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Essay/Term paper: Soft drink industry case study

Essay, term paper, research paper:  Economics

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Soft Drink Industry Case Study

Table of Contents

Introduction 3
Description 3
Segments 3
Caveats 4
Socio-Economic 4
Relevant Governmental or Environmental Factors, etc. 4
Economic Indicators Relevant for this Industry 4
Threat of New Entrants 5
Economies of Scale 5
Capital Requirements 6
Proprietary Product Differences 7
Absolute Cost Advantage 8
Learning Curve 8
Access to Inputs 8
Proprietary Low Cost Production 8
Brand Identity 9
Access to Distribution 9
Expected Retaliation 9
Conclusion 10
Suppliers 10
Supplier concentration 10
Presence of Substitute Inputs 11
Differentiation of Inputs 12
Importance of Volume to Supplier 13
Impact of Input on Cost or Differentiation 13
Threat of Backward or Forward Integration 13
Access to Capital 14
Access to Labor 14
Summary of Suppliers 14
Buyers 15
Buyer Concentration versus Industry Concentration 15
Buyer Volume 15
Buyer Switching Cost 15
Buyer Information 16
Threat of Backward Integration 16
Pull Through 16
Brand Identity of Buyers 17
Price Sensitivity 17
Impact on Quality and Performance 17
Substitute Products 18
Relative price/performance relationship of Substitutes 18
Buyer Propensity to Substitute 18
Rivalry 18
Industry Growth Rate 20
Fixed Costs 21
Product Differentiation 21
Brand Identity 21
Informational Complexity 22
Corporate Stakes 22
Conclusion 23
Critical Success Factors 23
Prognosis 24
Bibliography 26
Appendix 27
Key Industry Ratios 27


The 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. Segments
The 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 Share
1990 1991 1992 1993 1994 Cola 69.9
69.7 68.3 67 65.9 Lemon-Lime 11.7 11.8 12
12.1 12.3 Pepper 5.6 6.2 6.9 7.3 7.6 Root
2.7 2.8 2.3 2.7 2.7 Orange 2.3 2.3
2.6 2.3 2.3 Other 7.8 7.2 7.9 8.6 9.2
Source: Industry Surveys, 1995


The 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 data available to determine over capacity.


Relevant Governmental or Environmental Factors, etc.

The Federal Government regulates the soft drink industry, like any industry
where the public ingests the products. The regulations vary from ensuring clean,
safe products to regulating what those products can contain. For example, the
government has only approved four sweeteners that can be used in the making of a
soft drink (Crouch, Steve). The soft drink industry currently has had very
little impact on the environment. One environmental issue of concern is that
the use of plastics adversely affects the environment due to the unusually long
time it takes for it to degrade. To combat this, the major competitors have
lead in the recycling effort which starting with aluminum and now plastics. The
only other adverse environmental impact is the plastic straps that hold the cans
together in 6-packs. These straps have been blamed for the deaths of fish and
mammals in both fresh and salt water.

Economic Indicators Relevant for this Industry

The general growth of the economy has had a slight positive influence on the
growth of the industry. The general growth in volume for the industry, 4-5
percent, has been barely keeping up with inflation and growths on margins have
been even less, only 2-3 percent (Crouch, Steve).

Threat of New Entrants

Economies of Scale

Size is a crucial factor in reducing operating expenses and being able to make
strategic capital outlays. By consolidating the fragmented bottling side of the
industry, operating expenses may be spread over a larger sales base, which
reduces the per case cost of production. In addition, larger corporate coffers
allow for capital investment in automated high speed bottling lines that
increase efficiency (Industry Surveys, 1995). This trend is supported by the
decline in the number of production workers employed by the industry at higher
wages and fewer hours. This in conjunction with the increased value of
shipments over the period shows the increase in efficiency and the economies
gained by consolidation (See table 2).

