1) Why is the soft drink industry so profitable?
There are many reasons for the soft drink industry to be so profitable, both rivalry and supplies are large contributors. The soft drink industry is about as close as it gets to a real duopoly, between Pepsi and Coke there is little rooms for substitutes or rivalry. Even as bottled water and other bottled beverages became more popular Pepsi and Coke were quick to jump on the band wagon and produce their own line of bottled water. This modification in the market ended up producing a more profitable duopoly, once Pepsi and Coke created product lines to meet these other substitutes they could operate much more efficiently than these smaller companies. Now that the largest companies in the industry had product lines of the most popular bottled beverages at the cheapest price possible, they reduced any hazard of substitutes. Because soft drinks are such a basic recipe, the power of supplies is greatly diminished. Finding a supplier of sugar in the open market is incredibly easy, and substitutes for sugar is also easy to come by. In the modern soft drink industry, corn syrup is used more often than actual sugar. Beside the main ingredient sugar, the raw material aluminum and plastic was a major part of producing soft drinks. These materials were also cheap and easy to come by, because of the enormous supply of suppliers contracts could be negotiated with relative ease. Between lack of competition and absence of substitutes, matched with very advantageous contracts from supplies of sugar, corn syrup, aluminum, and plastic this soft drink industry has become incredibly profitable.
2) Compare the economics of the concentrate business to the bottling business: Why is the profitability so different?
There are major differences between the concentrate business and the bottling business, mostly the fact the concentrate business has most of the power in their business transactions with the bottling industry. This...