Cola wars continue: Coke and Pepsi in 2010 (HBS 9-711-462) a. Use the 5-forces framework to explain why the soft drink concentrate industry has been so profitable.
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The main costs components of bottlers are concentrate and syrup. However, ever since the concentrate producers such as Coke and Pepsi built a nationwide franchised bottling network, the bottlers were put under their control. Also, after the 1987 Master Bottler Contract, the concentrate industry had the right to determine concentrate price and other terms of sale. As the concentrate companies of CSD expanded into different categories, the concentrate producers bottled some products on their own. The threat of new entrants was also relatively low. Since Coke and Pepsi had extremely high market share, it was not easy for other companies to overcome the entry barrier. Though there were other coke brands at the beginning, Coke and Pepsi has bought up all others.
Lastly, the threat of substitute products or services was also low. Though there is a growing health-consciousness among customers, Coke and Pepsi dealt with zero-calorie drinks and natural sugar ingredients. Though non-carbonated drinks such as 7-up and Dr. Pepper struggled to fight back, the market share was not enough
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