structural violence, inciting the reader to confront the consequences of hierarchy, discrimination, and stratification. Furthermore, in the articleRead MoreSchool Shootings And Its Impact On Student s Safety And Education1406 Words   |  6 Pagesin possession of a firearm while on school properties and if this will decrease the number and magnitude of school shootings. Many scholars believe equipping teachers with firearms will be costly and end up unnecessarily endangering more students, but many scholars claim that a teacher should be the last line of defense against a school shoot er. The question this paper hopes to answer is how can equipping teachers who teach grades K-12 help to prevent school shootings in the United States. ThisRead MoreDo Violent Video Games Make People More Violent?1277 Words   |  6 Pagesthan 90% of children in the United States play video games.Among kids between the ages of 12 and 17, the number rises to 97%. The psychological group also reported that 85% or more of video games on the market contain some form of violence (Do Video Games Lead to Violence). A video game may be considered violent if it contains â€Å"violent† language, gore/blood, and crime. Video games are given parental levels of what age is mature enough to play that game. A video game with a higher parental level shouldRead MoreSchool Shootings : School And Community Violence Trends And Reviewing Evidence On Best Practices Essay1564 Words   |  7 Pages Abstract School shootings have generated great public concern and fostered a widespread impression that schools are unsafe for many students; this article counters those misapprehensions by examining empirical evidence of school and community violence trends and reviewing evidence on best practices for preventing school shootings. Many of the school safety and security measures deployed in response to school shootings have little research support, and strategies such as zero-tolerance disciplineRead MoreMisogyny Of Hip Hop : The Solution1564 Words   |  7 Pages’Kayla Morgan Jeffrey Baggett English 102 April 25, 2016 Misogyny In Hip Hop: The Solution In today’s society many individuals listen to music. With so many different genres to choose from in the music industry, one of the most popular genres of music is Hip Hop. With the constant urge for new artists, lyrics, and rap styles, it seems as though Hip Hop is the holy grail of music. One of the main problems with Hip Hop is the misogyny of women. Adams and Fuller (2006) define misogyny as the â€Å"hatredRead MoreEssay on Theories of Causation of Crime and Its Solution 1250 Words   |  5 Pagespublic attention when Cesare Lombrose suggested that criminals cannot be identified by examining their body structures, number of toes, etc giving the research data that determined that ordinary people are mostly involved in crime than militants. Now, this theory is followed by Modern biological theory which signifies that chemical imbalance in brain results violence activities. It supports remarkable example of violence occurred due to lower portion of serotonin chemical and a buse of drugs alcohol (FishbeinRead MoreThe Effects Of Past And Current Domestic Violence Towards Women Essay1461 Words   |  6 Pagesdomestic violence and even some of the laws that are put in place to protect and demean women’s rights. The purpose of this paper is to inform readers that there are many issues that lead up to a woman killing their abuser/husbands, such as the harsh history of violent used against women by their husband, involvement of church, fear for children in the home, and having limited resources to safely leave. This paper will also inform readers of the effects of past and current domestic violence towards

Problems of Inequality and Poverty in Finance Free Essays

Abstract Inequality and poverty are realities for the majority of developing economies around the world. Intuitively, financial development leading to economic growth should have a positive relationship between the reduction of income inequality (and therefore social inequality) and poverty eradication. Successful regulation of the financial sector leading the economic and political stability will have the effect of increasing access to capital through increased foreign direct investment. We will write a custom essay sample on Problems of Inequality and Poverty in Finance or any similar topic only for you Order Now In this way FDI can be used to improve access to microfinance which has been identified by the UNDP and developing countries as a primary strategy to poverty eradication as a long-term goal. Introduction Literature on poverty alleviation notes that levels of poverty can be decomposed in two distinct ways. The first is through rapid economic growth and the second is though a change in the distribution of income in that economy (Bourguignon, 2004). This literature acknowledges the inherent link between poverty alleviation, economic growth and income redistribution. In terms of statistical representation, Besley and Burgess (2003) prove that in order for alleviation of poverty to occur, developing countries need to effect an annual growth of 3.8% in the Gross Domestic Product (GDP) in order to half poverty in the next decade which is currently less than half the average growth recorded in recent decades. Therefore although financial development has been shown to produce faster rates of economic growth, literature still remains largely unconvinced of the link between financial development and poverty alleviation (Beck et al., 2004). It goes without saying that income inequality perpetuat es social inequality by affording lower-income groups limited access to necessities, commodities, health and education which in turn creates a recurring cycle of poverty and inequality in itself. This paper therefore aims to explore the link between financial development and inequality in poverty alleviation with a particular focus on developing countries in Africa. The central hypothesis of this paper asserts that if there is a positive relationship between financial development and the reduction of income inequality, financial development can be used as a means of alleviating poverty in developing countries. The Impact of Financial Development on Income Inequality The impact of financial development on the reduction of income inequality is not settled in current research outcomes, with certain models implying that development enhances opportunities for growth and reduces inequality. However, that this reduction is hampered by imperfections in the financial markets with factors such as credit restraints impeding the flow of capital to poorer individuals and communities, therefore enforcing inequality in income and intensifying the wealth disparity in these developing economies (Beck et al., 2004). According to these models, financial development plays the role of reducing these credit restraints and therefore improving the availability of capital for redistribution in lower-income groups and thereby accelerating growth. Contrary to these models however, Haber et al. (2003) note that in low-income countries, poorer members of society remain in rural areas and therefore rely on access to capital through family connections and as a result, financial development will only result in assisting the high-income end of the spectrum. Overall therefore, this may have a negative impact on income inequality. Evidence from developed economies suggest a nonlinear approach to financial development which asserts that at higher levels of economic development, there is increasing wealth available to a larger percentage of the population which may have the effect of offsetting this negative impact (Greenwood Jovanovic, 1990). The problematic element of this nonlinear model is that reaching higher levels of economic development may take substantial economic growth over a long-period of time, which does little to address immediate concerns of income inequality. Indicators of financial development include the improvement of information and transactions costs, and the availability and distribution of capital. For developing countries, which often experience a lack of availability of credit, there is a larger reliance on foreign direct investment and private credit institutions to provide capital. In these regions there is a large reliance on micro-finance institutions (MFIs) to improve the access to capital for low-income groups. Case studies in developing countries have proven that access to microfinance has a positive impact on poverty alleviation and income inequalities (Meagher, 2002). Practice however has shown that MFI access is in itself problematic as it requires strict regulation of the financial services industry in that country in order to ensure both consumer and investor protection (Omino, 2005). The success of MFIs in providing access to capital relies heavily on a coherent strategy by the government of the country through the c entral banking institution or primary financial regulation authority. The Use of Microfinance for Poverty Alleviation One could argue that the use of microfinance as a means of poverty reduction and income redistribution is a moot point, as it has been popularly acknowledged as a primary long-term strategy for the eradication of poverty. The United Nations Development Programme prioritized microfinance as part of their broader international agenda as a measure of poverty alleviation (UNDP, 1997). As part of this international mandate, the UNDP provided avenues where commercial financial institutions could gain funding from the UNDP as a means of providing microfinance to low-income families with comparatively lower repayment demands and in doing so, catering for the social economic burdens carried by the nationals of the countries involved (UNDP, 2004). This agenda is one that has been adopted by financial regulation authorities in developing countries. The Central Bank of Liberia, for example has adopted a new regulatory framework which provides a unified approach to regulation of the financial sec tor with a specific focus on MFIs, acknowledge the mandate of the UNDP to make use of these institutions for wealth redistribution and poverty eradication (Central Bank of Liberia, 2009), which was a goal specifically supported by the United Nations Capital Development Fund (UNCDP, 2008). The support for these forms of financing institutions is not specific to Liberia with the UNDP and UNCDP offering similar support to other developing countries around the world, with a specific focus on improving financial development through effective regulation in the sector. The rationale behind the use of MFIs as a primary means of poverty reduction lies in the access that it gives to lower income groups to encourage small business. This acts as a grassroots approach to wealth redistribution and therefore the use of MFIs has been identified as a primary method of poverty alleviation in developing countries, such as Liberia (Central Bank of Liberia, 2005). Financial development through the use of non-traditional means of providing access to credit for lower-income groups requires unified regulation of the banking sector in developing countries. This necessitates a hierarchical approach to regulation which effectively regulates the relationship between the national financial policy of the country, macroeconomic financial institutions and MFIs. The effect of consistent regulation in this way has the effect of stabilizing the economy of the country, as an unstable economic environment generates inflation which has a proven effect on microenterprise that is more severe than established, wealthier companies or corporations (Franks, 2000). Therefore ensuring a stable economic environment is essential to continued wealth redistribution and ultimately poverty alleviation. A case study of the Philippines further showed that the investment in poverty alleviation in this way enhanced the economic and political resources of the average household and as a result had a positive effect on social capital and cooperation through the encouragement of production and industry (Quinones Siebel, 2000). This in turn had a positive effect on the political stability in this region which further encourages foreign direct investment (FDI) in the economy of the country. The knock-on effect of FDI in developing countries is self-explanatory with a positive result on economic growth and greater access to capital. An unfortunate reality however faces many African nations