Table 2 General Statistics: Year
Companies Workers Hours Wages Value of Shipments
1982 1626 42.4 85.2 7.84
16807.5 1983 41.5 85.1 8.24 17320.8 1984 39.8
81.7 8.51 18052 1985 1414 37.2 77.8 9.1 19358.2 1986
1335 35.5 73.5 9.77 20686.8 1987 1190 35.4 71.5 10.45
22006 1988 1135 35.2 71.8 10.78 23310.3 1989 1027 33.4
67.7 10.98 23002.1 1990 941 32 65.7 11.48 23847.5 1991
31.9 66.8 11.85 25191.1 1992 29.8 61.6 12.46
26260.4 1993 28.6 59.3 12.93 27224.4 1994 27.4
56.9 13.39 28188.5 1995 26.2 54.5 13.86 29152.5 1996
25 52.1 14.32 30116.5 Source: Manufacturing USA, 4th Ed.

Further evidence of economies is supported by the increased return on assets
from 1992-1995, as shown in table 3. Coke and Pepsi clearly show increased
return on assets as the asset base increases. However, Cadbury/Schweppes does
not show conclusive evidence from 95 to 96.

Table 3

CADBURY/SCHWEPPES 93 94 95 96 ASSETS 2963100
3266900 3501500 4595000 SALES 3372400 3724800
4029600 4776000

NET INCOME 195600 236800 261900 300000 Sales/Income 5.80% 6.36%
6.50% 6.28% Income/Assets 6.60% 7.25% 7.48% 6.53%

COKE ASSETS 11051934 12021000 13873000 15041000 SALES
13073860 13963000 16181000 18018000

NET INCOME 1664382 2176000 2554000 2986000
Sales/Income 12.73% 15.58% 15.78% 16.57% Income/Assets 15.06% 18.10%
18.41% 19.85%

PEPSI ASSETS 20951200 23705800 24792000 25432000 SALES
21970000 25021000 28472400 30421000

NET INCOME 374300 1588000 1752000 1606000 Sales/Income
1.70% 6.35% 6.15% 5.28% Income/Assets 1.79% 6.70% 7.07% 6.31%

Source: Compact Disclosure

Capital Requirements

The requirements within this industry are very high. Production and
distribution systems are extensive and necessary to compete with the industry
leaders. Table 4 shows the average capital expenditures by the three industry

Table 4
Dec-95 Dec-94 Jan-94 Jan-93 Receivables 1624333
1385767 1226633 1077912 Inventories 867666.7
803666.7 777366.7 716673.7 Plant & Equip 5986333
5795367 5246600 4642058 Total Assets 15022667
14055500 12997900 11655411 Source: Compact Disclosure

The magnitude of these expenditures causes this to be a high barrier to entry.

Proprietary Product Differences

Each firm has brands that are unique in packaging and image, however any of the
product differences that may develop are easily duplicated. However, secret
formulas do create a difference or good will that cannot be duplicated. The
best example of this is the "New Coke" fiasco of 1985. Coke reformulated its
product due to test marketing results that showed New Coke beat Pepsi 47% to 43%
and New Coke was preferred over old Coke by a 10% margin. However, Coke
executives did not take into account the good will created by the old Coke name
and formula. The introduction of New Coke as a replacement of Coke was met by
outrage and unrelenting protest by the public. Three months from the initial
launch of New Coke, management apologized to the public and reissued the old
Coke formula. Test marking shows that there is only a small difference in
actual product taste (52% Pepsi, 48% Coke), but the good will created by a brand
can have significant proprietary differences (Dess, 1993). This is a high
barrier to entry.

Absolute Cost Advantage

Brands do have secret formulas, which makes them unique and new entry into the
industry difficult. New products must remain outside of patented zones but
these differences can be slight. This leads to the conclusion that the absolute
cost advantage is a low barrier within this industry.

Learning Curve

The shift in the manufacturing of soft drinks is gravitating toward automation
due to speed and cost. However, industry technology is low and the
manufacturing process is not difficult, therefore the learning curve will be
short and will have a low barrier to entry.

Access to Inputs

All the inputs within the soft drink industry are commodity items. These
include cane, beet, corn syrup, honey, concentrated fruit juice, plastic, glass,
and aluminum. Access to these inputs is not a barrier to enter the industry.

Proprietary Low Cost Production

The process of manufacturing soft drinks is not a proprietary process. The
methods used in the process are relatively standard within the industry and the
knowledge needed to begin production can easily be acquired. This is not a
barrier to entry.

