CSDs consisted of a flavor base (called "concentrate")‚ a sweetener‚ and carbonated water. The production and distribution of CSDs involved four major participants: concentrate producers‚ bottlers‚ retail drannels‚ and suppliers.6 Concentrate Producers The concentrate producer blended raw material ingredients‚ packaged the mixfure in plastic canisters‚ and shipped those containers to the bottler. To make concentrate for diet CSDs‚ concentrate makers often added artificial sweetener; with
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Distribution of CSD involved 4 major players: Concentrate producers‚ bottlers‚ retail channels and suppliers Concentrate Producers They blended raw material ingredients‚ packaged the mixture in plastic canisters‚ and shipped those containers to bottler --> Required little capital - cost for advertising‚ promotion‚ market research and bottler support ==> Once fragmented --> Consolidated with Coke and Pepsi (72% of market sales) Bottlers They purchased concentrate‚ added carbonated water and high fructose
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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
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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. There are several reasons for this‚ using the five forces analysis we can clearly demonstrate how each force contributes the profitability of the industry. Barriers to Entry: The several factors that make it very difficult for the competition to enter the soft drink market include: Bottling Network: Both Coke and PepsiCo
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distribution of CSDs: 1. Concentrate Producers (Coke‚ Pepsi‚ and others)). They blended raw material ingredients‚ packaged the mixture‚ and shipped to the bottlers. They have large number of employees located in bottler site to support sales efforts‚ set standards‚ and suggest operational improvements. They negotiated with the bottlers’ suppliers to achieve reliable supply‚ fast delivery‚ and low prices. 2. Bottlers (CCE‚ PBG‚ and others). They purchased concentrate‚ added carbonated water and
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of the concentrate business to that of the bottling business: Why is profitability so different? Comparing the financial statements of the largest concentrate producers (Coca-Cola Company and PepsiCo) and those of the largest bottlers (CCE and PBG) we can easily identify numerous factors affecting their economies and profitability. The first‚ and probably greatest difference in the economies of the concentrate and bottling businesses is the initial capital investment: while concentrate producers
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Cola Wars Continue: Coke and Pepsi in 2006 1. Why is the soft drink industry so profitable? In an industry dominated by two heavyweight contenders‚ Coke and Pepsi‚ in fact‚ between 1996 and 2004 per capita consumption of carbonated soft drinks (CSD) remained between 52 to 54 gallons per year. Consumption grew by an average of 3% per year over the next three decades. Fueling this growth were the increasing availability of CSD‚ the introduction of diet and flavored varieties‚ and brand extensions
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1. Why is the soft drink industry (i.e.‚ the cola concentrate industry) so profitable? The soft drink industry survives on the rivalry that has existed for over a century between Coca-Cola and Pepsi-Cola. The two brands are competing for the market share nationally and globally by trying to clinch the thirst of every person in the world. In Michael Porter’s five forces‚ the threat of rivalry pushes both companies to “out compete” with each other and drive up the fixed cost to enter the market
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profitable due to numerous reasons. Overall‚ it was the successful combination of concentrate producers‚ bottlers‚ retail channels‚ and suppliers plus the wide spread availability of CSD’s and their availability in diet and numerous other flavors. 2. Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different? - Concentrate producers‚ produced cheap concentrate product that was promoted and advertised successfully. The cost to build and
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groupings: Concentrate producers‚ bottlers‚ retailer channels and suppliers. As major part players in the Carbonated Soft Drinks Industry (CSD)‚ analysis of the Industry structure is synonymous to assessment of the Industry major players on Structure-Conduct-Performance (SCP) paradigm. This essay seeks to subject to assessment the CSD Industry major players to the five forces concept. CONCENTRATE PRODUCERS‚ In this part of the industry‚ raw materials are converted into concentrates. Ingredients
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