which represents the converse situation, where many years of poor financial management have led to inherent corruption within the system and in order to make use of the available support offered by the UNDP and UNCDP, these countries require a significant financial overhaul which is low on the priority lis t for many countries. This is particularly true of developing countries that have suffered the effects of oil wealth, which has had a negative overall effect on economic growth despite an abundance of natural resources which has compounded wealth disparity and poverty (Mahdavy, 1970). Conclusion The evidence presented in this paper shows that there are a number of factors required for financial development to positively contribute to a reduction of income inequality (and therefore social inequality) and poverty eradication. The most important factor is effective and unified regulation of the financial sector of the country, which will have the effect of stabilizing the economy and therefore stabilizing interest rates, but also in the stabilization of the political climate in the country. Theoretically, this positions these economies favorably in terms of FDI which will have the effect of increasing the amount of capital available for redistribution. By redistributing wealth at a lower-income level, the nonlinear financial effects of economic growth can be expedited with a realistic alternative to gradual wealth distribution in favour of bottom-up wealth creation. In this way, financial development tackles the problem of wealth disparity and the associated poverty levels fro m a top-down and bottom-up approach which can reasonably be expected to increase the rate of economic growth, and doing so in a manner that does not rely on singular capital redistribution that may be plagued by imperfections in financial markets. In this way, financial development can be used as a means of alleviating income inequalities and poverty levels in developing countries. References Beck, T., Demirguc-Kunt, A. Levine, R. (2004) Finance, Inequality and Poverty: Cross Country Evidence. NBER Working Paper Series, Working Paper 10979 Besley, T. Burgess, R. (2003) Halving Global Poverty. Journal of Economic Perspectives, 17, pp. 3-22. Bourguignon, F. (2004) The Poverty-Growth-Inequality Triangle. World Bank mimeo. Central Bank of Liberia (2005) Integrating Financial Services into Poverty Reduction Strategies: Institutional Experience of Liberia West-African Regional Workshop, Monrovia: CBL Central Bank of Liberia (2009) Microfinance Policy and Regulatory Supervisory Framework for Liberia Monrovia: CBL Franks, J. (2000) Macroeconomic Stabilization and the Microentrepreneur. Journal of Microfinance, 2, pp. 69-91 Greenwood, J. Jovanovic, B. (1990) Financial Development, Growth, and the Distribution of Income, Journal of Political Economy, 98, pp. 1076-1107 Haber, S., Razo, A. Maurer, N. (2003) The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico. Cambridge University Press. Mahdavy, H. (1970) ‘The Patterns and Problems of Economic Development in Rentier States: The Case of Iran’ In Studies in the Economic History of the Middle East, ed. M. A. Cook. London: Oxford University Press Meagher, P. (2002) Microfinance Regulation in Developing Countries: A Comparative Review of Current Practice Maryland: IRIS Centre Omino, F. (2005) Regulation and Supervision of Microfinance Institutions in Kenya. Essays on Regulation and Supervision, Central Bank of Kenya, No. 5 Quinones, B., Seibel, H. (2000) Social capital in microfinance: Case studies in the Philippines. Policy Sciences, 33, pp. 421-433 United Nations Development Programme (1997) Microstart Programme Geneva: UNDP How to cite Problems of Inequality and Poverty in Finance, Essay examples

Comparison of Provincial Employment Statutes of Canada

Question: Describe about the Comparison of Provincial Employment Statutes of Canada. Answer: Compare Saskatchewan's human rights legislation with British Columbia's human rights legislation in terms of how they protect an employee against discrimination in hiring In the Saskatchewan human rights, legislation the focus is on the bill of rights that gives certain freedom to the people of the country, which is applicable in the employment conditions in the section 16 of the law. The law protects the rights of the people during an employment condition. The employment condition of the section denotes the specific conditions that are to be maintained by the Saskatchewan human rights law (The Saskatchewan Human Rights Code and regulations, 1993). The employer in the different cases cannot discriminate against the religious practices of the employee or potential employee. This is not applicable in the cases where the school or other institution where religious instruction is needed as specialty. The age, sex or the educational qualification of the applicant cannot be discriminated against if the job description does not require those particular qualities in an employee. Nevertheless, in the case of the British Columbia human rights legislation the di fferent rights of the employees are spelled out and the conditions where they cannot be applied is not the focus of the legislation (Www2.gov.bc.ca, 2016). This legislation protects the rights of the employees against the discrimination in the grounds of age, sex, race, religion, marital status, sexual orientation and age. Therefore, the protection in the time of hiring is given to the applicants. So in other words the Saskatchewan human rights legislation points out the gaps of the bill of rights and makes sure that no undue advantage is given to the candidate when the skills or criterion are intrinsic to the ability of the person to do a job. The British Columbia legislation focuses on the rights of the employees and the focus is on the employer and their acts of discrimination. References Www2.gov.bc.ca. (2016). Human Rights Protection - Province of British Columbia. [online] Available at: https://www2.gov.bc.ca/gov/content/justice/human-rights/human-rights-protection [Accessed 21 Jul. 2016]. The Saskatchewan Human Rights Code and regulations. (1993). Regina: Queen's Printer.

The Power and the Glory of the Roman Empire Essay Example

The Power and the Glory of the Roman Empire Paper I am greatly marveled by the wonderful pictures and information the article tackles on certain details of the Roman world where textbooks normally take for granted. Such examples mentioned in the article, covers what Romans do in their leisure time and details on the structure of the city, which then leads to how its leaders turned Rome to be one of the richest, and most powerful metropolises the world has ever witnessed. It is a good thing that the author started on the foundation of the topic by defining the terminologies and then interconnecting it with other issues. The author presented such information of Rome, its culture, its magnificent blueprint of the city and the other aspects of certain power and strategies manipulated by its leaders, with such creativity that a normal textbook lack. Thus, making it more interesting to read alongside its pictures that reassure us of the glory of the whole Roman Empire. The article is supported by additional information like the formation of the calendar, Marcus Licinius Crassus and the city of Pompey. As I read the part about Pompey, I cant help but imagine it happening before my eyes and be heartbroken by the whole event and at same time, I marvel at the remains of this city. The information unearthed in this city adds to what there was in a Roman town back then. How such work of art also serves as public signs. The actual seeds and pollens seen here tell us what people were eating, another is the minerals in paint and vegetable dyes in scraps of cloth, which reveals about their trade patterns. We will write a custom essay sample on The Power and the Glory of the Roman Empire specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The Power and the Glory of the Roman Empire specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The Power and the Glory of the Roman Empire specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Another is how Pompeii carries out traffic flow, when examined; the researchers concluded that Romans had one-way streets and no left turn intersections. And lastly, the article describes how such locations played a major role in history, where struggles of order were played out. Combining all these information, I believe that technology also helped in the way of saving these artifacts and also digging carefully and efficiently. For a couple of decades now the leaders of Europe have been struggling to implement a revolutionary and furiously controversial concept: a single European currency. Governments have fallen, fists have flown, and bitter curses have been exchanged in a variety of Romance and Germanic languages over this visionary idea. So explosive are the politics of the proposed Euro that the notion of a single coinage for so many different peoples is an impossible dream. I strongly disagree with T. R. Reids statement, I believe that such revolutionary concept is possible, for there was a time when the Roman Empire has a single currency, a single code and a single Emperor. Rome had a signal achievement in the sheer art of governing. Just like how the Greeks tried and tested all kinds of governing concepts and given us descriptions about it, the Romans, already experienced such revolution. The only roadblock to making this concept come alive is arguments that governments raise about, may it be for their own benefit or their defeat. As Rome is best known to be the most rich and powerful metropolis that the world has witnessed then, there is an assurance to such concept. As a student is drowsed by the unending textbooks and definitions, I believe that this article will alleviate such problem and aid a student in their quest for knowledge. Such information is discussed with illustrations, with pride and excitement that you cant help but be attracted more to the Roman Empire. In this article I believe just the same that a student will be able to put together all the facts that they have learned, link it with the textbook and this additional information and great illustrations on the city of Rome which technology has structured out for us. The article focuses on events that caused certain turnabouts, and also gives us a timeline of the 1st Emperor-Augustus up to Constantine. I say this with zest because I myself have been attracted to such wonder.

HaleaKala Volcano essays

HaleaKala Volcano essays HaleaKala is the second largest shield volcano in the world. It's under historical status, which means it is dormant or not active right now. The summit elevation is 10,023 feet high, its latitude is 70.8 degrees North, and its longitude is 156.25 degrees west. Haleakala's base diameter is 33-miles, and more then 90 percent of the mountain are under water. Measured from its base on the other ocean floor its elevation would be 28,000 feet. It is located on the Hawaiian island of Maui there are two volcanoes on the island of Maui. One is west Maui and the other East Maui. East Maui volcano, HaleaKala is the easternmost of the two shield volcanoes that are in Maui. Haleakala was born at the Hawaiian hot spot. The Hawaiian hot spot that Maui was formed on is 1 million years old and is growing about 4 inches per year. HaleaKala Crater is erosion calderas formed by the heads of two large valleys as they eroded in the volcano. HaleaKala Crater last erupted in 1700 at the Perouse Bay. The crater is an active volcano, because the eruption was in the historic time of Hawaii. HaleaKala was formed like any other shield volcano. It was made by the fluid lava flows. The flow after pours out in all directions from a central summit vent, building a broad, gently sloping cone of flat domical shape. It almost looks like a warriors shield. It flows of highly fluid basaltic lava and cools dipping sheets. Lavas erupt from vents along fractures that develop on the flanks of the cone. Some of the largest volcanoes are shield. HaleaKala has had ten eruptions in the past 1,000 years. It's said to erupt again in the future, because of its eruptive history. The powerful force of erosion has affected HaleaKala greatly. The powerful force of erosion has affected HaleaKala greatly. About 300,000 years ago HaleaKalas volcanic activity slowed, at the same time of torrential rains of Hawaii. Streams that flowed down which are now called Kaup ...

