The Soft Drink Industry So Profitable?

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the soft drink industry so profitable?

An industry analysis through Porter's Five Forces reveals that market forces are favorable for profitability.

Defining the industry: Both concentrate producers (CP) and bottlers are profitable. These two parts of the

industry are extremely interdependent, sharing costs in procurement, production, marketing and distribution.

Many of their functions overlap; for instance, CPs do some bottling, and bottlers conduct many promotional

activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers

and buyers. Entry into the industry would involve developing operations in either or both disciplines.

Beverage substitutes would threaten both CPs and their associated bottlers. Because of operational overlap

and similarities in their market environment, we can include both CPs and bottlers in our definition of the soft

drink industry. In 1993, CPs earned 29% pretax profits on their sales, while bottlers earned 9% profits on their

sales, for a total industry profitability of 14% (Exhibit 1). This industry as a whole generates positive

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