Brand Identity

This is a very strong force within the industry. It takes a long time to
develop a brand that has recognition and customer loyalty. "Brand loyalty is
indeed the HOLY GRAIL to American consumer product companies." (Industry Surveys,
1995) A well recognized brand will foster customer loyalty and creates the
opportunity for real market share growth, price flexibility, and above average
profitability (Industry Surveys, 1995). Therefore this is a high barrier to

Access to Distribution

Distribution is a critical success factor within the industry. Without the
network, the product cannot get to the final consumer. The most successful soft
drink producers are aggressively expanding their distribution channels and
consolidating the independent bottling and distribution centers. From 1978 to
the present, the number of Coca-Cola bottlers decreased from 370 to 120
(Industry Surveys, 1995). In addition, 31.9% of the soft drink business is in
supermarkets, where acquiring shelf space is very difficult (Santa, 1996). This
is a high barrier to entry.

Expected Retaliation

Market share within the industry is critical; therefore any attempt to take
market share from the leaders will result in significant retaliation. The soft
drink industry is a moderately mature market with slow single digit growth
(Industry Surveys, 1995). Projected growth rates are 4-5% in sales volume and 2-
3% in margin (Crouch, Steve). Therefore, growth in market share is obtained by
stealing share from rivals causing retaliation to be high in defense of current
market position. This is a high barrier to entry.


To be successful on a large scale, the high capital requirements for
manufacturing, distribution, and marketing are high barriers to entry.
Therefore the threat of new entrants is low making this an attractive industry.


Supplier concentration

Supplier concentration is low due to the fact that the main ingredients are
sugar (cane and beet), water, various chemicals, and aluminum cans, plastic and
glass bottles. There are many places to get sugar and ingredients for soft
drinks because they are commodity items. The containers (aluminum cans, bottles
etc.) make up 36 percent of all the inputs that the industry uses. Other
supplies like sugars, syrups and extracts account for 23 percent of the inputs
(Manufacturing USA). There are five major suppliers of glass bottles. Altrista
Corp., Anchor Glass Container, Glassware of Chile, Owens Illinois, and Vistro Sa
are the major makers of glass bottles (Compact Disclosure). This is a fair
amount of suppliers considering that only five percent of soft drink sales are
in glass bottles. There are even more suppliers of plastic bottles. This is
good because 43% of all sales are from plastic bottles (Prince, 1996). All this
makes the concentration for glass and plastic suppliers moderate. The aluminum
can industry is even older and more established than the plastic industry.
Reynolds Metal Products, American National Can Company and Metal Container Corp.
are the main suppliers of aluminum cans. 50.6% of total soft drink sales are
packaged in aluminum cans (Prince, 1996). Since the aluminum industry is older
and more established, these are likely to be the only manufacturers for a while.
Even though the concentration of aluminum producers are low there are only three
major players in the industry, Coke, Pepsi, and Cadbury. These three account
for nearly 90% of domestic soft drink sales (Dawson, 1996). This makes the
balance of power slightly favor the suppliers of aluminum cans, even though the
number of producers and buyers are equal (3). Syrups and extracts account for
16.7% of input costs to the soft drink industry (Manufacturing USA, Fourth Ed.).
Even though these are a small percentage of inputs, all the major soft drink
companies own companies that produce flavoring extracts and syrups (Industry
Surveys, 1995). This is probably due to the fact that they all have "secret
formulas" and this is how they protect the secret. Coke, Pepsi, and Dr. Pepper
all have "secret formulas". This makes the concentration of suppliers for
extracts very low but they are owned by the soft drink industry. This backward
integration by the major players makes the power question moot. Suppliers do
have limited power over the soft drink industry. The concentration of suppliers
remains relatively low, which would seem to give the supplier power. The shear
mass and volume that the industry buys negates that effect and balances, if not
tips it back toward the soft drink industry.

