Coke vs. Pepsi
...n. As I’ve understood from the case, one of the main components of both Coke and Pepsi is sugar, which can be easily be purchased almost everywhere, this is a product that can be easily bought in any amount. A lot of suppliers wanted to sell sugar to these companies and to sign a contract with them. The partnership meant to the supplier that will have big profits and as brighter the company will be the more money supplier will get from the sold amount of sugar. There is a huge variety of suppliers, so to compete they had to make a lot of privileges to the buyer. Even in times when sugar has increased in its price, it did not enforce Coca-Cola and Pepsi, they are both flexible and switched to the syrup, as they did in 1980s. In other words, Coca-Cola and Pepsi had a lot of alternatives to make their products, the market was huge and the variety of suppliers to choose from was also big. Everybody wanted to dial with Coke and Pepsi, so in many cases the prices of the inputs of Coke and Pepsi was offered by the companies to the supplier. So to conclude, why actually the soft drink industry is so profitable, the answer is, because of the competition between Pepsi and Coca-Cola, that motivates both to be even more successful, to be more popular. Secondly, is because the “market of many alternatives” of the suppliers. Also let’s not forget about the qualitative advertising that each company does all the time. Let’s discuss now the economics of concentrate and bottling business. Why the profitability is so different? These two, and Concentrate producer’s and bottlers, are working independently and deal the same suppliers and buyers at the same time, which means that they are linked with each other in some way. But as for profitability, the industries are different. The main point is the value of each one. As for the Concen...