5 Coke vs Pepsi 21st Century Case Study

In a â€Å"carefully waged competitive struggle,† from 1975 to 1995 both Coke and Pepsi achieved average annual growth of around 10% as both U. S. nd worldwide CSD consumption consistently rose. According to Roger Enrico, former CEO of Pepsi-Cola: No The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to invent them. And on the other side of the fence, I’m sure the folks at Coke would say that nothing contributes as much to the present-day success of the Coca-Cola company than . . . Pepsi. 1 This cozy relationship was threatened in the late 1990s, however, when U. S. CSD consumption dropped for two consecutive years and worldwide shipments slowed for both Coke and Pepsi. In response, both firms began to modify their bottling, pricing, and brand strategies. They also looked to emerging international markets to fuel growth and broadened their brand portfolios to include non-carbonated beverages like tea, juice, sports drinks, and bottled water. Do As the cola wars continued into the twenty-first century, the cola giants faced new challenges: Could they boost flagging domestic cola sales? Where could they find new revenue streams? Was their era of sustained growth and profitability coming to a close, or was this apparent slowdown just another blip in the course of Coke’s and Pepsi’s enviable performance? 1Roger Enrico, The Other Guy Blinked and Other Dispatches from the Cola Wars (New York: Bantam Books, 1988). ________________________________________________________________________________________________________________ Research Associate Yusi Wang prepared this case from published sources under the supervision of Professor David B. Yoffie. Parts of this case borrow from previous cases prepared by Professors David Yoffie and Michael Porter. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright  © 2002 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www. hbsp. harvard. edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 Economics of the U. S. CSD Industry Americans consumed 23 gallons of CSD annually in 1970 and consumption grew by an average of 3% per year over the next 30 years (see Exhibit 1). This growth was fueled by increasing availability as well as by the introduction and popularity of diet and flavored CSDs. Through the mid-1990s, the real price of CSDs fell, and consumer demand appeared responsive to declining prices. 2 Many alternatives to CSDs existed, including beer, milk, coffee, bottled water, juices, tea, powdered drinks, wine, sports drinks, distilled spirits, and tap water. Yet Americans drank more soda than any other beverage. At 60%-70% market share, the cola segment of the CSD industry maintained its dominance throughout the 1990s, followed by lemon/lime, citrus, pepper, root beer, orange, and other flavors. C CSD consisted of a flavor base, a sweetener, and carbonated water. Four major participants were involved in the production and distribution of CSDs: 1) concentrate producers; 2) bottlers; 3) retail channels; and 4) suppliers. 3 Concentrate Producers The concentrate producer blended raw material ingredients (excluding sugar or high fructose corn syru p), packaged it in plastic canisters, and shipped the blended ingredients to the bottler. The concentrate producer added artificial sweetener to make diet soda concentrate, while bottlers added sugar or high fructose corn syrup themselves. The process involved little capital investment in machinery, overhead, or labor. A typical concentrate manufacturing plant cost approximately $25 million to $50 million to build, and one plant could serve the entire United States. No A concentrate producer’s most significant costs were for advertising, promotion, market research, and bottler relations. Marketing programs were jointly implemented and financed by concentrate producers and bottlers. Concentrate producers usually took the lead in developing the programs, particularly in product planning, market research, and advertising. They invested heavily in their trademarks over time, with innovative and sophisticated marketing campaigns (see Exhibit 2). Bottlers assumed a larger role in developing trade and consumer promotions, and paid an agreed percentage—typically 50% or more—of promotional and advertising costs. Concentrate producers employed extensive sales and marketing support staff to work with and help improve the performance of their bottlers, setting standards and suggesting operating procedures. Concentrate producers also negotiated directly with the bottlers’ major suppliers—particularly sweetener and packaging suppliers—to encourage reliable supply, faster delivery, and lower prices. Do Once a fragmented business with hundreds of local manufacturers, the landscape of the U. S. soft drink industry had changed dramatically over time. Among national concentrate producers, CocaCola and Pepsi-Cola, the soft drink unit of PepsiCo, claimed a combined 76% of the U. S. CSD market in sales volume in 2000, followed by Cadbury Schweppes and Cott Corporation (see Exhibit 3). There were also private label brand manufacturers and several dozen other national and regional producers. Exhibit 4 gives financial data for Coke and Pepsi and their top affiliated bottlers. 2 Robert Tollison et al. , Competition and Concentration (Lexington Books, 1991), p. 11. 3 The production and distribution of non-carbonated soft drinks and bottled water will be discussed in a later section. 2 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. 702-442 op y Cola Wars Continue: Coke and Pepsi in the Twenty-First Century Bottlers Bottlers purchased concentrate, added carbonated water and high fructose corn syrup, bottled or canned the CSD, and delivered it to customer accounts. Coke and Pepsi bottlers offered â€Å"direct store door† (DSD) delivery, which involved route delivery sales people physically placing and managing the CSD brand in the store. Smaller national brands, such as Shasta and Faygo, distributed through food store warehouses. DSD entailed managing the shelf space by stacking the product, positioning the trademarked label, cleaning the packages and shelves, and setting up point-of-purchase displays and end-of-aisle displays. The importance of the bottler’s relationship with the retail trade was crucial to continual brand availability and maintenance. Cooperative merchandising agreements between retailers and bottlers were used to promote soft drink sales. Retailers agreed to specified promotional activity and discount levels in exchange for a payment from the bottler. tC The bottling process was capital-intensive and involved specialized, high-speed lines. Lines were interchangeable only for packages of similar size and construction. Bottling and canning lines cost from $4 million to $10 million each, depending on volume and package type. The minimum cost to build a small bottling plant, with warehouse and office space, was $25million to $35 million. The cost of an efficient large plant, with four lines, automated warehousing, and a capacity of 40 million cases, was $75 million in 1998. 4 Roughly 80-85 plants were required for full distribution across the United States. Among top bottlers in 1998, packaging accounted for approximately half of bottlers’ cost of goods sold, concentrate for one-third, and nutritive sweeteners for one-tenth. Labor accounted for most of the remaining variable costs. Bottlers also invested capital in trucks and distribution networks. Bottlers’ gross profits often exceeded 40%, but operating margins were razor thin. See Exhibit 5 for the cost structures of a typical concentrate producer and bottler. Do No The number of U. S. soft drink bottlers had fallen, from over 2,000 in 1970 to less than 300 in 2000. 6 Historically, Coca-Cola was the first concentrate producer to build nation-wide franchised bottling networks, a move that Pepsi and Cadbury Schweppes followed. The typical franchised bottler owned a manufacturing and sales operation in an exclusive geographic territory, with rights granted in perpetuity by the franchiser. In the case of Coca-Cola, territorial rights did not extend to fountain accounts—Coke delivered to its fountain accounts directly, not through its bottlers. The rights granted to the bottlers were subject to termination only in the event of default by the bottler. The original Coca-Cola franchise contract, written in 1899, was a fixed-price contract that did not provide for contract renegotiation even if ingredient costs changed. With considerable effort, often involving bitter legal disputes, Coca-Cola amended the contract in 1921, 1978, and 1987 to adjust concentrate price. By 1999, over 81% of Coke’s U. S. volume was covered by the 1987 Master Bottler Contract, which granted Coke the right to determine concentrate price and other terms of sale. Under the terms of this contract, Coke was not obligated to share advertising and marketing expenditures with the bottlers; however, the company often did in order to ensure quality and proper distribution of marketing. In 2000, Coke contributed $766 million in marketing support and $223 million in infrastructure support to its top bottler alone. The 1987 contract did not give complete pricing control to Coke, but rather used a pricing formula that adjusted quarterly for changes in sweetener prices and stated a maximum price. This contract differed from Pepsi’s Master Bottling Agreement with its top bottler, which granted the bottler 4 â€Å"Louisiana Coca-Cola Reveals Crown Jewel,† Beverage Industry, January 1999. 5 Calculated from M. Dolan et al. , â€Å"Coca-Cola Beverages,† Merrill Lynch Capital Markets, July 6, 1998. Timothy Muris et al. , Strategy, Structure, and Antitrust in the Carbonated Soft-Drink Industry, (Quorum Books, 1993), p. 63; John C. Maxwell, ed. Beverage Digest Fact Book 2001. 