Cola Wars Essay

792 Words4 Pages
Cola Wars Continue: Coke Vs Pepsi in 2006 1. Why is the soft drink industry so profitable? By reading the statistic factors: ■ The annual consumption of gallons per capita of soft drink grew from a sum of 114.5 to 153.4 (+340%) in the year 1970 to 2004. Out of this, the annual consumption of gallons per capita of CSDs grew from a sum of 22.7 to 52.3 (+230% growth) in the year 1970 to 2004. ■ From 1975 to 1995 both Coke and Pepsi achieve average annual growth of around 10% ■ American’s drank more soda than any other beverage ■ Very large market share. More than 50% after the year 1994 (reached the top to 54% in 1998). ■ Average 10.65% net profit in sales for both Pepsi and Coke. ■ The US soft drink market share of Coca Cola Company and PepsiCo Inc. grew from 53.8 % to 74.8% in the year 1966 to 2004. From this fact we can learn that the soft drink industry is dominated by these 2 firms which holding the market power and a competitive fringe with many smaller firms acting as price takers. Also, both concentrate producers and bottlers are profitable. These two parts of the industry are extremely interdependent which sharing costs in production, marketing and distribution. ( many overlapped functions) The industry is already vertically integrated to some extent. The above mentioned data regarding the soft drink market & industry in the US could explain why this industry is so profitable. 2. Compare the economics of concentrate business to that of the bottling business: Why is the profit so different? By comparing the function: Concentrate Producers ■ Blend raw material ingredients ■ Packaged Mixture in plastic canisters ■ Shipped to bottlers Bottlers ■ Purchased Concentrate ■ Added carbonated water and high fructose corn syrup ■ Bottled CSD product ■ Delivered to customers accounts By comparing the industrial features: Concentrate

More about Cola Wars Essay

Open Document