When analyzing the soft drink industry, one may wonder why this industry is so profitable. A simple answer to this may be that everyone will eventually get thirsty, so soft drinks will always be a consumable good. A Porter’s Five Force analysis will help give a closer look at why this industry is so profitable. In respect to Coke and Pepsi, these two companies segmented the industry into the production of soft drink syrup and the manufacturing/distribution of their products at a retail level, while their emphasis was more on the production of soft drink syrup. The chart below is a Porter’s Five Force analysis done on this industry.
|Porter’s Five Force Analysis |
|Forces |Level of Intensity |
| |(low, medium, high) |
|Supplier Power |Low |
|Potential Entrants |Low |
|Industry Rivalry |High |
|Buying Power |Medium |
|Threat of Substitutes |High |
The supplier power is low for this industry because few basic inputs (sweeteners and packaging) were required which could easily be provided by many sources. Also, Coke and Pepsi accounted for a large portion of the metal can industry’s business, there were always many suppliers just waiting for the opportunity to do business with them. Because the established brand names of Coke and Pepsi, the potential for entrants was low for this industry. Not only does a company have to compete with the brand names, but it...