Presence of Substitute Inputs

There is not a lot of variety in inputs. The biggest substitute input was when
the industry switched from aluminum cans to plastic bottles. This made the
glass industry almost shake out completely. The next big substitute input was
for sugar. Since people were demanding more and more ways to lose weight and
consume fewer calories, the diet soft drink exploded in sales. This demand made
the soft drink industry find an alternative to sugar to sweeten their product.
This substitute turned out to be Nutrasweet non-sugar sweetener. This was
found to reduce the calories and retain the taste of their respective products.
Other sweeteners, like molasses, do not work because they change the flavor of
the product. Most of these substitute inputs had already taken place so they
become less relevant to the industry as time marched on. Substitute inputs
usually do not become important until the customer or market changes
dramatically. This happens when new studies come out from the government about
how harmful something is. This was the case when scientists came out with the
study that stated that saccharin was harmful to rats. The industry had to
respond by reducing its use of saccharin and look for a substitute. At this
time, the industry found Nutrasweet to be a reasonable substitute for saccharin,
which was used more heavily in diet drinks. All in all, there are a lot of
substitutes for packaging but not for sweeteners because these sweeteners must
have government approval (Crouch, Steve). This makes suppliers have power over
the industry as seen in the almost overnight empire of Nutrasweet. This will
most likely change drastically when Aspirtain (Nutrasweet) loses its patent in a
few years.

Differentiation of Inputs

Sugar is commonly available while Nutrasweet is patented. There is no
differentiation for sugar and only one choice in Nutrasweet. As far as the
other chemicals and inputs, they are commodity items, and it does not matter who
supplies them. This makes suppliers have little power over the soft drink

Importance of Volume to Supplier

The soft drink industry buys a large portion of the Nutrasweet market but their
percentage of purchases are falling as other products begin to use it. Sugar is
bought but not in the volume that the grocery store or other industries do. The
aluminum can, plastic bottles and glass bottles (less now) are all pretty much
dependent on the soft drink industry for their livelihood. This makes the
supplier have pretty much no power over the industry.

Impact of Input on Cost or Differentiation

Since the inputs are basic elements there is no differentiation and therefore no
impact on the final product for using different inputs. If the price of the
input changed, it would dramatically change the price of the product as the
aluminum cartel did in 1994. Since the major inputs are commodity items, the
prices can change dramatically due to environmental forces. If the sugar
industry suffers a loss due to weather or because of political unrest (like in
Cuba), then the prices go up and the soft drink industry is usually left
absorbing them. The soft drink industry can not, in all cases, simply pass
along the price increase. Customers and distributors are more price sensitive
than ever. This makes the supplier have a fair amount of bargaining power over
the industry.

Threat of Backward or Forward Integration

With the current climate of "sticking to the core of the company," there is
little threat of backward integration into the supplier's industry. This is
after the fact that they already have integrated into the extracts to protect
their secrets. The integration into the extract-producing segment of the
suppliers will be the extent of the backward integration. The suppliers do not
have the capital required to forward integrate into the soft drink industry.
This makes the industry attractive for investment.

Access to Capital

The soft drink industry is very profitable and therefore looked upon favorably
by financial institutions. This includes the stock market, direct investors
(bondholders), and banks. Currently the operating margins for the industry have
grown from 17.9% in 1992 to 19.5% in 1996. The projected operating margins are
projected to grow to 20.5% from 1997 to 2001 (Value Line 1996). The profit
margins and demand are increasing for the soft drink industry (Industry Surveys,
1995). What this means is that capital is available for expansion or upgrading,
if additional capital is required. This is favorable to the industry.

Access to Labor

The industry is not highly technical except for chemical engineering. This
means that the demands for skilled labor are not very high. Which means that
the soft drink industry will not have trouble finding labor. There are no
established labor unions. The average labor cost is no more than in any other
industry. The average hourly wage is $11.85 per hour, which just about the same
as all manufacturing firms of $11.49 (Manufacturing USA).

Summary of Suppliers

When you sum up the different aspects of the suppliers you come to the quick
conclusion that the power is definitely in the hands of the soft drink industry.
This makes the industry very attractive for investment and for the companies
already in the industry from the supply aspect. This means that it is
attractive to new entrants as well.


