Porter 5 Forces- Cola Wars Continue
Cola wars continue: Coke and Pepsi in 2006 Written by Alyona Kuzmina.
Soft drink industry Shares of beverage companies have always been ranked high among other industries. Although, when consumer incomes decrease, sales of beer and soda don't drop that much. Additionally, it is cheap to produce those and drinks are so popular so companies can sell them for a large price. Actually, it is a very unique case, that such a product, which is in the group of basic commodities, is profitable. Both concentrate and bottling businesses are interrelated, because they create one product, but at different stages, they have the same consumers, however, there is a big difference in the structure and most significant is gaining profitability. 5 forces structure of both businesses would help to explain the phenomenon:
The power of suppliers: Concentrate and bottling producers would need sugar and corn syrup, flavors, sweeteners, packages and some other additives suppliers. However, they are not unique and rare products, so in case if one supplier offers goods for unreasonable price, concentrate producer would always have a chance to switch to the other. For example, Coca Cola and Pepsi are biggest customers in can industry and they have relations with multiple suppliers, giving them with that less bargaining power because of availability of different suppliers. So due to the reason that those commodities are basic and widely spread, the suppliers of those products do not have power on pricing.
The power of buyers: Buyers get power because of competition for brand shelf space in retailing distribution. The Act of 1980 gives a right of CPS to award defined territories for bottlers, which in its turn gives bargaining power to bottlers/ buyers, because of the absence of alternative supplier. Bottlers are connected to CPs in respect of setting up prices and other conditions of the trade. Major channels for bottlers are food stores, fast food fountains, and
Soft drink industry Shares of beverage companies have always been ranked high among other industries. Although, when consumer incomes decrease, sales of beer and soda don't drop that much. Additionally, it is cheap to produce those and drinks are so popular so companies can sell them for a large price. Actually, it is a very unique case, that such a product, which is in the group of basic commodities, is profitable. Both concentrate and bottling businesses are interrelated, because they create one product, but at different stages, they have the same consumers, however, there is a big difference in the structure and most significant is gaining profitability. 5 forces structure of both businesses would help to explain the phenomenon:
The power of suppliers: Concentrate and bottling producers would need sugar and corn syrup, flavors, sweeteners, packages and some other additives suppliers. However, they are not unique and rare products, so in case if one supplier offers goods for unreasonable price, concentrate producer would always have a chance to switch to the other. For example, Coca Cola and Pepsi are biggest customers in can industry and they have relations with multiple suppliers, giving them with that less bargaining power because of availability of different suppliers. So due to the reason that those commodities are basic and widely spread, the suppliers of those products do not have power on pricing.
The power of buyers: Buyers get power because of competition for brand shelf space in retailing distribution. The Act of 1980 gives a right of CPS to award defined territories for bottlers, which in its turn gives bargaining power to bottlers/ buyers, because of the absence of alternative supplier. Bottlers are connected to CPs in respect of setting up prices and other conditions of the trade. Major channels for bottlers are food stores, fast food fountains, and