Soft Drink And Ice Manufacturing

The soft drink industry is one of the most highly profitable industries in the USA. Also, the competitive market is a very large market. Americans consumed about 53 gallons of soft drinks per person a year in 2000 by $ 60.3 billion!! Comparing with the market in 1990, since it was 47 gallons. In recent years, the market growth has slowed.

The existing concentrate business is largely controlled by Coca-Cola Company (Coca-Cola) and PepsiCo (Pepsi), together claiming a combined 72% of the U.S. carbonated soft drink (CSD) market sales volume in 2009. Refer to Exhibit 1 for an illustration of the CSD industry value chain. For more than a century, Coca-Cola and Pepsi have maintained growth and large market shares through mastering five competitive forces, shown in Exhibit 2, that drive profitability and shape the industry structure.

The purpose of this research paper is to analyze Sam Adams and the global craft beer market. I will apply microeconomic models to analyze the supply and demand conditions for Sam Adams, its price elasticity of demand for products, cost of production and the overall market. There will be recommendations to maximize future profits and sustain success for Sam Adams. In this paper I will also analyze the craft beer industry and recommend actions for better management of supply and demand, improving the cost of production and the different barriers of entry that Sam Adams can utilize to impact its future in the craft beer industry. Applying the concepts of variable and fixed costs, I will make recommendations for its output decisions and profitability that will help them succeed in a monopolistically competitive market structure. In the conclusion of this paper I will make recommendations to manage future production and sustain its success, as well as evaluate the business structure and effective decision-making strategies. The craft beer industry is a monopolistic competition because it has the ability to allow many firms to produce similar good or services, but it at the same time allows each firm to make independent production decisions and differentiate their product from the competition by creating its own pricing.

and Pepsi Co dominate the industry with their strong brand name and great distribution channels. In addition, the soft-drink industry is fully saturated and growth is small. This makes it very difficult for new, unknown entrants to start competing against the existing firms. Another barrier to entry is the high fixed costs for warehouses, trucks, and labor, and economies of scale. New entrants cannot compete in price without economies of scale. These high capital requirements and market saturation make it extremely difficult for companies to enter the soft drink industry; therefore new entrants are not a strong competitive force.

Coca Cola one of the major producers, supplier, and vendor of the soft drink industry sells a variety of up to 35,000 different products ranging from their regular soft drinks, to clothing, and collectable toys. Coca Cola sells four of the five top selling soft drink beverages, which are Diet Coke, Sprite, Fanta, and of course, Coca Cola. The Coca Cola company also sell water, juices, and sport drinks.

The soft drink industry in the United States is a highly profitably, but competitive market. In 2000, carbonated soft drink retail sales were estimated $60.3 billion, however, soft drink consumption growth has slowed in recent years. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the U.S. They are the Coca Cola Company with 44.1% market share, The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/ Seven Up, Inc. with 14.7% market share. These three companies market the top ten brands account for 73% of soft drink sales in the U.S. Dr. Pepper/ Seven Up, Inc. owns two of the top ten brands: Dr.

However, no matter what the advertisements claim, the statistics concerning the shares and value of each company cannot lie. The Coca-Cola Company dominates the soft-drink market by owning four of the global top five soft-drink brands, which include Coca-Cola, Diet Coke, Fanta, and Sprite. The Coca-Cola Company makes or licenses more than 400 drink products in more than 200 nations. In 2006, Coca Cola’s sales reached 24,088 million dollars and had a net income of about 5,080 million dollars, with 71,000 employees working in the company. PepsiCo, Incorporated is the largest snack maker and second largest soft-drink maker in the world. It sells beverages and snacks in approximately 200 nations as well. In 2006, its sales reached 35,137 million dollars and had a net income of $5,642 dollars with 168,000 employees working in the company. With these numbers, one can assume that Pepsi is earning more profit if wages payouts are not considered, but Pepsi has a large number of workers working for

