1. Why, historically, has the soft drink industry been so profitable?
Coca Cola was formulated in 1886 by a pharmacist in Atlanta who started to sell it in drug stores as a ‟portion for mental and physical disorders.“ Five years later the Asa Candler acquired the formula for Coca-Cola syrup which was a well-protected secret of the company. He also granted the first bottling franchise which grew qucikly. In the following years a lot of imitations were fight agressively by court for protecting their carbonated soft-drink (CSD) with its special flavour.
Later on Coca Cola was advertised as a ‟lifestyle“ product and the international business began to develop. Pepsi was founded in 1893 and they also adopted a franchise bottling system which built up a big network very quickly. About 20 years later Pepsi went bankrupt and later on they declared bankrupcy the second time. However business went on and Pepsi built up a marketing strategy
‟Twice as much for a nickel, too.“ Pepsi step for step gained market shares and became the second behind Coca Cola. The competition in the soft drink industry began to grow.
The soft drink industry consists of bottlers and suppliers. One fact which supports the profitability of the soft drink industry is that there are only two relevant players Coca Cola and Pepsi who have enough power for setting rules. The rivalry between both can be seen as a copmpetitive advantage for the major players. They created a hugh barrier for new market entries while controlling the soft drink industry. The numbers in Exhibit 2 shows the development of market share by Unit
Case Volume in the U.S. in percent. In 1970 Coca Cola gained a market share of 34.7 % and Pepsi achieved 19.8% which was accumulated 54%. Both companies were able to increase their shares
to
