Case Analysis Of The Soft Drink Industry

4478 words - 18 pages

Third highest grade in the class Needs work on the critical success factors for the industryTable of ContentsIntroduction 3Description 3Segments 3Caveats 4Socio-Economic 4Relevant Governmental or Environmental Factors, etc. 4Economic Indicators Relevant for this Industry 4Threat of New Entrants 5Economies of Scale 5Capital Requirements 6Proprietary Product Differences 7Absolute Cost Advantage 8Learning Curve 8Access to Inputs 8Proprietary Low Cost Production 8Brand Identity 9Access to Distribution 9Expected Retaliation 9Conclusion 10Suppliers 10Supplier concentration 10Presence of Substitute Inputs 11Differentiation of Inputs 12Importance of Volume to Supplier 13Impact of Input on Cost or Differentiation 13Threat of Backward or Forward Integration 13Access to Capital 14Access to Labor 14Summary of Suppliers 14Buyers 15Buyer Concentration versus Industry Concentration 15Buyer Volume 15Buyer Switching Cost 15Buyer Information 16Threat of Backward Integration 16Pull Through 16Brand Identity of Buyers 17Price Sensitivity 17Impact on Quality and Performance 17Substitute Products 18Relative price/performance relationship of Substitutes 18Buyer Propensity to Substitute 18Rivalry 18Industry Growth Rate 20Fixed Costs 21Product Differentiation 21Brand Identity 21Informational Complexity 22Corporate Stakes 22Conclusion 23Critical Success Factors 23Prognosis 24Bibliography 26Appendix 27Key Industry Ratios 27IntroductionDescriptionThe soft drink industry is concentrated with the three major players, Coca-Cola Co., PepsiCo Inc., and Cadbury Schweppes Plc., making up 90 percent of the $52 billion dollar a year domestic soft drink market (Santa, 1996). The soft drink market is a relatively mature market with annual growth of 4-5% causing intense rivalry among brands for market share and growth (Crouch, Steve). This paper will explore Porter's Five Forces to determine whether or not this is an attractive industry and what barriers to entry (if any) exist. In addition, we will discuss several critical success factors and the future of the industry.SegmentsThe soft drink industry has two major segments, the flavor segment and the distribution segment. The flavor segment is divided into 6 categories and is listed in table 1 by market share. The distribution segment is divided in to 7 segments: Supermarkets 31.9%, fountain operators 26.8%, vending machines 11.5%, convenience stores 11.4%, delis and drug stores 7.9%, club stores 7.3%, and restaurants 3.2%.Table 1: Market Share1990 1991 1992 1993 1994Cola 69.9 69.7 68.3 67 65.9Lemon-Lime 11.7 11.8 12 12.1 12.3Pepper 5.6 6.2 6.9 7.3 7.6Root 2.7 2.8 2.3 2.7 2.7Orange 2.3 2.3 2.6 2.3 2.3Other 7.8 7.2 7.9 8.6 9.2Source: Industry Surveys, 1995CaveatsThe only limitations on access to information were:1. Financial information has not yet been made available for 1996.2. The majority of the information targets the end consumer and not the sales volume from the major soft drink producers to local distributors.3. There was no...

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