The soft drink industry in the United States is a highly profitably, but competitive market. In 2000 alone, consumers on average drank 53 gallons of soft drinks per person a year. There are three major companies that hold the majority of sales in the carbonated soft drink industry in the United States. They are the Coca Cola Company with 44.1% market share, followed by The Pepsi-Cola Company with 31.4% market share, and Dr. Pepper/Seven Up, Inc. with 14.7% market share. Each company respectively has numerous brands that it sales. These top brands account for almost 73% of soft drink sales in the United States. Dr. Pepper/Seven Up, Inc. owns two of the top ten

In 1886, the Coca Cola Company was developed but it wasn't until 1898 that the fierce competitor Pepsi-Cola entered into the market. These 2 companies are the two major players that dominate the consumer beverage (soft-drink) industry. Coke and Pepsi have since been competing to rein the global market in consumer beverages. The market of drinks in the United States alone is valued at more than thirty million dollars annually. With the growth of these two companies, PepsiCo has developed and acquired additional products outside the scope of just the consumer beverage industry, these products have helped the company to increase their exposure and position in the global market. This has not been the case for the Coca Cola Company; they

Soft drink industry is very profitable, more so for the concentrate producers than the bottler’s. This is surprising considering the fact that product sold is a commodity which can even be produced easily. There are several reasons for this, using the five forces analysis we can clearly demonstrate how each force contributes the profitability of the industry.

The economics of the concentrate business and bottling is different from each other in terms of number and size of rivals and cost structure etc. Concentrate business has few buyers and through its value chain compare to bottling business has many buyer and mid-way player in the soft drink industry. The concentrate manufacturing process involved a little capital investment in machinery, overhead, or labour to reduce the risks whereas bottlers involving high capital investment. Franchise agreements with soft drink industry allowed bottlers to handle the non-cola brand of other concentrate producers. It also allowed bottlers to choose whether to market new beverages introduced by a concentrate producer. Concentrate producers product cost structure is mostly based on variable costs such as advertising, promotion, market research, and bottler support however, bottler products cost constitution is mostly based on fixed costs and have higher cost leverage. Concentrate producers also took charge of negotiating customer development agreements with nationwide retailers such as Wal-Mart. Concentrate producers collaborated to make more profitable control with bottlers, for example, raw material negotiation with suppliers and sales price

The case explains the economics of the soft drink industry. There activities that add value to consumer at nearly every stage of the value chain of the soft drink industry. The war is primarily fought between Coca-Cola and PepsiCo as market leaders in this industry; who combined have roughly a ninety percent market share in their industry. The impact of globalization on competition has allowed both of these major players to find new markets to tap which has allowed each continued growth potential.

Coca-Cola is the number one non-alcoholic beverage in the world and is also the golden standard in the beverage industry. Over the pass decade carbonated beverage sales has decrease which has lead Coca-Cola to seek for new opportunity and investor. Contribution of US soda sales in Coca-Cola’s revenue could decline to less than 15% by 2020. By the end of 2017 Coca-Cola is looking to refranchise two-thirds of its bottling territories in North America. The outcome of Coca-Cola refranchise two-third of its bottling territories will reduce the revenue to Coca-Cola sales of its products, however the operating margin will increase. Also, this could reduce the percentage contribution by the U.S to Coca-Cola overall revenue.

The industry of Carbonated Soft Drinks (CSD) is highly concentrated. The three major companies, Coca Cola, PepsiCo, and Cadbury Schweppes accounted in 1998 for more than 90% of market share by case volume –Exhibit 1-.

The non-alcoholic beverages industry requires significant levels of infrastructure and technology, as well as large capital investments, in order to successfully compete in the market. As a result, it is considered as an industry with high barriers to entry that are difficult to overcome for new entrants. Additionally, the dominant position of the industry’s key players - Coca Cola and Pepsi - lower the threat of entry on the market as new entrants do not have the resources or capabilities to compete with these