Cola Wars Industry Analysis

Coca-Cola and Pepsi are two of the most important players in the Carbonated Soft Drink (CSD) industry. The CSD industry makes up a total of $66 billion that Coke and Pepsi are endlessly competing for. Two main participants of this industry include: concentrate producers and independent bottlers. Both have their own challenges and advantages, although, one seems to be a more desirable choice.

Concentrate Producers

Concentrate producers are responsible for blending the raw materials for the CSD’s and then shipping the concentrate to the bottlers. Some of their most substantial costs go towards advertising, promotion, market research and bottlers’ support. A large portion of their staff deal directly with bottlers to help in sales efforts, and to get consistent supply and low prices from sweetener and package maker suppliers. The following five forces describe the strength of the different parties involved in the concentrate producing business.

Five Forces Model of Concentrate Producers

• Suppliers: The bargaining power of suppliers is weak due to the fact that all of the raw materials are basic commodities like caffeine, water, sweeteners, etc. These goods are readily available, which make the bargaining power weak.

• Buyers: The bargaining power of buyers is weak since the concentrate producers are continually trying to gain support from its bottlers. Concentrate producers even give financial incentives to bottlers to help them fund soda fountain machines since the bottler’s responsibility is to deliver the concentrate to restaurants and other retail channels.

• Substitutes: The threat of substitutes is high since there are endless beverage types in the industry. With the diversification of teas, juices, energy drinks, health drinks, there is a higher threat in the market for substitutes. The CSD industry changed and Coke and Pepsi are now incorporating Non-Carbonated drinks (NCD) to their product mix.

• New Entrants: The threat of new...