The Soft Drink Industry So Profitable?
Essay Preview: The Soft Drink Industry So Profitable?
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the soft drink industry so profitable?
An industry analysis through Porters Five Forces reveals that market forces are favorable for profitability.
Defining the industry: 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.
Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional
activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers
and buyers. Entry into the industry would involve developing operations in either or both disciplines.
Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap
and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft
drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their
sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive