One Paragraph Assessment Of The Soft Drink Industr

335 Words2 Pages
The profitability of the soft drink industry is pretty good. For the concentrated producers, their proprietary, branded products, and the mature relationship with both suppliers and buyers have made entry barriers high for the new entrants. Thus, the concentrate producers may have better control on cost and retail price. Looking at the whole market, the purchase activities of consumers have made the products of concentrate producers can not be easily replicated, this will also contributed to a favorable cost and price for the concentrate producers and thus maintain a better profitability. The extended histories and successful advertising efforts have also contributed to this. The low cost of raw material and their significant amount of demand have lowered the bargaining power of their suppliers, another favorable cost control opportunity for concentrate producers. If we take a look at the down stream, the buyer power is not really high since the CPs has taken significant control of the distribution channels by different methods. On the other hand, high rivalry within the industry may not always be good for the profitability of bottlers, but not concentrate producers. For instance in this case, Coke and Pepsi concentrated on a differentiation and advertising strategy in the 60’s and 70’s. The “Pepsi Challenge” in 1974 was a prime example of this strategy where blind taste tests were hosted by Pepsi in order to differentiate itself as a better tasting product from Coke. However during the early 1990’s bottler’s of Coke and Pepsi employed low priced strategies in the supermarket channel in order to compete with store brands, This had a negative effect on the profitability of the bottlers. Net profit as a percentage of sales for bottlers during this period was in the low single digits. Pepsi and Coke were, however, able to maintain the profitability through sustained

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