3 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 perpet ual rights to distribute Pepsi cola products while at the same time required it to purchase its raw materials from Pepsi at prices, and on terms and conditions, determined by Pepsi. Pepsi negotiated concentrate prices with its bottling association, and normally based price increases on the CPI. Coke and Pepsi both raised concentrate prices throughout the 1980s and early 1990s, even as the real (inflation-adjusted) retail prices for CSD were down (see Exhibit 6). tC Coca-Cola and Pepsi franchise agreements allowed bottlers to handle the non-cola brands of other concentrate producers. Franchise agreements also allowed bottlers to choose whether or not to market new beverages introduced by the concentrate producer. Some restrictions applied, however, as bottlers could not carry directly competitive brands. For example, a Coca-Cola bottler could not sell Royal Crown Cola, but it could distribute Seven-Up, if it decided not to carry Sprite. Franchised bottlers had the freedom to participate in or reject new package introductions, local advertising campaigns and promotions, and test marketing. The bottlers also had the final say in decisions concerning retail pricing, new packaging, selling, advertising, and promotions in its territory, though they could only use packages authorized by the franchiser. In 1971, the Federal Trade Commission initiated action against eight major CPs, charging that exclusive territories granted to franchised bottlers prevented intrabrand competition (two or more bottlers competing in the same area with the same beverage). The CPs argued that interbrand competition was sufficiently strong to warrant continuation of the existing territorial agreements. After nine years of litigation, Congress enacted the â€Å"Soft Drink Interbrand Competition Act† in 1980, preserving the right of CPs to grant exclusive territories. Retail Channels No In 2000, the distribution of CSDs in the United States took place through food stores (35%), fountain outlets7 (23%), vending machines (14%), convenience stores (9%), and other outlets (20%). Mass merchandisers, warehouse clubs, and drug stores made up most of the last category. Bottlers’ profitability by type of retail outlet is shown in Exhibit 7. Costs were affected by delivery method and frequency, drop size, advertising, and marketing. The main distribution channel for soft drinks was the supermarket. CSDs were among the five largest selling product lines sold by supermarkets, raditionally yielding a 15%-20% gross margin (about average for food products) and accounting for 3%-4% of food store revenues. 8 CSDs represented a large percentage of a supermarket’s business, and were also a big traffic draw. Bottlers fought for retail shelf space to ensure visibility and accessibility for their products, and looked for new locations to increase impulse purchases, such as placing coolers at checkout counters. The proliferation of products and packaging types created intense shelf space pressures. Do Discount retailers, warehouse clubs, and drug stores accounted about 15% of CSD sales in the late 1990s. These firms often had their own private label CSD, or they sold a generic label such as President’s Choice. Private label CSDs were usually delivered to a retailer’s warehouse, while branded CSDs were delivered directly to the store. With the warehouse delivery method, the retailer was responsible for storage, transportation, merchandising, and stocking the shelves, thus incurring additional costs. The word â€Å"fountain outlets† traditionally referred to soda fountains, but was later used also for restaurants, cafeterias, and other establishments that served soft drinks by the glass using fountain dispensers. 8 Progressive Grocer 1998 Sales Manual Databook, July 1998, p. 68. 4 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. 702-442 op y Cola Wars Continue: Coke and Pepsi in the Twenty-First Century tC Hi storically, Pepsi had focused on sales through retail outlets, while Coke had dominated fountain sales. Coca-Cola had a 65% share of the fountain market in 2000, while Pepsi had 21%. Competition for fountain sales was intense. National fountain accounts were essentially â€Å"paid sampling,† with CSD companies earning pretax operating margins of around 2%. For restaurants, by contrast, fountain sales were extremely profitable—about 80 cents out of every dollar spent stayed with the restaurant retailers. In 1999, for example, Burger King franchisees were believed to pay about $6. 20 per gallon for Coke syrup, but they received a substantial rebate on each gallon in the form of a check; one large Midwestern Burger King franchisee said his annual rebate ran $1. 45 per gallon, or about 23%. Coke and Pepsi also invested in the development of fountain equipment, such as service dispensers, and provided their fountain customers with cups, point-of-sale material, advertising, and in-store promotions to increase brand presence. After Pepsi entered the fast-food restaurant business with the acquisitions of Pizza Hut (1978), Taco Bell (1986), and Kentucky Frie d Chicken (1986), Coca-Cola persuaded other chains such as Wendy’s and Burger King to switch to Coke. PepsiCo spun its restaurant business off to the public in 1997 under the name Tricon, while retaining the Frito-Lay snack food business. In 2000, fountain â€Å"pouring rights† remained split along pre-Tricon lines, as Pepsi supplied all of Taco Bell’s and KFC’s, and the overwhelming majority of Pizza Hut restaurants. Coke retained exclusivity deals with McDonald’s and Burger King. No Coke and Cadbury Schweppes handled fountain accounts from their national franchisor companies. Employees of the franchisee companies negotiated and signed pouring rights contracts which, in the case of big restaurant chains, could cover the entire United States or even the world. The accounts were actually serviced by employees of the franchisors’ fountain divisions, local bottlers, or both. Local bottlers, when they were used, were paid service fees for delivering syrup and fixing and placing machines. Historically, PepsiCo could only sell directly to end-user national accounts. By 1999, Pepsi had persuaded most of its bottlers to modify their franchise agreements to allow Pepsi to sell fountain syrup via restaurant commissary companies, which sell a range of supplies to restaurants. Concentrate producers offered bottlers rebates to encourage them to purchase and install vending machines. The owners of the property on which vending equipment was located usually received a sales commission. Coke and Pepsi were the largest suppliers of CSDs to the vending channel. Juice, tea, sports drinks, lemonade, and water were also available through vending machines. Suppliers to Concentrate Producers and Bottlers Do Concentrate producers required few inputs: the concentrate for most regular colas consisted of caramel coloring, phosphoric and/or citric acid, natural flavors, and caffeine. 10 Bottlers purchased two major inputs: packaging, which included $3. 4 billion in cans, $1. 3 billion in plastic bottles, and $0. 6 billion in glass; and sweeteners, which included $1. 1 billion in sugar and high fructose corn syrup, and $1. billion in artificial sweetener (predominantly aspartame). The majority of U. S. CSDs were packaged in metal cans (60%), then plastic bottles (38%), and glass bottles (2%). Cans were an attractive packaging material because they were easily handled, stocked, and displayed, weighed little, and were durable and recyclable. Plastic bottles, introduced in 1978, bo osted home consumption of CSDs because of their larger 1-liter, 2-liter, and 3-liter sizes. Single-serve 20-oz. PET bottles quickly gained popularity and represented 35% of vended drinks and 3% of grocery drinks in 2000. Nikhil Deogun and Richard Gibson, â€Å"Coke Beats Out Pepsi for Contracts With Burger King, Domino’s,† The Wall Street Journal, April 15, 1999. 10 Based on ingredients lists, Coke Classic and Pepsi-Cola, 2001. 5 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 The concentrate producers’ strategy towards can manufacturers was typical of their supplier relationships. Coke and Pepsi negotiated on behalf of their bottling networks, and were among the metal can industry’s largest customers. Since the can constituted about 40% of the total cost of a packaged beverage, bottlers and concentrate producers often maintained relationships with more than one supplier. In the 1960s and 1970s, Coke and Pepsi backward integrated to make some of their own cans, but largely exited the business by 1990. In 1994, Coke and Pepsi instead sought to establish stable long-term relationships with their suppliers. Major can producers included American National Can, Crown Cork Seal, and Reynolds Metals. Metal cans were viewed as commodities, and there was chronic excess supply in the industry. Often two or three can manufacturers competed for a single contract. Early History11 tC The Evolution of the U. S. Soft Drink Industry Coca-Cola was formulated in 1886 by John Pemberton, a pharmacist in Atlanta, Georgia, who sold it at drug store soda fountains as a â€Å"potion for mental and physical disorders. † A few years later, Asa Candler acquired the formula, established a sales force, and began brand advertising of Coca-Cola. Tightly guarded in an Atlanta bank vault, the formula for Coca-Cola syrup, known as â€Å"Merchandise 7X,† remained a well-protected secret. Candler granted Coca-Cola’s first bottling franchise in 1899 for a nominal one dollar, believing that the future of the drink rested with soda fountains. The company’s bottling network grew quickly, however, reaching 370 franchisees by 1910. No In its early years, Coke was constantly plagued by imitations and counterfeits, which the company aggressively fought in court. In 1916 alone, courts barred 153 imitations of Coca-Cola, including the brands Coca-Kola, Koca-Nola, Cold-Cola, and the like. Coke introduced and patented a unique 6. 