Coke Case

In: Business and Management

Submitted By elainequan
Words 871
Pages 4
1) Why, historically, has the soft drink industry been so profitable?
Coca-Cola and Pepsi are 2 common soft drink companies that have been in existence for many years. Coca-Cola was founded in 1886 by a pharmacist, and the company grew from there. During World War II, soldiers were given reduced price Coca-Cola. Similarly, Pepsi (called Pepsi-Cola) was invented by a pharmacist in 1893. During the Great Depression, a 12 ounce bottle of Pepsi cost the same as a 6.5 ounce bottle of Coke, thus keeping it in business. Both companies have since capitalized on the booming industry. In 1970, Americans were drinking 23 gallons of soft drinks a year, on average, and that amount grew by 3% annually for the next 30 years. Soft drinks were the most popular beverage of choice for Americans. They were inexpensive to buy, and this was due in part to Coke and Pepsi’s cost strategies. Making soft drink concentrate required very few ingredients and very little equipment. They also coordinated with their suppliers to get fast delivery and low prices. Both companies offered significant funds to large chain grocery stores to help with marketing and promotion in exchange for shelf space and point-of-purchase displays, in order to boost revenues. Coca-Cola and Pepsi have historically had many of the same strategies, including the introduction of a diet option and a large variety of flavors. This was because having an aggressive and similarly matched competitor forced both companies to be focused, sharp, and ready to innovate.

2) Compare the economics of the concentrate business to that of the bottling business: Why is the profitability so different?
Bottles can obtained from many sources and different suppliers.These bottle producers have no power over pricing.Therefore, bottlers have less added values, they don’t have their own brand or special formulas.They purchase concentrate, add…...

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