History of the Soft Drinks Industry Essay

Introduction Soft drinks, more popularly known as sodas, are not exactly referred to as items of necessity. People can live without sodas. In fact, people might be safer if they don’t drink soft drinks so much. And yet, soft drinks somehow make it to the top of the list of items bought by the average consumer. Why is this, exactly? Well, for one thing, sodas are delicious. They stand between liquor and juice. Those who are too young to drink beer but think that fruit juice is too juvenile can order sodas. Those too old and are putting their health at risk by drinking hard drinks can enjoy soft drinks and no one would think any less of them. In short, sodas have a mass appeal. They carry an image with them; an image of a person with a comfortable lifestyle. This report will take a look at the soft drink industry as a whole and particular industry’s leaders, brief history and description of the industry; will show industry characteristics, trends, changes, and competitive factors; will give recommendations for the companies within the industry. My experience of the consumer and the seller of the soft drinks, allowed me to say, that the soft drinks industry deserves attention. It is one of the biggest, fast growing, perspective, and profitable industries in the world. It takes a big place in our life as consumers. Soft drinks, and such big companies as Coca – Cola or PepsiCo, are widely spread everywhere and available in any country in the world. I decided to choose the soft drinks industry, because it illustrates the great production and distribution; and important business innovations, such as product development, franchising, and mass marketing, as well as the evolution of consumer tastes and cultural trends. History of the soft drinks industry. The soft drink industry began in the mid-1880s with the creation of syrup that was mixed with carbonated water and served at drug store lunch counters. During the early years, soft drinks were sold only in stores that could provide fountain service. Increasing distribution was tied to building additional syrup manufacturing plants. With the advent of bottling machinery, soft drinks began to be distributed beyond the town drug store. The first bottled soda water or soft drink in the United States was produced in 1835. These drinks were called soft drinks, only to separate them from hard alcoholic drinks. This drinks do not contain alcohol and broadly specifying this beverages, includes a variety of regular carbonated soft drinks, diet and caffeine free drinks, bottled water juices, juice drinks, sport drink and even ready to drink tea or coffee packs. So we can say that soft drinks mean carbonated drinks. Charles Aderton invented â€Å"Dr Pepper† in Waco, Taxes in 1885. Dr. John S. Pemberton invented â€Å"Coca – Cola† in Atlanta, Georgia in 1886. Caleb Bradham invented â€Å"Pepsi – Cola† in 1892, and so on. Bigger and smaller companies appear on a soft drink market since the greatest profitability (advantage) and cheap manufacturing of this industry was discovered. Today, soft drink is more favorite refreshment drink in the United States then tea, coffee, juice and etc. Soft drinks industry overview in the United States and World Wide. The soft drinks industry is very big, very visible, highly concentrated, and appears to have been very profitable. The leaders of the Soft Drink Industry are the Coca-Cola Company, PepsiCo, Cadbury Schweppes/Dr. Pepper Snapple, Cott Corp. , and National Beverage Corp. There is also noticeable Asian and European influence on a world market of the soft drinks. Leading companies have prominent presence in the soft drink industry. This industry is well established already, and it would be difficult for any company to enter or exit successfully. According to the Coca- Cola annual report (2009), it has the most soft drink sales with 24. 4 billion dollars. The Coca-Cola product line has several popular soft drinks including Coca-Cola, Diet Coke, Fanta, Barq’s, and Sprite, selling over 400 drink brands in about 200 countries. PepsiCo is the next top competitor with soft drink sales grossing 21 billion dollars for the two beverage subsidiaries, PepsiCo Beverages North America and PepsiCo International (annual report PepsiCo Inc. , 2009). PepsiCo’s soft drink product line includes Pepsi, Mountain Dew, and Slice which make up more than one quarter of its sales. Cadbury Schweppes/Dr. Pepper Snapple had soft drink sales of 6 billion dollars with a product line consisting of soft drinks such as A&W Root Beer, Canada Dry, and Dr. Pepper (annual report Cadbury Schweppes/Dr. Pepper Snapple, 2009). Cott Corporation