5ounce â€Å"skirt† bottle to be used by its franchisees that subsequently became an American icon. Robert Woodruff, who became CEO in 1923, began working with franchised bottlers to make Coke available wherever and whenever a consumer might want it. He pushed the bottlers to place the beverage â€Å"in arm’s reach of desire,† and argued that if Coke were not conveniently available when the consumer was thirsty, the sale would be lost forever. During the 1920s and 1930s, Coke pioneered open-top coolers to storekeepers, developed automatic fountain dispensers, and introduced vending machines. Woodruff also initiated â€Å"lifestyle† advertising for Coca-Cola, emphasizing the role of Coke in a consumer’s life. Do Woodruff also developed Coke’s international business. In the onset of World War II, at the request of General Eisenhower, he promised that â€Å"every man in uniform gets a bottle of Coca-Cola for five cents wherever he is and whatever it costs the company. † Beginning in 1942, Coke was exempted from wartime sugar rationing whenever the product was destined for the military or retailers serving soldiers. Coca-Cola bottling plants followed the movements of American troops; 64 bottling plants were set up during the war—largely at government expense. This contributed to Coke’s dominant market shares in most European and Asian countries. Pepsi-Cola was invented in 1893 in New Bern, North Carolina by pharmacist Caleb Bradham. Like Coke, Pepsi adopted a franchise bottling system, and by 1910 it had built a network of 270 11 See J. C. Louis and Harvey Yazijian, The Cola Wars (Everest House, 1980); Mark Pendergrast, For God, Country, and Coca-Cola (Charles Scribner’s, 1993); David Greising, I’d Like the World to Buy a Coke (John Wiley Sons, 1997). 6 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. du or 617-783-7860. 702-442 op y Cola Wars Continue: Coke and Pepsi in the Twenty-First Century franchised bottlers. Pepsi struggled, however, declaring bankruptcy in 1923 and again in 1932. Business began to pick up in the midst of the Great Depression, when Pepsi lowered the price for its 12-ounce bottle to a nickel, the same price Coke charged for its 6. 5-ounce bottle. When Pepsi tried to expand its bottling network in the late 1930s, its choices were small local bottlers striving to compete with wealthy Coke franchisees. 12 Pepsi nevertheless began to gain market share. In 1938, Coke filed suit against Pepsi, claiming that Pepsi-Cola was an infringement on the CocaCola trademark. The court ruled in favor of Pepsi in 1941, ending a series of suits and countersuits between the two companies. With its famous radio jingle, â€Å"Twice as Much, for Nickel Too,† Pepsi’s U. S. sales surpassed those of Royal Crown and Dr Pepper in the 1940s, trailing only Coca-Cola. In 1950, Coke’s share of the U. S. CSD market was 47% and Pepsi’s was 10%; hundreds of regional CSD companies continued to produce a wide assortment of flavors. tC The Cola Wars Begin In 1950, Alfred Steele, a former Coca-Cola marketing executive, became Pepsi’s CEO. Steele made â€Å"Beat Coke† his theme and encouraged bottlers to focus on take-home sales through supermarkets. The company introduced the first 26-ounce bottles to the market, targeting family consumption, while Coke stayed with its 6. 5-ounce bottle. Pepsi’s growth soon began tracking the growth of supermarkets and convenience stores in the United States: There were about 10,000 supermarkets in 1945, 15,000 in 1955, and 32,000 at the peak in 1962. No In 1963, under the leadership of new CEO Donald Kendall, Pepsi launched its â€Å"Pepsi Generation† campaign that targeted the young and â€Å"young at heart. † Pepsi’s ad agency created an intense commercial using sports cars, motorcycles, helicopters, and a catchy slogan. The campaign helped Pepsi narrow Coke’s lead to a 2-to-1 margin. At the same time, Pepsi worked with its bottlers to modernize plants and improve store delivery services. By 1970, Pepsi’s franchise bottlers were generally larger compared to Coke bottlers. Coke’s bottling network remained fragmented, with more than 800 independent franchised bottlers that focused mostly on U. S. cities of 50,000 or less. 13 Throughout this period, Pepsi sold concentrate to its bottlers at a price approximately 20% lower than Coke. In the early 1970s, Pepsi increased the concentrate price to equal that of Coke. To overcome bottlers’ opposition, Pepsi promised to use the extra margin to increase advertising and promotion. Do Coca-Cola and Pepsi-Cola began to experiment with new cola and non-cola flavors and a variety of packaging options in the 1960s. Before then, the two companies had adopted a single product strategy, selling only their flagship brand. Coke introduced Fanta (1960), Sprite (1961), and lowcalorie Tab (1963). Pepsi countered with Teem (1960), Mountain Dew (1964), and Diet Pepsi (1964). Each introduced non-returnable glass bottles and 12-ounce metal cans in various packages. Coke and Pepsi also diversified into non-soft-drink industries. Coke purchased Minute Maid (fruit juice), Duncan Foods (coffee, tea, hot chocolate), and Belmont Springs Water. Pepsi merged with snackfood giant Frito-Lay in 1965 to become PepsiCo, claiming synergies based on shared customer targets, store-door delivery systems, and marketing orientations. In the late 1950s, Coca-Cola, still under Robert Woodruff’s leadership, began using advertising that finally recognized the existence of competitors, such as â€Å"American’s Preferred Taste† (1955) and â€Å"No Wonder Coke Refreshes Best† (1960). In meetings with Coca-Cola bottlers, however, executives only discussed the growth of their own brand and never referred to its closest competitor by name. 2 Louis and Yazijian, p,. 23. 13 Pendergrast, p. 310. 7 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 During the 1960s, Coke primarily focused on overseas markets, apparently believing that domestic soft drink consumption had neared saturation at 22. 7 ga llons per capita in 1970. 14 Pepsi meanwhile battled aggressively in the United States, doubling its share between 1950 and 1970. The Pepsi Challenge In 1974, Pepsi launched the â€Å"Pepsi Challenge† in Dallas, Texas. Coke was the dominant brand in the city and Pepsi ran a distant third behind Dr Pepper. In blind taste tests hosted by Pepsi’s small local bottler, the company tried to demonstrate that consumers in fact preferred Pepsi to Coke. After its sales shot up in Dallas, Pepsi started to roll out the campaign nationwide, although many of its franchise bottlers were initially reluctant to join. tC Coke countered with rebates, rival claims, retail price cuts, and a series of advertisements questioning the tests’ validity. In particular, Coke used retail price discounts selectively in markets where the Coke bottler was company owned and the Pepsi bottler was an independent franchisee. Nonetheless, the Pepsi Challenge successfully eroded Coke’s market share. In 1979, Pepsi passed Coke in food store sales for the first time with a 1. 4 share point lead. Breaking precedent, Brian Dyson, president of Coca-Cola, inadvertently uttered the name â€Å"Pepsi† in front of Coke’s bottlers at the 1979 bottlers conference. No During the same period, Coke was renegotiating its franchise bottling contract to obtain greater flexibility in pricing concentrate and syrups. Bottlers approved the new contract in 1978 only after Coke conceded to link concentrate price changes to the CPI, adjust the price to reflect any cost savings associated with a modification of ingredients, and supply unsweetened concentrate to bottlers who preferred to purchase their own sweetener on the open market. 15 This brought Coke’s policies in line with Pepsi, which traditionally sold its concentrate unsweetened to its bottlers. Immediately after securing bottler approval, Coke announced a significant concentrate price hike. Pepsi followed with a 15% price increase of its own. Cola Wars Heat Up In 1980, Cuban-born Roberto Goizueta was named CEO and Don Keough president of Coca-Cola. In the same year, Coke switched from sugar to the lower-priced high fructose corn syrup, a move Pepsi emulated three years later. Coke also intensified its marketing effort, increasing advertising spending from $74 million to $181 million between 1981 and 1984. Pepsi elevated its advertising expenditure from $66 million to $125 million over the same period. Goizueta sold off most of the non-CSD businesses he had inherited, including wine, coffee, tea, and industrial water treatment, while keeping Minute Maid. Do Diet Coke was introduced in 1982 as the first extension of the â€Å"Coke† brand name. Much of CocaCola management referred to its brand as â€Å"Mother Coke,† and considered it too sacred to be extended to other products. Despite internal opposition from company lawyers over copyright issues, Diet Coke was a phenomenal success. Praised as the â€Å"most successful consumer product launch of the Eighties,† it became within a few years not only the nation’s most popular diet soft drink, but also the third-largest selling soft drink in the United States. 14 Maxwell. 15 Pendergrast, p. 323. 8 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. 702-442 op y Cola Wars Continue: Coke and Pepsi in the Twenty-First Century In April 1985, Coke announced the change of its 99-year-old Coca-Cola formula. Explaining this radical break with tradition, Goizueta saw a sharp depreciation in the value of the Coca-Cola trademark as â€Å"the product had a declining share in a shrinking segment of the market. †16 On the day of Coke’s announcement, Pepsi declared a holiday for its employees, claiming that the new Coke tasted more like Pepsi. The reformulation prompted an outcry from Coke’s most loyal customers. Bottlers joined the clamor. Three months later, the company brought back the original formula under the name Coca-Cola Classic, while retaining the new formula as the flagship brand under the name New Coke. Six months later, Coke announced that Coca-Cola Classic (the original formula) would henceforth be considered its flagship brand. tC New CSD brands proliferated in the 1980s. Coke introduced 11 new products, including Cherry Coke, Caffeine-Free Coke, and Minute-Maid Orange. Pepsi introduced 13 products, including Caffeine-Free Pepsi-Cola, Lemon-Lime Slice, and Cherry Pepsi. The number of packaging types and sizes also increased dramatically, and the battle for shelf space in supermarkets and other food stores grew fierce. By the late 1980s, both Coke and Pepsi offered more than ten major brands, using at least seventeen containers and numerous packaging options. 