Buyer Concentration versus Industry Concentration

The buyers for the soft drink industry are members of a large network of
bottlers and distributors that represent the major soft drink companies at the
local level. Distributors purchase the finished, packaged product from the soft
drink companies while bottlers purchase the major ingredients. With the
consolidation that has occurred within the industry, there is little difference
between the two. Distributors are assigned to represent a specific geographic
area, for example a town or a county. In turn, these distributors are
responsible for distributing the product to the retailers who sell the products
to the end consumer. In recent years, the national companies have been
purchasing independent bottlers in an effort to consolidate the business and
gain some distribution economies of scale (Thompson and Strickland, 1993).

Buyer Volume

The contractual agreements, which are present in this industry, dictate that the
major soft drink companies will sell their products to the distributors.
Therefore, buyer volume is not a factor for this industry. Buyer Switching Cost

Independent bottlers have contractual agreements to represent that company
within a certain area. Switching costs would include establishing new
relationships with other companies to represent and the legal costs associated
with distributors being released from the contract.

Buyer Information

Distributors are very informed about the product that they are distributing.
Information flows freely between the soft drink Companies and the local
distributors and down to the retailers. There are many co-operative promotions
where distributors and soft drink companies collaborate on price and advertising
campaigns (Crouch, Steve). For example, major soft drink firms will send a
regular report out to its distributors describing upcoming promotional events
where the cost will be shared between the two companies. For promotions that
fall outside of this report, the distributors will have to coordinate that
sponsorship with the soft drink company.

Threat of Backward Integration

It is doubtful that local distributors will move into the actual production
process of soft drinks. Distributors specialize in the transportation and
promotion of the product that they rely on the carbonated beverage companies
produce. However, major retailers; for example Wal-Mart and Harris Teeter have
begun distributing their own private label brands of soft drinks. Wal-Mart now
offers Sam's Choice and Harris Teeter offers President's Choice at a
significantly lower price. These private label competitors will not provide the
variety of packaging alternatives, which make the national leaders so successful
(PepsiCo 1995 Annual Report). For example, Pepsi offers 12-ounce cans, 20 ounce
bottles, 1 liter bottles, six packs, twelve packs, cases and "The Cube" 24 can

Pull Through

Pull through is not a factor from the independent bottler's perspective. These
bottlers have a franchise agreement to represent a major carbonated beverage
company on the local level. These distributors are legally bound to represent
these companies and therefore cannot choose not to promote certain types of

Brand Identity of Buyers

Brand identity of buyers is not relevant to the distributors because of the
contractual relationship that exists where distributors represent the soft drink
companies. The distributors have an exclusive contractual agreement to
represent that soft drink brand.

Price Sensitivity

Distributors are not highly price sensitive buyers. Independent bottlers are on
a national contract so all distributors pay the same price for the same products.

Price to Total Purchases

Soft drinks are the single product that the distributors are concerned with so
price is very important to them. Soft drink companies rely on these distributors
to represent them on the local level, so it is important to maintain a healthy

Impact on Quality and Performance

All three of the leading carbonated beverage producers, Coca-Cola, PepsiCo, and
Cadbury Schweppes believe that their buyers (distributors) are an important step
in taking their products to the end consumer. The service, which their
distributors provide to the retailers, makes a difference to the retailers who
sell the product to the end consumer. The actions of that distributor reflect on
the soft drink company so if the distributor does not provide the level of
service that retailer or restaurant desires, it may harm the company's image.

Substitute Products

Relative price/performance relationship of Substitutes

The carbonated beverage industry provides a non-alcoholic means of satisfying an
individuals desire to quench their thirst. Traditionally, coffee and tea would
be considered substitute products. In recent years, carbonated beverages have
seen the emergence of many new substitute products that wish to reduce soft
drink's market share. The soft drink market has been traditionally competitive,
without the added friction from "ready to drink tea, shelf stable juice, sports
drinks and still-water" competitors also. (Gleason, 1996) Leaders in these
emerging segments include Quaker Oats, with their Snapple and Gatorade products,
Perrier, and Arizona Iced Teas. "In other words, Pepsi isn't Coke's biggest
competition, Tap water is." (Gleason, 1996). Generally speaking, soft drinks
are less expensive to the consumer than these substitute products.

Buyer Propensity to Substitute

Buyer propensity to substitute is low due to the contractual relationships
between the soft drink companies and the distributors.