is one of the world’s biggest soft drinks manufacturers, but has a low profile among consumers because it specializes in producing private label products for retailers. In fact the company is largely credited with revitalizing the supermarket own-label beverage market during the early 1990s, scoring a number of important goals including the introduction of Sam’s American Choice cola by Wal-Mart and Sainsbury’s Classic Cola in the UK. Currently, its small portfolio of consumer brands includes RC Cola, Stars & Stripes and Red Rain. National Beverage Corp. (National Beverage) develops, manufactures, markets and distributes a portfolio of beverage products throughout the United States. The Company develops and sells flavored beverage products, including a selection of flavored soft drinks, juices, waters and energy drinks. Its brands include Shasta and Faygo, each of which has over 50 flavor varieties. The Company also maintains a line of flavored beverage products for the health-conscious consumer, including Everfresh, Home Juice and Mr. Pure 100% juice and juice-based products The Coca-Cola Company accounted for 26. 5% of the world’s soft drinks sales and 43 % of the US market, almost double the amount of rival PepsiCo, which holds a 13. 4 % share of the world market and 32 % of the US market. Both companies appear to be keen to extend their focus by expanding into growing segments for soft drink production. In the last month Coca-Cola has revealed it is extending began researching benefits of Chinese herbal remedies to target growing demand for nutritional benefits and functionality in their products. PepsiCo at the same time has increased its focus in production of non-carbonated beverages with juice in particular becoming important to its operations. Both companies remain significantly ahead of their rivals, reflecting the increasingly competitive nature of the soft drinks market. Cadbury Schweppes/Dr. Pepper Snapple takes 15 % of the US market and 3 % of the world market. Cott Corp takes 5 % of the US market. National Beverage Corp. takes 2% of the US market. (Table 1. â€Å"The top 10 Soft Drinks Companies in 2008 by global market share†, Page 21 and Table 1. a. â€Å"The Top 10 Soft Drinks Manufacturers in the US in 2008 by volume†, Page 21 ). At the core of the beverage industry is the carbonated soft-drink category. The dominant players in this area (Coca Cola, Pepsi, and Cadbury Schweppes/Dr. Pepper Snapple) own virtually all of the North American market’s most widely distributed and best-known brands. (Table 4 â€Å"Top Ten Soft Drinks in the US, 2009. † Page 24) They are dominant in world markets as well. These companies’ products occupy large portions of any supermarket’s shelf space, often covering more territory than real food categories like dairy products, meat, or produce. Coca-Cola and PepsiCo continued to dominate the soft drinks market in 2010 accounting for more than a third of global sales in the sector, according to market analytic. Soft drinks industry description. The market size of this industry has been changing. Soft drink consumption has a market share of 46. 8% within the non-alcoholic drink industry. (Table 2, 2. a. â€Å"Global Soft Drinks Market Segmentation: % Share, by Value, 2008†, Page 21). Total market value of soft drinks reached $367. 2 billion in 2008 with a market value forecast of $377. 1 billion by the end of 2010. In 2013, the global soft drink market is forecast to have a value of $456. 3 billion. The 2008 soft drink volume was 325,367. 2 million liters (Table 3 â€Å"Global Soft Drinks Market Volume: liters million†, Page 22). In 2013, the global soft drink market is forecast to have a volume of 474 million liters, an increase of 22. 3% since 2008. Soft drink industry is lucrative with a potential for high profits, but there are several obstacles to overcome in order to capture the market share. Carbonates sales proved the most lucrative for the global soft drink market, generating 46. 8% of the total value. However, the volume of the U. S. carbonated soft drinks declined -3% in 2009. That compares to – 2. 3% decline in 2008; a – 0. 6 % decline in 2007; and a -0. 2% decline in 2006. Top companies, Coke and Pepsi, generated similar results last year. Coke carbonated soft drinks volume was down -3. 1% and PepsiCo’s was down -4%. Both lost share. Dr. Pepper Snapple’s carbonated soft drink volume was down -1. 3%. (See below, Table 5 â€Å"Carbonated soft drink Companies in the U. S. for 2009†). In the U. S. , with the carbonated soft drinks decline accelerating, other categories are slowly growing. (For example, bottled water and energy drinks market. ) The Coca-Cola Company accounts for 22. 6% of the global soft drink market’s volume. Supermarkets and hypermarkets distribute 48. 4% of the global soft drink market’s volume. Table 5. â€Å"Carbonated soft drink Companies for 2009†. Top -10 CSD Companies in the US for 2009| 2009| 2009| 2008| | 2009| 2008| | Rank Companies| Market Share| Market Share| Share Change| Cases (millions)| Cases (millions)| Volume% Change| 1| Coca-Cola Co| 42. 7| 42. 8| -0. 1| 4107. 6| 4241. 1| -3. 10%| 2| Pepsi Co| 30. 8| 31. 1| -0. 3| 2960. 4| 3082. 8| -4. 00%| 3| Dr Pepper Snapple| 15. 3| 15| 0. 3| 1471. 2| 1491. 3| -1. 30%| 4| Cott Corp| 4. 7| 4. 8| -0. 1| 448| 476. 6| -6. 00%| 5| National Beverage| 2. 6| 2. 5| 0. 1| 247. 5| 243. 9| 1. 50%| 6| Hansen Natural| 0. 8| 0. 8| flat| 79| 76. 5| 3. 30%| 7| Red Bull| 0. 7| 0. 6| 0. 1| 67. 2| 63. 9| 5. 20%|. 8| Big Red| 0. 4| 0. 4| flat| 43. 6| 42. 4| 2. 70%| 9| Rockstar| 0. 4| 0. 4| flat| 40. 2| 41| -2. 00%| 10| Other| 1. 6| 1. 6| flat| 156. 3| 160. 3| -2. 50%| | Total Industry| 100| 100| | 9621| 9919. 8| -3. 00%| Statements of leading companies within soft drink industry of the US| | Coca – Cola Company | PepsiCo| Dr Pepper Snapple Group, Inc. | National Beverage Corp| Cott Corp (2008) | Net operating revenue| millions $ 30. 990| 43. 232| 5. 531| thousands $ 575. 177| millions $ 1. 648| Cost of goods sold| 11. 088| 20. 099| 2. 234| 405. 322| 1. 467| GROSS PROFIT | 19. 902| 23. 133| 3. 297| 169. 855| 181|. Selling Expenses| 11. 358| 15. 026| 2. 135| 131. 918| 179. 8| OPERATING INCOME| 8. 231| 8. 044| 1. 085| 24. 742| loss 113. 0| TOTAL ASSETS| 48. 671| 39. 848| 8. 776| 265. 682| 873. 1| LIABILITIES AND EQUITY| 48. 671| 39. 848| 8. 776| 265. 682| 873. 1| OPERATING ACTIVITIES| 8. 186| 6. 796| 865| 35. 829| 66. 9| INVESTING ACTIVITIES| used in 4. 149| used in 2. 401| used in 251| used in 3. 491 | used in 54. 8| FINANSIAL ACTIVITIES| used in 2. 293| used in 2. 497| used in 554| 305| used in 19. 4 | Five Forces of the Soft Drinks Industry. ( Figure 3. â€Å"Five Forces of the Soft Drinks Industry†. Page 24). Threat of New Entrants. Significant barriers exist to entering the soft drink industry. Bottling operations have a fairly high minimum efficient scale and require fixed assets which are specific not only to the process of bottling but also to a specific type of packaging. Entering bottling, meanwhile, would require substantial capital investment, which would deter entry. Exit costs are thus also high. Bottling operations do exist which in theory could be contracted out, but they are tied up in long-term contracts with the major players and thus can only contract with other producers in a limited way. Perhaps the most significant barrier to entry, however, is the strong brand identity associated with the best-selling soft drinks. Placing another cola on the market is not an attractive value proposition. Bargaining Power of Suppliers. Suppliers to the soft drink industry are, for the most part, providing commodity products and thus have little power over the industry. Sugar, bottles and cans are homogeneous goods which can be obtained from many sources, and the aluminum can industry has been plagued by excess supply. The one necessary ingredient which is unique is the artificial sweetener; aspartame is clearly preferred by consumers of diet beverages and for a time was under patent protection and therefore only available from one supplier. However, the patent expired and another producer entered, reducing the market power of NutraSweet. For example, the inputs for Coke and Pepsi’s products were primarily sugar and packaging. Sugar could be purchased from many sources on the open market, and if sugar became too expensive, the firms could easily switch to corn syrup, as they did in the early 1980s. Bargaining Power of Customers. Buyers can be considered at the consumer or the retail level. The soft drink industry sold to consumers through five principal channels: food stores, convenience and gas, fountain, vending, and mass merchandisers, fast food restaurants. For consumers, taste will be an important part of the preference for a particular soft drink; thus although there is no monetary switching cost, there may be a loss of enjoyment associated with a less-preferred brand. Because of this, consumers have historically been brand-loyal and not based purchase decisions on price. Retail outlets have not been able to exhibit much buyer power over the industry, although they can do so more easily than consumers. Traditionally these outlets have been fragmented and have been reliant on the major soft drink brands to increase store traffic. However, at the time of the case there has already been evidence of some buyer power on the part of grocery stores, as they successfully resisted an attempt to price the varieties with more costly inputs higher. As grocery chains increasingly consolidate and as discount outlets continue to grow, buyer power on the part of retailers is likely to increase. Threat of Substitute Products. While the U. S. soft drink market was growing, substitutes did little to interfere. Soft drinks are sufficiently unique that when a consumer wants a soft drink another product is not likely to satisfy. Other cold drinks such as water, juices and iced tea offer similar refreshing qualities, yet they do not have the same taste or properties. Hot beverages and alcoholic beverages are not desirable or appropriate for many of the occasions when one would want a soft drink. The one category which threatens soft drink producers is the â€Å"new age† product which offers (or implies) more natural ingredients and/or health benefits. The soft drink industry’s initial answers to these beverages, in the form of Tab Clear and Crystal Pepsi, are not going to compete effectively with the new age products. Competitive Rivalry within an Industry. The concentration in the industry (mainly between its leaders: Coke, Pepsi and Cadbury/Schweppes) would suggest that internal rivalry is somewhat less than if there were many players of equal size. Although the competition between Coke and Pepsi has become fiercer over time, they traditionally competed primarily on advertising, promotion and new products rather than price (although the explosion of new brands did eventually lead to some price competition). The products are similar but not homogeneous and buyers are fairly brand loyal. Retail buyers have significant costs for switching from the major brands since those are responsible for bringing people into the store. Flattening and potentially declining U. S.demand may be a factor which increases internal rivalry and encourages more price competition and thus erosion of profits. Revenues are extremely concentrated in this industry, with Coke and Pepsi, together with their associated bottlers, commanding 73% of the case market. In fact, the soft drink market can be characterized as an oligopoly, or even a duopoly between Coke and Pepsi, resulting in positive economic profits. As analysis using Porter’s five forces shows that the soft drink industry is very profitable. Suppliers and buyers have not had more power over the industry than it has had over them. Internal rivalry, while seeming intense, has not eroded the profitability of the industry because of its concentration and the fact that the two major players have primarily competed on the basis of advertising and promotion and not price. Entry is difficult both for reasons of scale and the strong brand identity of the current major players. Substitutes have not been close enough to take away significant market share, although the emergence of new substitutes may pose the largest threat to the industry’s profitability. Soft drink industry has an oligopolistic character. SWOT analysis of the main producers in the soft drink industry. Coca – Cola Company. The Coca-Cola Company is the world’s leading manufacturer, distributor and marketer of Non- alcoholic beverage concentrates and syrups, in the world. Coca – Cola has a strong brand name and brand portfolio. Business – Week and Interbred, branding consultancy, recognize Coca – cola as one of the leading brands in their top 100 global brands ranking in 2009. The Business Week – Interbred valued Cocoa – Cola at 67,000 million dollars in 2008. Coca – Cola ranks well ahead of its close competitor PepsiCo which has a ranking of 22 having a brand value of 12,690 million dollars. The Company’s strong brand value facilitates customer recall and allows Coca – Cola to penetrate market. However, the company is threatened by intense competition which could have an adverse impact on the company’s market share. Strengths| Weaknesses| World’s leading brand| Negative publicity| large scale of operations| Sluggish performance in North America| Robust revenue growth in three segment| Decline in cash from operating activities| Opportunities| Threats| Acquisitions Intense competition| Intense competition| Growing bottles water market| Dependence on bottling partners| Growing Hispanic population in US| Sluggish growth of carbonated beverages| Strengths. World’s leading brand: The Company owns four of the top five soft drink in the world: Coca – Cola, Diet Coke, Sprite and Fanta. Strong brands allow the company to introduce brand extensions such as Vanilla Coke, Cherry Coke and Coke with Lemon. Over the years, the company has made large investments in brands promotions. Consequently, Coca – Cola is one of the best recognized global brands. The company’s strong brand value facilitates customer recall and allows Coca – Cola to penetrate new markets and consolidate existing ones. Large scale of operations: With revenues is excess of 24 billion dollars Coca – Cola has a large scale of operation. Of the approximately 52 billon beverage servings of all types consumed worldwide every day, beverages bearing trademarks owned by or licensed to Coca – Cola account for more than 1. 4 billion. The company’s operations are supported by a strong infrastructure across the world. Coca – Cola owns and operates 32 principal beverage concentrates and/or syrups manufacturing plants located throughout the world. In addition, it owns or has interest in 37 operations with 95 principal beverage bottling and canning plants in the US. The company also owns bottled water production and still beverage facilities as well as a facility that manufactures juice concentrates. The company’s large scale of operation allows it to feed upcoming markets with relative ease and enhances its revenue generation capacity. Robust revenue growth in three segments: Coca – Cola revenues recorded a double digit growth, in tree operating segments. These tree segments are Latin America, East/South Asia, and Pacific Rim and Bottling investments. Revenues from Latin America grew by 20,4% during 2007, over 2006. During the same period, revenues from East/South Asia and Pacific Rim grew by 10. 6 % while revenues from the bottling investments segment by 19. 9%. Together, the three segments of Latin America, East/South Asia and Pacific Rim and Bottling investments, accounted for 34. 8% of total revenues during 2007. Robust revenues growth rates in these segments contributed to top-line growth for Coca – Cola during 2007. Weaknesses. Negative publicity: The company received negative publicity in India during September 2006. The company was accused by the Center of Science and Environment (CSE) of selling products containing pesticide residue. These pesticides included chemicals witch could cause cancer, damage to the nervous and reproductive systems and reduce bone menial density. Such negative publicity could adversely impact the company’s brand image and the demand for Coca- Cola products. Sluggish performance in North America: Coca – Cola’s performance in North America was far from robust. North America is Coca – Cola’s core market generating about 30 % of total revenues during 2007. Therefore, a strong performance in North America is important for the company. Sluggish performance in North America could impact the company’s future growth prospects and prevent Coca – Cola from recording a more robust top-line growth. Decline in cash from operating activities: Cash flows from operating activities decreased 7% in 2008 compared to 2007. Decline in cash from operating activities reduces availability of funds for the company’s investing and financing activities, which, in turn, increases the company’s exposure to debt markets and fluctuating interest rates. Opportunities. Acquisitions: Strong international operations increase the company’s capacity to penetrate international markets and also gives it an opportunity to diversity its revenue stream. Coca – Cola made acquisitions in Australia, New Zealand, Germany, and China for the last 3 years. These acquisitions strengthened Coca – Cola international operations. It gives Coca – Cola an opportunity for growth, through new product launch or greater penetration of existing markets. Growing bottled water market: Bottled water is one of the fastest – growing segments in the world’s food and beverage market owing to increasing health concerns. The market for bottled water in the US is forecast to reach revenues of about 19. 3 billion dollars by the end of 2010. The company’s Dasani brand water is the 3rd best-selling bottled water in US. Coca – Cola could leverage its strong position in the bottled water segment to take advantage of growing demand for flavored water. Growing Hispanic population in US: Hispanics are growing rapidly in number and economic power. As a result, they have become more important to markets than ever before. The company can benefit from an expanding Hispanic population in the US, which would translate into higher consumption of Coca – Cola products and higher revenues for the company. Threats. Intense competition: Intense competition Coca – Cola competes in the nonalcoholic beverages of the commercial industry. The company faces intense competition in various markets from regional as well as global players. Also, the company faces