17 The struggle for market share intensified and the level of retail price discounting increased sharply. Consumers were constantly exposed to cents-off promotions and a host of other supermarket discounts. No Throughout the 1980s, the smaller concentrate producers were increasingly squeezed by Coke and Pepsi. As their shelf-space declined, small brands were shuffled from one owner to another. Over five years, Dr Pepper was sold (all and in part) several times, Canada Dry twice, Sunkist once, Shasta once, and AW Brands once. Some of the deals were made by food companies, but several were leveraged buyouts by investment firms. Philip Morris acquired Seven-Up in 1978 for a big premium, but despite superior brand rankings and established distribution channels, racked up huge losses in the early 1980s and exited in 1985. (Exhibit 8a shows the brand performance of top companies, as ranked by retailers. ) In the 1990s, through a series of strategic acquisitions, Cadbury Schweppes emerged as the clear (albeit distant) third-largest concentrate producer, snapping up the Dr Pepper/Seven-Up Companies (1995) and Snapple Beverage Group (2000). (Appendix A describes Cadbury Schweppes’ operations and financial performance. ) Bottler Consolidation and Spin-Off Do Relations between Coke and its franchised bottlers had been strained since the contract renegotiation of 1978. Coke struggled to persuade bottlers to cooperate in marketing and promotion programs, upgrade plant and equipment, and support new product launches. 8 The cola wars had particularly weakened small independent franchised bottlers. High advertising spending, product and packaging proliferation, and widespread retail price discounting raised capital requirements for bottlers, while lowering their margins. Many bottlers that had been owned by one family for several generations no longer had the resources or the commitment to be competitive. At a July 1980 dinner with Coke’s fifteen largest domestic bottlers, Goizueta announced a plan to refranchise bottling operations. Coke began buying up poorly managed bottlers, infusing capital, 6 The Wall Street Journal, April 24, 1986. 17 Timothy Muris, David Scheffman, and Pablo Spiller, Strategy, Structure, and Antitrust in the Carbonated Soft Drink Industry. (Quorum Books, 1993), p. 73. 18 Greising, p. 88. 9 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 and quickly reselling them to better-performing bottlers. Refranchising allowed Coke’s larger bottlers to expand outside their traditionally exclusive geographic territories. When two of its largest bottling companies came up for sale in 1985, Coke moved swiftly to buy them for $2. 4 billion, preempting outside financial bidders. Together with other bottlers that Coke had recently bought, these acquisitions placed one-third of Coca-Cola’s volume in company-owned bottlers. In 1986, Coke began to replace its 1978 franchise agreement with the Master Bottler Contract that afforded Coke much greater freedom to change concentrate price. tC Coke’s bottler acquisitions had increased its long-term debt to approximately $1 billion. In 1986, on the initiative of Doug Ivester, who later became CEO, the company created an independent bottling subsidiary, Coca-Cola Enterprises (CCE), and sold 51% of its shares to the public, while retaining the rest. The minority equity position enabled Coke to separate its financial statements from CCE. As Coke’s first so-called â€Å"anchor bottler,† CCE consolidated small territories into larger regions, renegotiated with suppliers and retailers, merged redundant distribution and material purchasing, and cut its work force by 20%. CCE moved towards mega-facilities, investing in 50 million-case production lines with high levels of automation. Coke continued to acquire independent franchised bottlers and sell them to CCE. 19 â€Å"We became an investment banking firm specializing in bottler deals,† reflected Don Keough. In 1997 alone, Coke put together more than $7 billion in deals involving bottlers. 20 By 2000, CCE was Coke’s largest bottler with annual sales of more than $14. 7 billion, handling 70% of Coke’s North American volume. Some industry observers questioned Coke’s accounting practice, as Coke retained substantial managerial influence in its arguably independent anchor bottler. 21 No In the late 1980s, Pepsi also acquired MEI Bottling for $591 million, Grand Metropolitan’s bottling operations for $705 million, and General Cinema’s bottling operations for $1. 8 billion. The number of Pepsi bottlers decreased from more than 400 in the mid-1980s to less than 200 in the mid-1990s. Pepsi owned about half of these bottling operations outright and held equity positions in most of the rest. Experience in the snack food and restaurant businesses boosted Pepsi’s confidence in its ability to manage the bottling business. In the late 1990s, Pepsi changed course and also adopted the anchor bottler model. In April 1999, the Pepsi Bottling Group (PBG) went public, with Pepsi retaining a 35% equity stake. By 2000, PBG produced 55% of PepsiCo beverages in North America and 32% worldwide. As Craig Weatherup, PBG’s chairman/CEO, explained, â€Å"Our success is interdependent, with PepsiCo the keeper of the brands and PBG the keeper of the marketplace. In that regard, we’re joined at the hip. †22 Do The bottler consolidation of the 1990s made smaller concentrate producers increasingly dependent on the Pepsi and Coke bottling network to distribute their products. In response, Cadbury Schweppes in 1998 bought and merged two large U. S. bottlers to form its own bottler. In 2000, Coke’s bottling system was the most consolidated, with its top 10 bottlers producing 94% of domestic volume. Pepsi’s and Cadbury Schweppes’ top 10 bottlers produced 85% and 71% of the domestic volume of their respective franchisors. 19 Greising, p. 292. 20 Beverage Industry, January 1999, p. 17. 21 Albert Meyer and Dwight Owsen, â€Å"Coca-Cola’s Accounting,† Accounting Today, September 28, 1998 22 Kent Steinriede, â€Å"PBG Charts Its Own Course,† Beverage Industry, May 1, 1999. 10 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Adapting to the Times 702-442 op y Cola Wars Continue: Coke and Pepsi in the Twenty-First Century In the late 1990s, a variety of problems began to emerge for the soft drink industry as a whole. Although Americans still drank more CSDs than any other beverage, U. S. sales volume registered only a 0. 2% increase in 2000, to just under 10 billion cases (a case was equivalent to 24 eight-ounce containers, or 192 ounces). This slow growth was in contrast to the 5%-7% annual growth in the United States during the 1980s. Concurrently, financial crisis in various parts of the world left Coke and Pepsi bottlers over-invested and under-utilized. tC Coca-Cola was also impacted by difficulties in leadership transition. After the death of the popular CEO Roberto Goizueta in 1997, his successor Douglas Ivestor had two rocky years at the helm, during which Coke faced a high-profile race discrimination suit and a European public relations scandal after hundreds of people became ill from contaminated soft drinks. Douglas Daft assumed leadership in April 2000; one of his first moves was to lay off 5,200 employees, or 20% of worldwide staff. While expressing â€Å"enthusiastic support for the current strategic course of the Company under Doug Daft’s leadership,† Coke’s Board voted against Daft’s eleventh-hour negotiations to acquire Quaker Oats in November 2000. As they had numerous times over the last century, analysts predicted the end of Coke and Pepsi’s stellar growth and profitability. Meanwhile, Coke and Pepsi turned their attention to bolstering domestic markets, diversifying into non-carbonated beverages (non-carbs), and cultivating international markets. Balancing Market Growth, Market Share, and Profitability in the United States No During the early 1990s, Coca-Cola and PepsiCo bottlers employed a low-price strategy in the supermarket channel in order to compete more effectively with high-quality, low-price store brands. As the threat of the low-priced brands lessened, CCE responded in March 1999 with its first major price increase at the retail level after 20 years of flat take-home pricing. Its strategy was to reposition Coke Classic as a premium brand. PBG followed that price increase shortly after. Price wars had driven soda prices down to the point where bottlers couldn’t get a decent return on supermarket sales,† explained a Pepsi executive. 23 Observed one industry analyst, â€Å"Coke’s growth is coming internationally, and Pepsi’s is coming from Frito-Lay. It is in the companies’ mutual best interest not to destroy the domestic market and eat up each other’s share. † 24 Consume rs’ initial reaction to price increases was a reduction in supermarket purchases. When CCE raised prices in supermarkets by 6. 0%-8. 0% in both 1999 and 2000, comparable volumes in North America declined each year (1. % in 1999 and 0. 