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 …

…concentrate producers would no longer be able to profit from the strategic asymmetries of the market. As of the date of the HBS case study, this had not yet occurred and it was difficult to foresee whether or not vertical integration would ever provide long-term value to the major players within the soft drink industry. Few Number of Buyers Many Number of Sellers Sellers Dominate Buyers Dominate No One Dominates High Trading Risk Few Many