Degree of Concentration and Balance among Competitors

Three main competitors: Pepsico, Coca-Cola, and Dr. Pepper/Cadbury
control the Soft Drink industry. Their combined total sales revenues account
for 90 percent of the entire domestic market. This market dominance makes the
industry a fiercely competitive and dynamic business environment to operate in.
The single market leader is Coca-Cola with a 42 percent market share and over
$18 billion in sales worldwide. PepsiCo maintains a 31 percent market share
with $10.5 billion in sales worldwide. The smallest of the three leaders is Dr.
Pepper/Cadbury, which holds roughly 16 percent of the market. Coke's consistent
dominance of both Pepsi and Dr. Pepper/Cadbury has caused Coke to become a
household name when referring to soft drinks.
As far as balance among competitors is concerned, PepsiCo is a much
larger company than Coke and Dr. Pepper/Cadbury combined. The reason being that
PepsiCo also owns companies in the snack and food industries (Frito-Lay, Pizza
Hut, Taco Bell, and KFC). With a work force of 480,000 people, PepsiCo is the
world's third largest employer behind General Motors and Wal-Mart. This has not
lead to a more profitable soft drink business, nor has it helped PepsiCo use its
size to steal market share from Coke or Dr. Pepper/Cadbury.

Diversity among Competitors

Though Coca-Cola dominates the industry in sales volume and market share,
it does not dominate when it comes to innovative marketing and business strategy
efforts. For instance, PepsiCo generates 71 percent of its revenues from the
U.S., while Coca-Cola derives 71 percent of its from international markets.
Similarly, PepsiCo only gets 41 percent of its total revenues from soft drinks.
The remaining 59 percent come from its snack and food business. Coke on the
other hand gets all of its revenues from its soft drinks. Clearly both of the
industry leaders have different strategies as far as revenue generation is
concerned. However, as far as their product lines are concerned they are very
similar and operate parallel to one another. Pepsi and Coca-Cola both have
lemon-lime, citrus, root beer, and cola flavors. Dr. Pepper/Cadbury does not
have as similar a product line to that of Pepsico and Coca-Cola. It
manufactures Dr. Pepper (a unique spicy cola drink), ginger ale, tonic water,
and carbonated water under its Schweppes and Canada Dry brands. Coke does have
an answer to Dr. Pepper in its Mr. Pibb, but only holds a .4 percent market
share compared to Dr. Peppers 6 percent market share. The relatively low level
of diversity makes the soft drink industry unattractive for investment.

Industry Growth Rate

Although new product lines have come into the beverage industry over the
past two to three years, the soft drink segment has held and grown its share
steadily. The onslaught of the sport drink and bottled tea have proven to be a
passing fad that has gained little if no long term market share from soft drinks.
Growth figures for the soft drink industry have been very steady since 1993,
and are projected to continue to be so into the last part of the twentieth
century. As can be seen in Figure 1, volatility was somewhat prevalent in the
1980's but has since lessened and leveled off (Valueline, 1996). Figure 1

Year '87-'88 '88-'89 '89-'90 '90-'91 '91-
'92 '92-'93 '93-'94 '94-'95 Growth 5.7% 5.2% 2%
3% 2.9% 4% 4.4% 4%

Over the past ten years soft drinks have gained 5 percent of total
beverage sales, putting them over the 25 percent share level for all
beverage sales. As for new and emerging markets, both Coke and Pepsi are
attacking the international environment. Coca-Cola generates 80 percent
of its revenues abroad, and Pepsi is attempting but failing to put more
emphasis there as well. "Pepsi is losing customers to Coke in every major
foreign territory. The company has always struggled overseas, but in the past
few months it has lost key strongholds in Russia and Venezuela to Coke" (Sellers,
1996). Because of the consistent growth of both the domestic and foreign
markets, the soft drink industry is attractive for investment.

Fixed Costs

The S&P Industry Survey has shown the soft drink industry profit margin
to be on a steady incline over the past fifteen years. Levels in 1980 were near
14%, while as of year-end 1995 were over 20% and expected to flatten a bit.
This flattening effect may be an indication that fixed costs are on the rise due
to expansion


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