8% in 2000). In 2001, however, the bottling companies effected more moderate price increases and consumer demand appeared to be on the upswing. Do Both Coke and Pepsi also set about to boost the flagging cola market in other ways, including exclusive marketing agreements with Britney Spears (Pepsi) and Harry Potter (Coke). Pepsi reintroduced the highly effective â€Å"Pepsi Challenge,† which was designed to boost overall cola sales and draw consumers away from private labels as much as it was to plug Pepsi over Coke. In contrast to the supermarket channel, Coke and Pepsi’s rivalry in the fountain channel intensified in the late 1990s. To penetrate Coke’s stronghold, Pepsi aggressively pursued national 23 Lauren R. Rublin, â€Å"Chipping Away: Coca-Cola Could Learn a Thing or Two from the Renaissance at PepsiCo,† Barron’s, June 12, 2000. 24 Rublin. 11 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 accounts, forcing Coke to make costly concessions to retain its biggest customers. Pepsi broke Coke’s stronghold at Disney with a 1998 contract to supply soft drinks at the new DisneyQuest, Club Disney and ESPN Zone chains. After a heated bidding war in 1999 over the 10,000-store chain of Burger King Corporation, Coke again won the fountain contract involving $220 million per year for 40 million gallons of syrup soda, but only after agreeing to double its $25 million in rebates to the food chain. Pepsi also sued Coke over access to the fountain market, charging Coke with â€Å"attempting to monopolize the market for fountain-dispensed soft drinks through independent foodservice distributors throughout the United States. Coke persuaded a Federal court to dismiss the suit in 2000. Despite Pepsi’s efforts, at the end of 2000, Coke still dominated the fountain market with 65% share of national â€Å"pouring rights† to Pepsi’s 21% and Dr Pepper/Seven Up’s 14%. tC The Rise of Non-Cola Beverages As consumer trends shifted from diet soda , to lemon-lime, to tea-based drinks, to other popular non-carbs, Coke and Pepsi vigorously expanded their brand portfolios. Each new product was accompanied by debate on how much each company should stray from its core product: regular cola. On one hand, cola sales consistently dwarfed alternative beverages sales, and cola-defenders expressed concern that over-enthusiastic expansion would distract the company from its flagship product. Also, history had shown that explosions in demand for alternative drinks were regularly followed by slow or negative growth. On the other hand, as domestic cola demand appeared to plateau, alternative beverages could provide a growth engine for the firms. No By the late 1990s, the soft drink industry had seen various alternative beverage categories come and go. From double-digit expansion in the late 1980s, diet CSDs peaked in 1991 at 29. 8% of the CSD segment and then declined to their 1988-level share of 24. 4% in 1999. PepsiCo’s introduction of Pepsi One in late 1998 was partially responsible for the minor recovery of the diet drink segment. Flavored soft drinks such as citrus, lemon-lime, pepper, and root beer were also popular. In 1999, Mountain Dew grew faster than any other CSD brand for the third year in a row, posting 6. 0% volume growth, but in 2000, its growth slowed to 1. 5% due to competing â€Å"new-age† non-carbs. Do At the turn of this century, CSDs accounted for 41. 3% of total non-alcoholic beverage consumption, bottled water accounted for 10. 3%, and other non-carbs accounted for the remainder. 25 When measured in gallons, sales of non-carbs rose by 18% in 1995 and 5% in 2000, compared to 3% and 0. 2% respectively for CSDs. The drinks with high growth and high hype were non-carbs such as juices/juice drinks, sports drinks, tea-based drinks, dairy-based drinks—and especially bottled water. In the 1990s, the bottled water industry grew on average 8. 3% per year, and volume reached more than 5 billion gallons in 2000. Revenue growth outpaced volume growth, with a 9. 3% increase to approximately $5. 6 billion, and per capita consumption gained 5. 1 gallons to 13. 2 gallons per person. Pepsi’s Aquafina went national in 1998. Coke followed in 1999 with Dasani. Though Pepsi and Coke sold reverse-osmosis purified water instead of spring water, they had a distribution advantage over competing water brands. 26 Coke and Pepsi launched other new drinks throughout the 1990s. They also aggressively acquired brands that rounded out their portfolios, including Tropicana (Pepsi, 1998), Gatorade (Pepsi, 5 Maxwell. Does not include â€Å"tap water / hybrids / all others† category. 26 Reverse osmosis is a method of producing pure water by forcing saline or impure water through a semi-permeable membrane across which salts or impurities cannot pass. 12 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. 702-442 op y Cola Wars Continue: Coke and Pepsi in t he Twenty-First Century 2000), and SoBe (Pepsi, 2000). Both companies predicted that future increases in market share would come from beverages other than CSDs. Pepsi pronounced itself a â€Å"total beverage company,† and Coca-Cola appeared to be moving in the same direction, recasting its performance metric from share of the soda market to â€Å"share of stomach. † â€Å"If Americans want to drink tap water, we want it to be Pepsi tap water,† said Pepsi’s vice-president for new business, describing the philosophy behind the new strategy. 27 Coke’s Goizueta had echoed the same view: â€Å"Sometimes I think we even compete with soup. †28 Though cola remained the clear leader in terms of both companies’ volume sales, both Coke and Pepsi relied heavily on non-carbs to stimulate their overall growth in the late 1990s. In 1999, non-carbs accounted for 80% of Pepsi’s and more than 100% of Coke’s growth. 29 tC At the turn of the century, Pepsi had the lion’s share of non-CSD sales. Pepsi led Coke by a wide margin in 2000 volume sales in three key segments: Gatorade (76%) led PowerAde (15%) in the $2. 6billion sports drinks segment, Lipton (38%) led Nestea (27%) in the $3. 5-billion tea-based drinks segment, and Aquafina (13%) led Dasani (8%) in the $6. 0-billion bottled water segment. 30 Including multi-serve juices, Tropicana held an approximate 44% share of the $3-billion chilled orange juice market, more than twice that of Minute Maid. 1 With the acquisition of Quaker and South Beach Beverages, Pepsi raised its non-carb market share to 31%, to Coke’s 19% (see Exhibit 8b). No Non-CSD beverages complicated Coke’s and Pepsi’s traditional production and distribution processes. While bottlers could easily manage some types of alternative beverages (e. g. , cold -filled Lipton Brisk), other types required costly new equipment and changes in production, warehousing, and distribution practices (e. g. , hot-filled Lipton Iced Tea). In many cases, Coke and Pepsi paid more than half the cost of these investments. The few bottlers that invested in these capabilities either purchased concentrate or other additives from Coke and Pepsi (e. g. , Dasani’s mineral packet) or compensated the franchiser through per-unit royalty fees (e. g. , Aquafina). Most bottlers, however, did not invest in hot-fill (for some iced tea), reverse-osmosis (for some bottled water), or other specialized equipment, and instead bought their finished product from a central regional plant or one owned directly by Coca-Cola or PepsiCo. They would then distribute these alongside their own bottled products at a percentage mark-up. More split pallets32 led to slightly higher labor costs, but otherwise did not significantly affect distribution practices. Despite these complicated and evolving arrangements, higher retail prices for alternative beverages meant that margins for the franchiser, bottler, and distributor were consistently higher than on CSDs. Internationalizing the Cola Wars Do As domestic demand appeared to plateau, Coke and Pepsi increasingly looked overseas for new growth. Throughout the 1990s, new access to markets in China, India, and Eastern Europe stimulated some of the most intense battles of the cola wars. In many international markets, per capita consumption levels remained a fraction of those in the United States. For example, while the 27 Marcy Magiera, â€Å"Pepsi Moving Fast To Get Beyond Colas,† Advertising Age, July 5, 1993. 28 Greising, p. 233. 29 Bonnie Herzog, â€Å"PepsiCo, Inc. : The Joy of Growth,† Credit Suisse First Boston Corporation, September 8, 2000. 30 Maxwell, p. 152-3. 31 Betsy McKay, â€Å"Juiced Up: Pepsi Edges Past Coke, and It has Nothing to Do With Cola,† The Wall Street Journal, November 6, 2000. 32 Pallets are hard beds, usually of wood, used to organize, store, and transport products. A split pallet carries more than one product type. 13 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Cola Wars Continue: Coke and Pepsi in the Twenty-First Century op y 702-442 average American drank 874 eight-ounce cans of CSDs in 1999, the average Chinese drank 22. In 1999, Coke held a world market share of 53%, compared to Pepsi’s 21% and Cadbury Schweppes’ 6%. Among major overseas markets, Coke dominated in Western Europe and much of Latin America, while Pepsi had marked presence in the Middle East and Southeast Asia (see Exhibit 9). C By the end of World War II, Coca-Cola was the largest international producer of soft drinks. Coke steadily expanded its overseas operations in the 1950s, and the name Coca-Cola soon became a synonym for American culture. Coke built brand presence in developing markets where soft drink consumption was low but potential was large, such as Indonesia: With 200 million inhabitants, a med ian age of 18, and per capita consumption of 9 eight-ounce cans of soda a year, one Coke executive noted that â€Å"they sit squarely on the equator and everybody’s young. It’s soft drink heaven. 