Key Player's State of Affairs

The key players in the food and tobacco industry are all obviously quite well established companies that consistently preform at high productivity rate. Recently Coca-Cola Co. third quarter earnings rose 8.1% with an increase in sales from every region, displaying it's current advantage over its major competitor Pepsi Co. While Coke is doing very well right now (reported $2.22 billion profit from this quarter with a total revenue of $12.25 billion) it appears that there may be rough times ahead. Not only are commodity costs projected to rise $8oo million this year, but also, due to the tumultuous state of the European Union's economy, the dollar is strengthening. Coca-Cola's marketing strategy in the past in regards to rising commodity prices was to exploit favorable exchange rates; however, with the dollar strengthening, this strategy could take a hit during next quarter. Coca-Cola's success can still be seen when held in the light of their competitor Pepsi Co. Coke saw a mere 1% sales drop after raising their soda prices as opposed to Pespi's 5% drop.

Domino's witnessed a 33% increase in profit recently. Domino's sales in the U.S. saw a 3% increase as opposed to the 3% drop experienced by Yum Brand's Pizza Hut. Domino's success is due in large part to innovative menu changes and a large amount of international growth. In 2009 Domino's changed their Pizza recipe and it seems to have been for the better as customer loyalty is growing for the Pizza chain. Domino's has also branched out a bit from its niche by now offering other products such as pasta bowls and chicken wings. Domino's is also continuing to stay on top by taking marketing it's pizza as cheap; therefore, in the market of penny pinchers Domino's has managed to make a name for itself. Recently, however, Domino's has again branched out, and while still undercutting competition with their original recipe have launched a new line of Artisan pizzas which trade price for quality. Along with keeping themselves attractive to multiple consumer demographics, Domino's has expanded globally and is now enjoying advantageous foreign currency exchange rates.

Yum Brands, while taking hits from competition such as Domino's and the industry wide rise in commodity prices has also now run into trouble in China--one of it's largest markets. Inflation in China is forcing Yum to raise its prices much faster than it had hoped, and citizens are starting to turn to cheaper alternatives. A portrayal of how sudden the unfortunate situation is in China for Yum can be seen when noting that last quarter Yum experienced a 19% rise in sales in China, however after this sudden inflation Yum's restaurant margin fell 3.9% and is expected to fall 1.3% more by the end of the year. In an early blog I mentioned Yum's exceptional success in China, but the situation has taken a sudden turn for the worse. With one of it's largest markets depreciating on top of the rising commodity prices Yum may have to do some quick thinking in order to continue growth.

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