Soft Drink Industry

The global soft drink industry is currently expanding quite rapidly. This is due to two major factors. First, markets are expanding rapidly in developing countries and second people are turning toward natural, healthy, and low-calorie drinks. This so called “new-age” beverages, such as tea-based beverages, is considerably stimulating the development of the soft drink industry and also creating a major challenge to the carbonated beverage market. In part to address this trend, big soft drink companies, like Pepsi and Coke, are striving to become a “total beverage company” (Seet and Yoffie 95), in which they will serve the comprehensive soft drink market.
Generally speaking, the soft drink off-trade value worldwide is gradually rising ever year, from $231,401 in 2001 to $323,031 in 2006 (Global Market Information Database 2007). The biggest market for soft drinks is still North America and Western Europe, which together consumed 43% of gross soft drink volume worldwide in 2006 (Global Market Information Database ‘07). However, the general developing trend for the North America and Western European market is now shrinking in terms of the global market while the Asian market is expanding very rapidly in recent years to now account for 22% of the global market (Global Market Information Database ‘07). The market volumes of Africa, the Middle East, and Australia are comparatively smaller. However, the Middle East, Africa, Eastern Europe, and Asia-pacific markets are “emerging markets” and attract many companies, ranging from multinationals to niche specialists, who continue to see volume growth well in excess of the market average (Robinson ‘04).
With the growth in volume, the average level of profitability of the soft drink industry remains quite high. First, the concentrate producers (CP’s) have become integrated with bottling companies, thereby reducing production costs. The CP’s and bottlers remain profitable through interdependence, sharing promotional and