Case Study : The Soft Drinks Industry Essay

726 Words Oct 17th, 2016 3 Pages
The soft drinks industry has been historically profitable due to the impact of Porter’s five forces on the industry. First, the threat of new entrants is extremely low. CSD bottlers are the most capital-intensive part of the industry’s supply chain. In 1986, Coke acquired various different bottlers and created an independent bottling subsidiary, Coca-Cola Enterprises (CCE). Following their footsteps, Pepsi did the same and founded the Pepsi Bottling Group (PBG). By consolidating the bottlers, the top companies in the industry, Coca-Cola and Pepsi created an environment in which it is difficult for other companies to enter. Most new CSD companies would have difficulty finding bottlers and would not have the funds to develop their own independent bottlers due to the capital-intensive aspect.
Furthermore, most CSD companies have consolidated their brands through a series of marketing and promotion efforts that tie the brand to a lifestyle. Robert Woodruff, from Coca-Cola, was one of the first to push this initiative and made sure that Coke played a role in the consumer’s life. Pepsi, on the other hand, spent over $1 billion to redesign its logo in order to transform their image. Therefore, it is almost impossible for any new firm to acquire the amount of brand loyalty that these two companies have, making it even harder for anyone to enter the market.
Second, different from the bottled-water industry, where price-sensitive consumers can seek cheaper alternatives such as…

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