Pepsi And Coke

808 Words 4 Pages
1. Why, historically, has the soft drink industry been so profitable?
a. The soft drink industry has been so profitable because of various reasons. One is because both Pepsi and Coke have been able to take advantage of niche markets where there was a higher per capita. These were areas where people were drinking the most soda and it allowed both companies to produce at high volumes, increasing the profitability. There has also been such a high demand for soft drinks and sales topped those of any alternatives. The substitutes available like coffee, water, and other drinks don’t sell in volumes like soft drinks do. Both Pepsi and Coke also has the ability to hold majority share of the market as barriers to entry were so high. They controlled
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Due to competition, both companies, throughout history, were forced to continuously improve their products and were back and forth with advertising campaigns. For example, the “Pepsi Challenge” was a huge success for Pepsi as it allowed them to gain some market share from Coke. This then put pressure on Coke to answer with a campaign of their own and to gain some popularity back. The pressures to differentiate then lead to both companies going into a price war and using a low price strategy to gain customers, mostly in retail stores. They would compete with marketing strategies like end of aisle displays and other store wide displays. To drive up those decreasing profits, both companies also ventured out to new industries such as Pepsi with Frito-Lay and Coke creating new drinks and moving into international markets. This allowed them to increase margins in those areas. Towards more recent years both products have been through numerous product launches and have even started a premium product pricing strategy. Basically, as one company changed, the other has followed and tried to outdo the previous. This has created those fluctuations in profit levels in the …show more content…
Going off what I spoke about in the previous answers both companies have been able to sustain market share and profits due to little threats to entry, brand loyalty, and being able to adjust to new market trends and moving international. It is very difficult to tap into this market as both brands have created very strong networks and franchises globally. To break into that market share and customer base, one would need substantial capital. Also, technology has not been a threat in this industry and has actually helped both companies as they are able to produce more and more efficiently. Moving international also opened up bigger markets for both companies as they can reach more mouths and increase their volume. Lastly, their ability to create new drinks based off market trends has allowed them to keep their brand loyalty and give their customers what they

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