Why is the soft drink industry so profitable? Both concentrate producers CP and bottlers are profitable. These two parts of the industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution.
Data from Exhibit 5 As the above table indicates concentrate business is highly profitable compared to the bottling business. The reasons for this are: They could offer attractive packaging to the end consumer.
To preempt new competition from entering business if they control the bottling. Effect of competition between Coke and Pepsi on industry profits: Net profit as a percentage of sales for bottlers during this period was in the low single digits Pepsi however sought to correct this mistake by entering emerging markets where it was not at a competitive disadvantage with respect to Coke as it failed to make any heady way in the European market.
Can Coke and Pepsi sustain their profits in the wake of flattening demand and growing popularity of non-carbonated drinks?
Yes Coke can Pepsi can sustain their profits in the industry because of the following reasons: The industry structure for several decades has been kept intact with no new threats from new competition and no major changes appear on the radar line This industry does not have a great deal of threat from disruptive forces in technology.
Coke and Pepsi have been in the business long enough to accumulate great amount of brand equity which can sustain them for a long time and allow them to use the brand equity when they diversify their business more easily by leveraging the brand. Globalization has provided a boost to the people from the emerging economies to move up the economic ladder.
This opens up huge opportunity for these firms Per capita consumption in the emerging economies is very small compared to the US market so there is huge potential for growth.
Coke and Pepsi can diversify into non—carbonated drinks to counter the flattening demand in the carbonated drinks. This will provide diversification options and provide an opportunity to grow.
Impact of globalization on Industry structure: Globalization provides Coke and Pepsi with both unique challenges as well as opportunities at the same time.
To certain extent globalization has changed the industry structure because of the following factors.
This has put Pepsi at a significant disadvantage compared to the US Market. Pepsi is however trying to counter this by competing more aggressively in the emerging economies where the dominance of Coke is not as pronounced, With the growth in emerging markets significantly expected to exceed the developed markets the rivalry internationally is going to be more pronounced.
Barriers to entry are not as strong in emerging markets and it will be more challenging to Coke and Pepsi, where they would have to deal with regulatory challenges, cultural and any existing competition who have their distribution networks already setup.
Internationally retailers and fountain sales are going to be weaker as they are not consolidated, like in the US Market. This will provide Coke and Pepsi more clout and pricing power with the buyers Substitutes: Since many of the markets are culturally very different and vast numbers of substitutes are available, added to the fact that carbonated products are not the first choices to quench thirst in these cultures present additional significant challenges.
A lot more money would have to be spent on advertising to get people used the carbonated drinks.Why is the soft drink industry so profitable?
In an industry dominated by two heavyweight contenders, Coke and Pepsi, in fact, between and per capita consumption of carbonated soft drinks (CSD) remained between 52 to 54 gallons per year.
You asked why the soft drink concentrate industry is so profitable. I assume you mean in terms of the seller (restaurant, convenience store, soda fountain operator, etc) In rough numbers, a 5-gallon concentrate yields approximately ounce servings.
1)Why, historically, has the soft drink industry been so profitable? Soft drink plays an important role in the people’s daily life.
There is no doubt that this industry is profitable.
CLASS PREPARATION QUESTION ANSWERS FOR BUSI CASES Isin Guler Cola Wars (1 point for each question) 1. Why is the soft-drink industry so profitable?
The industry is profitable because all five forces are favorable: The power of buyers is low (loyal customers, not price sensitive, no bargaining power), the power of suppliers is 94%(34).
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Why, Historically, Has the Soft Drink Industry Been So Profitable. Case assignment/preparation questions: /5(1). Soft drink industry is very profitable, more so for the concentrate producers than the bottler’s.
This is surprising considering the fact that product sold is a commodity which can even be produced easily.