33 By the early 1990s, Coke’s CEO Roberto Goizueta said, â€Å"Coca-Cola used to be an American company with a large international business. Now we are a large international company with a sizable American business. †34 No Following Coke, Pepsi entered Europe soon after World War II, and—benefiting from Arab and Soviet exclusion of Coke—into the Middle East and Soviet bloc in the early 1970s. However, Pepsi put less emphasis on its international operations during the subsequent decade. In 1980, international sales accounted for 62% of Coke’s soft drink volume, versus 20% for Pepsi. Pepsi rejoined the international battles in the late 1980s, realizing that many of its foreign bottling operations were inefficiently run and â€Å"woefully uncompetitive. †35 In the early 1990s, Pepsi utilized a niche strategy which targeted geographic areas where per capitas were relatively established and the markets presented high volume and profit opportunities. These were often â€Å"Coke fortresses,† and Pepsi put its guerilla tactics to work, noting that â€Å"as big as Coca-Cola is, you certainly don’t want a shootout at high noon,† said Wayne Calloway, then CEO of PepsiCo. 6 Coke struck back; in one high-profile coup in 1996, Pepsi’s longtime bottler in Venezuela defected to Coke, temporarily reducing Pepsi’s 80% share of the cola market to nearly nothing overnight. In the late 1990s, Pepsi moved even further away from head-to-head competition and instead concentrated on emerging markets that were still up for grabs. â€Å"We kept beating our heads in markets that Coke won 20 years ago,† explained Calloway’s successor, Roger Enrico. â€Å"That is a very difficult proposition. 37 In 1999, PepsiCo’s bottler sales were up 5% internationally and its operating profit from overseas was up 37%. Market share gains were reported in most of Pepsi-Cola International’s top 25 markets, including increases of 10% in India, 16% in China, and more than 100% in Russia. By 2000, international sales accounted for 62% of Coke’s and 9% of Pepsi’s revenues. Do Concentrate producers encountered various obstacles in international operations, including cultural differences, political instability, regulations, price controls, advertising restrictions, foreign exchange controls, and lack of infrastructure. When Coke attempted to acquire Cadbury Schweppes’ international practice, for example, it ran into regulatory roadblocks in Europe and in Mexico and Australia, where Coke’s market shares exceed 50%. On the other hand, Japanese domestic-protection price controls in the 1950s greased the skids for Coke’s high concentrate prices and high profitability, and in India, mandatory certification for bottled drinking water caused several local brands to fold. 33 John Huey, â€Å"The World’s Best Brand,† Fortune, May 31, 1993. 34John Huey, â€Å"The World’s Best Brand,† Fortune, May 31, 1993. 5 Larry Jabbonsky, â€Å"Room to Run,† Beverage World, August 1993. 36The Wall Street Journal, June 13, 1991. 37 John Byrne, â€Å"PepsiCo’s New Formula: How Roger Enrico is Remaking the Company†¦ and Himself,† BusinessWeek, April 10, 2000. 14 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617- 783-7860. 702-442 op y Cola Wars Continue: Coke and Pepsi in the Twenty-First Century To cope with immature distribution networks, Coke and Pepsi created their own ground-up, and often novel, systems. Coke introduced vending machines to Japan, a channel that eventually accounted for more than half of Coke’s Japanese sales. 38 In India, Pepsi found the most prominent businessman in town and gave him exclusive distribution rights, tapping his connections to drive growth. Significantly, both Coke and Pepsi recognized local-market demands for non-cola products. In 2000, Coke carried more than 200 brands in Japan alone, most of which were teas, coffees, juices, and flavored water. In Brazil, Coke offered two brands of guarana, a popular caffeinated carbonated berry drink accounting for one-quarter of that country’s CSD sales, despite rivals’ TV ads ridiculing â€Å"gringo guarana. † tC When the economy foundered in certain parts of the world during the late 1990s, annual consumption declined in many regions. Major financial quakes in East Asia in 1997, Russia in 1998 and Brazil in 1999 shook the cola giants, who had invested heavily in bottler infrastructure. From 1995 to 2000, Coke’s top line slowed to an average annual growth of less than 3%. Profits actually fell from $3. 0 billion in 1995 to $2. 2 billion in 2000. In Russia, where Coke invested more than $700 million from 1991 to 1999, the collapse of the economy caused sales to drop by as much as 60% and left Coke’s seven bottling plants operating at 50% capacity. In Brazil, its third-largest market, Coke lost more than 10% of its 54% market share to low-cost local drinks produced by family-owned bottlers exempt from that country’s punitive soft-drink taxes. In 1998, Coke estimated that a strong dollar cut into net sales by 9%. Pepsi, with its relatively lower overseas presence, was less affected by the crises. Nonetheless, Pepsi also subsidized its bottlers while experiencing a drop in sales. No Despite these financial setbacks, both Coke and Pepsi expressed confidence in the future growth of international consumption and used the downturn as an opportunity to snatch up bottlers, distribution, and even rival brands. To increase sales, they tried to make their products more affordable through measures such as refundable glass packaging (instead of plastic) and cheaper 6. ounce bottles. The End of an Era? At the turn of the century, growth of cola sales in the United States appeared to have plateaued. Coke and Pepsi were investing hundreds of millions of dollars to shore up international bottlers operating at low capacity. The companies’ overall growth in soft drink sales were falling short of precedent and of investors’ expectations. Was the fundamental nature of the cola wars changing? Would the parameters of this new rivalry include reduced profitability and stagnant growth— inconceivable under the old form of rivalry? Do Or, were the troubles of the late 1990s just another step in the evolution of two of America’s most successful companies? In 2001, non-cola, non-carbs, and even convenience foods offered diversification and growth potential. Low international per capita soft drink consumption figures hinted at tremendous opportunity in the competition for worldwide â€Å"throat share. † Noted a Coke executive in 2000, â€Å"the cola wars are going to be played now across a lot of different battlefields. †39 38 June Preston, â€Å"Things May Go Better for Coke amid Asia Crisis, Singapore Bottler Says,† Journal of Commerce, June 29, 1998, . A3. 39 Betsy McKay, â€Å"Juiced Up: Pepsi Edges Past Coke, and It has Nothing to Do With Cola,† The Wall Street Journal, November 6, 2000. 15 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. Do Exhibit 1 702-442 Copying or posting is an infringement of copyright. Permissions@hbsp. harvard. edu or 617-783-7860. No U. S. Industry Consumption Statistics 1970 1975 1981 1985 1990 1992 1994 1995 1996 1998 1999 2000 Historical Carbonated Soft Drink Consumption Cases (millions) Gallons/capita As a % of total beverage consumption 3,090 22. 7 2. 4 3,780 26. 3 14. 4 5,180 34. 2 18. 7 6,500 40. 3 22. 4 7,914 46. 9 26. 1 8,160 47. 2 26. 3 8,608 50. 0 27. 2 8,952 50. 9 28. 1 9,489 52. 0 28. 8 9,880 54. 0 30. 0 9,930 53. 6 29. 4 9,950 53. 0 29. 0 22. 7 22. 8 18. 5 35. 7 6. 5 5. 2 1. 3 1. 8 26. 3 21. 8 21. 6 33 1. 2 6. 8 7. 3 4. 8 1. 7 2 34. 2 20. 6 24. 3 27. 2 2. 7 6. 9 7. 3 6 2. 1 2 40. 3 24. 0 25. 0 26. 9 4. 5 7. 8 7. 3 6. 2 2. 4 1. 8 46. 9 24. 3 24. 2 26. 2 8. 1 8. 8 7. 0 5. 4 2. 0 1. 5 47. 2 23. 3 23. 8 26. 5 8. 2 9. 1 6. 8 5. 4 2. 0 0. 6 1. 4 50. 0 22. 8 23. 2 23. 3 9. 6 9. 4 7. 1 4. 8 1. 7 0. 9 1. 3 50. 9 22. 3 22. 8 1. 3 10. 1 9. 5 6. 8 4. 9 1. 8 1. 1 1. 2 52. 0 22. 3 22. 7 20. 2 11. 0 9. 7 6. 9 4. 8 1. 8 1. 1 1. 2 54. 0 22. 1 22. 0 18. 0 11. 8 10. 0 6. 9 4. 7 2. 0 1. 3 1. 3 53. 6 22. 2 21. 9 17. 2 12. 6 10. 2 7. 0 4. 6 2. 0 1. 4 1. 3 53. 0 22. 2 21. 7 16. 8 13. 2 10. 4 7. 0 4. 6 2. 0 1. 5 1. 2 114. 5 126. 5 133. 3 146. 2 154. 4 154. 3 154. 0 152. 6 153. 6 154. 1 153. 8 153. 6 68 56 49. 2 36. 3 28. 1 28. 2 28. 5 29. 9 28. 9 28. 4 28. 7 28. 9 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 182. 5 U. S. Liquid Consumption Trends (gallons/capita) Carbonated soft drinks Beer Milk Coffeea Bottled Waterb Juices Teaa Powdered drinks Wine Sports Drinksc Distilled spirits Subtotal Tap water/hybrids/all others Totald tC opy Source: John C. Maxwell, Beverage Digest Fact Book 2001, and The Maxwell Consumer Report, Feb. 3, 1994; Adams Liquor Handbook, casewriter estimates. aFrom 1985, coffee and tea data are based on a three-year moving average to counter-balance inventory swings, thereby portraying consumption more realistically. bBottled water includes all packages, single-serve, and bulk. cSports drinks included in â€Å"Tap water/hybids/all others† pre-1992. This analysis assumes that each person consumes on average one-half gallon of liquid per day. -16- Cola Wars Continue: Coke and Pepsi in the Twenty-First Century Advertisement Spending for the Top 10 CSD Brands ($ millions) op y Exhibit 2 Share of market 2000 Total market 20. 4 13. 6 8. 7 7. 2 6. 6 6. 3 5. 3 2. 0 1. 7 1. 1 1999 20. 3 13. 8 8. 5 7. 1 6. 8 3. 6 5. 1 2. 1 1. 8 1. 1 Advertisement Spendinga per 2000 2000 1999 share point 207. 3 130. 0 1. 2 50. 5 84. 0 83. 6 0. 5 44. 5 NA 2. 7 148. 9 91. 1 25. 5 37. 1 68. 4 71. 3 0. 8 39. 2 NA 2. 9 tC Coke Classic Pepsi-Cola Diet Coke Mountain Dew Sprite Dr Pepper Diet Pepsi 7UP Caffeine Free Diet Coke Barq’s root beer Total top 10 702-442 72. 9 72. 9 10. 2 9. 6 0. 1 7. 0 12. 7 13. 3 0. 1 22. 3 NA 2. 4 604. 2 485. 2 8. 3 707. 6 650. 0 NA Source: â€Å"Top 10 Soft-Drink Brands,† Advertising Age, September 24, 2001; casewriter estimates. aAdvertisement spending measured in 11 media channels from CMR. Brands and total market in 192-oz cases from Do No Beverage Digest/Maxwell. Case volume from all channels. 17 Copying or posting is an infringement of copyright. Permissions@hbsp. arvard. edu or 617-783-7860. 702-442 Cola Wars Continue: Coke and Pepsi in the Twenty-First Century U. S. Soft Drink Market Share by Case Volume (percent) 1966 op y Exhibit 3 1970 1975 1980 1985 1990 1995 1998 2000E 27. 7 1. 5 1. 4 2. 8 33. 4 28. 4 1. 8 1. 3 3. 2 34. 7 26. 2 2. 6 2. 6 3. 9 35. 3 2