Coke and Pepsi case
1. Why, historically, has the so drink industry been so profitable?
The CSD industry involved four major participants: concentrate producers,
bottlers, retail channels, and suppliers. Each of the participants had their own business, so
they all had their own costs and profits. This kind of industrial structure made the CSD
products affordable. In earlier days, low price made customers want to buy and try those
soft drinks. In addition, although, there were many other alternatives, like tea, beer, and
water, Americans drank more CSD than any other beverage. In this case, the consumer
did not have big power. The CSD industry also had high barrier of entry due to the
complex of the industrial structure and high initial capital requirement, which led to
limited amount of competitors. All those companies had their own secret formula, so it
was very hard to make a substitute for their products. The raw materials from the
suppliers were also cheap. These facts explained why CSD industry has been so
profitable in early days.
2. Why is the profitability of the concentrate business so dierent to that of the boling
business?
The two major participants in industry involved in producing are concentrate
producers and bottlers. They were all making soda, but their profitability was so different.
