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Nature Biew

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Submitted By sdutcher
Words 1026
Pages 5
Steven Dutcher
Harvard Case: Cola Wars
BUS 460
1 April 2014
Cola Wars
1. Why, historically, has the soft drink industry been so profitable?

The soft drink industry has historically always been an extremely profitable industry since the beginning of it in the early 1900’s. There are many factors that have lead to the industry being so profitable but it is mostly contributed to the “war” going on with Coca Cola and Pepsi. Coca Cola and Pepsi have been around a very long time and have strong brand loyalty to each, which does lead to help profitability for each company but that’s a small factors into why they are so profitable. To get the real reason why profitability has always been there for Coke and Pepsi you have to start by looking at the concentrate producers and the bottlers for each company. These two parts of Pepsi and Coca Cola are extremely interdependent by which they, share costs in production and marketing distribution. There is also other parts of a concentrate producer and bottler that overlap and those are: sometimes concentrate producers do some bottling and sometimes the bottlers do promotional activities. When you look at the concentrate producers and bottlers you can see why it easy for these parts of the company to contribute to profitability. The concentrate manufacturing process involves relatively little capital investment in machinery, overhead or labor. A typical concentrate manufacturing plant, which normally will cover a geographic area as large as the United States, would cost between fifty and one hundred million dollars to build. (Case) It is even cheaper for bottlers; production line costs are between four million and ten million each depending on the volume and package type. (Case) Bottlers could see gross profit margins that would exceed forty percent but would only have eight percent operating, which is only a third

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