Soft Drink Industry Case Study

Title	Soft Drink Industry Case Study
# of Words	4332
# of Pages (250 words per page double spaced)	17.33

Soft Drink Industry Case Study

Soft Drink Industry Case Study

Table of Contents

        Introduction    3
        Description     3
        Segments        3
        Caveats 4
        Socio-Economic  4
        Relevant Governmental or Environmental Factors, etc.    4
        Economic Indicators Relevant for this Industry  4
        Threat of New Entrants  5
        Economies of Scale      5
        Capital Requirements    6
        Proprietary Product Differences 7
        Absolute Cost Advantage 8
        Learning Curve  8
        Access to Inputs        8
        Proprietary Low Cost Production 8
        Brand Identity  9
        Access to Distribution  9
        Expected Retaliation    9
        Conclusion      10
        Suppliers       10
        Supplier concentration  10
        Presence of Substitute Inputs   11
        Differentiation of Inputs       12
        Importance of Volume to Supplier        13
        Impact of Input on Cost or Differentiation      13
        Threat of Backward or Forward Integration       13
        Access to Capital       14
        Access to Labor 14
        Summary of Suppliers    14
        Buyers  15
        Buyer Concentration versus Industry Concentration       15
        Buyer Volume    15
        Buyer Switching Cost    15
        Buyer Information       16
        Threat of Backward Integration  16
        Pull Through    16
        Brand Identity of Buyers        17
        Price Sensitivity       17
        Impact on Quality and Performance       17
        Substitute Products     18
        Relative price/performance relationship of Substitutes  18
        Buyer Propensity to Substitute  18
        Rivalry 18
        Industry Growth Rate    20
        Fixed Costs     21
        Product Differentiation 21
        Brand Identity  21
        Informational Complexity        22
        Corporate Stakes        22
        Conclusion      23
        Critical Success Factors        23
        Prognosis       24
        Bibliography    26
        Appendix        27
        Key Industry Ratios     27

Introduction

Description
     The soft drink industry is concentrated with the three major players,
Coca-Cola Co., PepsiCo Inc., and Cadbury Schweppes Plc., making up 90 percent of
the $52 billion dollar a year domestic soft drink market (Santa, 1996).  The
soft drink market is a relatively mature market with annual growth of 4-5%
causing intense rivalry among brands for market share and growth (Crouch, Steve).
This paper will explore Porter's Five Forces to determine whether or not this
is an attractive industry and what barriers to entry (if any) exist.  In
addition, we will discuss several critical success factors and the future of the
industry. Segments
     The soft drink industry has two major segments, the flavor segment and
the distribution segment.  The flavor segment is divided into 6 categories and
is listed in table 1 by market share.  The distribution segment is divided in to
7 segments:  Supermarkets 31.9%, fountain operators 26.8%, vending machines
11.5%, convenience stores 11.4%, delis and drug stores 7.9%, club stores 7.3%,
and restaurants 3.2%.

Table 1:  Market Share
          1990     1991     1992     1993     1994 Cola          69.9
69.7     68.3     67     65.9 Lemon-Lime          11.7     11.8     12
12.1     12.3 Pepper          5.6     6.2     6.9     7.3     7.6 Root
     2.7     2.8     2.3     2.7     2.7 Orange          2.3     2.3
2.6     2.3     2.3 Other          7.8     7.2     7.9     8.6     9.2
Source:  Industry Surveys, 1995

Caveats

The only limitations on access to information were: 1. Financial information has
not yet been made available for 1996. 2. The majority of the information targets
the end consumer and not the sales volume from the major soft drink producers to
local distributors. 3. There was no data available to determine over capacity.

Socio-Economic

Relevant Governmental or Environmental Factors, etc.

The Federal Government regulates the soft drink industry, like any industry
where the public ingests the products.  The regulations vary from ensuring clean,
safe products to regulating what those products can contain.  For example, the
government has only approved four sweeteners...

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