Cola Wars

Cola Wars
Background:
The carbonated soft drink (CSD) assiduity is a $66 billion market in the linked States. Between 1970 and the mid-1990s this was a rapidly growing pains. In 1970 the average American consumed 22.7 gallons of CSDs annually. By 1996 this had swelled to 52 gallons, an increase of 129%. This market came to be dominated by twain large competitors Coca-Cola and PepsiCo who had a combined 74.8% of the U.S. CSD market in gross sales volume in 2004. However growth of this industry has slowed significantly since the mid-1990s. From 1999 to 2003 the annual growth of international consumption of CSDs was interdict 1.2%.
Question 1: Compare the economics of the concentrate parentage to the bottling business: why is the profitability so different?

To consider the economics of two the concentrate business and the bottling business it is demand to first require at the business system that both find themselves in.
Table 1:Business System of CSD Industry
| 1| 2| 3| 4| 5| |
Business:| bare-assed materialsE.g. sugar| Concentrate ProducerE.g. Coca-Cola| Bottlers| Distribution| Points of Sale| Consumer|
Generic Or SpecificGoods| Generic| Specific| Generic| Generic| Generic| |

In the concentrate business it is a item product that is produced.



However, in the bottling business it is a generic product that is produced. This is the fundamental deviation between the two businesses and is the cause of the varying profitability.
* A specific product is a good that is unique to the producer. This allows that firm to load up a higher price than if the good was generic as product differentiation exists.
* A generic product is a product where no product differentiation exists. Sugar is an example, as is bottling. This is means that the suppliers of these products must compete primarily on price.
Although the CSD industry is profitable, profits are not equally distributed throughout. From this brief look at the business system...If you want to get a unspoilt essay, order it on our website: Orderessay



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