competition from various juice drinks and nectars. In many of the countries in which Coca – Cola operates, including the US, PepsiCo in one of the company’s primary competitor. (Other significant competitors include Nestle, Cadbury/Schweppes, Group DANONE and Kraft Foods. ) Competitive factors impacting the company’s business include pricing, advertising, sales promotion programs, product innovation. And brand and trademark development and protection. Intense competition could impact Coca – Cola market share and revenue growth rates. Dependence on bottling partners: Coca – Cola generates most of its revenues by selling concentrates and syrups to bottlers in whom it doesn’t have any ownership interest or in which it has no controlling ownership. Loss one or more of customers by any one of its major bottling partners could indirectly affect Coca – Cola business results. Such dependence on third parties is a weak link in Coca – Cola’s operations and increases the company’s business risks. Sluggish growth of carbonated beverages: US consumers have started to look for greater variety in their drinks and are becoming increasingly health conscious. This led to a decrease in the consumption of carbonated and other sweetened beverages in the US. The performance of the market is forecast to decelerate, with an anticipation compound annual rate of change of -0. 3% for the five-year period 2005-2010 expected to drive the market to a value of 62. 9 billion dollars by the end of 2010. Coca – Colas revenue could be adversely affected by a slowdown in the US carbonated beverage market. PepsiCo. In 2009 PepsiCo estimated that its annual retail sales had reached $92 billion, offering over 100 brands around the globe. The main cash cow of PepsiCo of course being the Pepsi carbonated drink that owned 10% of the US beverage market in 2008. PepsiCo offers the world’s largest portfolio of billion-dollar food and beverage brands, including 19 different product lines that each generates more than $1 billion in annual retail sales. PepsiCo mains businesses – Frito-Lay, Quaker, Pepsi-Cola, Tropicana and Gatorade – also make hundreds of other nourishing, foods and drinks. Strengths| Weaknesses| Strong core brand | Concentrated in North America . Strong market position | Health Craze will hurt soft drink | Solid brand portfolio | Negative publicity| | Strong revenue growth | | Economies of scale | | Opportunities| Threats| Food division expansion| Sluggish growth of carbonated drinks | Hispanic growth in the US | Competition with Coca-Cola & others| Bottled water growth | Declining economy/recession | Growing consumer health consciousness | | Cadbury Schweppes/Dr. Pepper Snapple. Dr Pepper Snapple Group Inc. (formerly Cadbury Schweppes Americas Beverages) is an American soft beverages drink company, which was spun off from Britain’s Cadbury Schweppes. Company manufactures, markets and distributes more than 50 brands of carbonated soft drinks, juices, ready-to-drink teas, mixers and other premium beverages across the United States, Canada, Mexico and the Caribbean. Our diverse portfolio includes Dr Pepper, Snapple, 7UP, Mott’s, A&W, Sunkist Soda, Canada Dry, Hawaiian Punch, Schweppes, Penafiel, Squirt, Clamato, Mr & Mrs T Mixers, Rose’s, Yoo-hoo and other consumer favorites. Most of the brands in this segment are CSD brands. In 2009, our Beverage Concentrates segment had net sales of approximately $1. 1 billion. Strengths| Weaknesses| Strong portfolio, consumer-preferred brands| Weak performance in Asian Market| Integrated business model| A substantial amount of outstanding debt| Strong customer relationships| | Strong operating margins and stable cash flows| | Opportunities| Threats| New distribution channels in a market| Changing consumer tastes| Growing consumer health consciousness | Operating in highly competitive markets| Focus on opportunities in high growth and high margin categories| Depend on the 3rd party bottling and distribution companies | Cott Corporation. Cott Corp is one of the leading non-alcoholic beverage companies and retailer brand soft drink providers. The company primarily operates in the US, Canada, the UK and Mexico. It is headquartered in Toronto, Canada and employs 2,803 people. The company recorded revenues of $1,648. 1 million during the financial year ended December 2009, a decrease of 7. 2% compared to 2008. The operating loss of the company was $113 million during 2009, compared to the operating loss of $54. 5 million in 2008. The net loss was $122. 8 million in 2009, compared to the net loss of $71. 