Both firms have held pricing contracts with bottlers (the primary buyer) that exemplify the bargaining power coke and pepsi maintain over bottlers modifications to pricing contracts over the past few decades favored the concentrate producer. Profitability in the soft drink market as analysis using porter's five forces shows why the soft drink industry has been so profitable suppliers and buyers have not had more power over the industry than it has had over them.
Even though bottlers earned a higher gross profit, they received a much less return on investment compared to concentrate producers according to the figures shown in the table, the cps used strategies that ensured much of the cost is passed on to the bottlers. Bottlers are situated all over the world as the principle of franchising is used that greatly helps in the spread of csds across the globe however, the returns received by concentrate producers differ from those received by bottlers for several reasons (yoffie, 2007) concentrate producers: capital investment concentrate production business is less capital intensive than bottling.
Exhibit 4 shows that concentrate producers used comparatively lower costs per each case leaving the bulk of operating costs to bottlers (yoffie & kim, 2011) even though bottlers earned a higher gross profit, they received a much less return on investment compared to concentrate producers. Vertical integration of concentrate producers and bottlers vertical integration occurs either when a firm takes over the manufacturing of its inputs or when it takes over the functions of its customers (grant, 2008. The greater profitability of concentrate producers over bottlers cola wars compare the economics of the concentrate business to that of the bottling business: why is the profitability so different the returns received by concentrate producers differ from those received by bottlers for several reasons concentrate producers: capital investment. Why, historically, has the soft drink industry been so profitable application of porter’s five forces helps us in the analysis of the soft drink industry industry structure analysis: the soft drink industry has two major manufacturing verticals – the concentrate producers (cp) and the bottlers, both of which are profitable even though the.
Bottlers have been consolidated by concentrate producers (cp), placing smaller cps at the mercy of pepsi and coca-cola's distribution systems (see exhibit 3) a making it tougher for smaller cps like cott corporation to compete and leaving them open to the threat of acquisition b. Several factors contribute to this profitability, and these factors also help to show why the profitability of the concentrate production side of the industry has been so much greater than the bottling side.
The greater profitability of concentrate producers over bottlers the concentrate producers are in the most advantageous positions relative to porter´s five forces. The greater profitability of concentrate producers over bottlers the concentrate producers are in the most advantageous positions relative to porter’s five forces their suppliers are the commodity producers mentioned above and have little power.
Cola wars : five forces analysis october 18, 2007 posted by laxmi goutham vulpala in case studies trackback 1 soft drink industry five forces analysis: soft drink industry is very profitable, more so for the concentrate producers than the bottler’s.
Case analysis coke pepsi2 1 1 why is the soft drink industry so profitable 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 this power did give them some control over soft drink profitability. This had a negative effect on the profitability of the bottlers (operating income in 2009: concentrate producers 32%, bottlers 8%) during this period net profit for bottlers was in the low single digits.