Cola Wars

Soft Drinks– Case Analysis
In the years between 1975 and 1993, the Coca Cola Company posted an average return
on equity of 30.5%. Similarly, PepsiCo Inc. recorded an average return on equity of
21.2%. Although these figures likely include the return form non-soft drink operations
(it’s difficult to tell from the available information in the Yoffee and Foley case), it is
clear that the soft drink industry is extremely profitable—profitable, that is, for
concentrate producers such as Coke and Pepsi.
For other members of the soft drink supply chain, the soft drink industry is not nearly as
attractive. Pretax profit for a typical bottler, by way of example, is less than one-third of
that of a standard concentrate producer. This discrepancy between the profitability of
concentrate producers and that of bottling companies results from the competitive
structure of the two separate industries.
Concentrate Providers: A Structural Analysis
Using a basic structural analysis of ...