4 million in 2008. Strengths| Weaknesses| Leading Producer of Retailer Brand Beverages with Diverse Product Portfolio | Unable to compete successfully in the highly competitive beverage category. | Extensive, Flexible Manufacturing Capabilities | May not be able to respond successfully to consumer trends | | significant amount of outstanding debt| Opportunities| Threats| New distribution channels in a market| Changing consumer tastes| Growing consumer health consciousness | Intense competition| Focus on opportunities in high growth and high margin categories| | National Beverage Corp. National Beverage develops, manufactures, markets and distributes a portfolio of beverage products throughout the US. The company develops and sells a selection of flavored soft drinks, juices, sparkling waters and energy drinks. It is headquartered in Fort Lauderdale, Florida and employed about 1,300 people. The company recorded revenues of $566 million during fiscal year ending April 2008, an increase of 5% over 2007. The increase in revenue was due to 9% growth in case volume of energy drinks, juices, and waters. The operating profit of the company was $172. 6 million during 2008, a decrease of 0. 4% compared with 2007. The net profit was $22. 5 million in 2008, decrease of 8. 9% compared with 2007. Strengths| Weaknesses| Extensive Brand Portfolio| Geographic concentration| | Declining Profits| Opportunities| Threats| Focus on Asia Pacific Market| Limitations on Commercialization of Alcoholic Products| Rise in Demand for bottled Water in the US| Riding Input Costs| Change in Consumer Preferences| Intense Competitive Pressures| Company’s key success factors within the soft drink industry. Key factors for competitive success within the soft drink industry branch from the trends of the microenvironment. Primarily, constant product innovation is imperative. A company must be able to recognize consumer wants and needs, while maintaining the ability to adjust with the changing market. They must keep up with the changing trends. Another key factor is the size of the organization, especially in terms of market share. Large distributors have the ability to negotiate with stadiums, universities and school systems, making them the exclusive supplier for a specified period of time. Additionally, they have the ability to commit to mass purchases that significantly lower their costs. They must implement effective distribution channels to remain competitive. Taste of the product is also a key factor for success. Moreover, established brand loyalty is a large aspect of the soft drink industry. Many consumers of carbonated beverages are extremely dedicated to a particular product, and rarely purchase other varieties. This stresses the importance of developing and maintaining a superior brand image. Price, however, is also a key factor because consumers without a strong brand preference will select the product with the most competitive price. Finally, global expansion is a vital factor in the success of a company within the soft drink industry. The United States has reached relative market saturation, requiring movement into the global industry to maintain growth. Soft drink industry main characteristics, trends and changes. Soft drinks are an integral part of American life and culture and soft drinks have been produced or consumed in nearly every corner of the world. The industry is lucrative with a potential for high profits, but there are several obstacles to overcome in order to capture the market share. Growing consumption trends can be attributed to rising disposable incomes, falling trade barriers, universal product acceptance, and a rising demand for American consumer goods. It would be very difficult for a new company to enter this industry because they would not be able to compete with the established brand names, distribution channels, and high capital investment. Likewise, leaving this industry would be difficult with the significant loss of money from the fixed costs, binding contracts with distribution channels, and advertisements used to create the strong brand images. This industry is well established already, and it would be difficult for any company to enter or exit successfully. The carbonated beverage industry is a highly competitive global industry, and has some characteristics of an oligopoly in the US. Three leading companies have prominent presence in the soft drink industry. The leaders include the Coca-Cola Company, PepsiCo, and Cadbury Schweppes. Leader companies have to hold the highest percentage of the global market share; therefore, companies need to be able to compete globally in order to be successful. Profitability in the soft drink industry will remain rather solid, but market saturation especially.