The document analyzes the competitive environment of the soft drink concentrate and bottling industries using Porter's Five Forces framework. It finds: 1) The threat of new entrants is high for concentrates due to low barriers but lower for bottlers due to capital requirements. 2) Rivalry is high in both industries as customers have many options. 3) Supplier power is low for concentrates but higher for bottlers who depend on concentrate producers. 4) The threat of substitutes is high given low switching costs and many alternative beverages. 5) Buyer power varies but is overall increasing with more information and retail consolidation.

1. By Tatjana Apanasevich, [email_address] Erik Bergschöld, bergsc@kth.se Jeanette Finder, 40199@student.hhs.se Caroline Perman, 40205@student.hhs.se 2304 Media Management

2. Threat of new entrants (rather high): Low switching costs Low investments Few dominating players Great recipy is needed Rivalry among concentrate producers: Very high Power of the suppliers (low) Generic products are easy to change. Big players and suppliers dependence Low switching costs Threat of substitutes (high/medium): Similar price and taste High threat (switching costs for users is low) Well known brand and status Other beverages Bargaining power of buyers (both low and high): Fountains - high since they can integrate high volume, good substitutes. Strong brand Bottlers bargaining power is low.

3. Overall the market has potential of profitability, because: barrier of entry is rather low initial investments there are many different suppliers to choose from hence low supplier power low switching costs for end consumers people’s preferences are changing together with changing trends, there are several ways to enter the market which might prove profitable for the new concentrate producer there is high rivalry which means that it might be difficult to compete

4. Threat of new entrants (low): Needs capital investments; industry (high costs of entry) Economies of scale Contract with concentrate producer crucial Rivalry among bottlers: increasing Power of the suppliers (high to low) Dependence on concentrate producers (brands, prices..) and bottle producers (generic product) Threat of substitutes (rather low) Increased interest for fountains New ways of consuming soft drinks, e.g. people can make it at home through soda stream Bargaining power of buyers Retailers: depends on what the brands, can be both high and low End consumer: low bargaining power (because of small volumes)

5. gross profit is much higher for concentrate (83% compared to 35%) (concentrate industry is a more attractive market in terms of return) the initial investment is lower concentrate market has a higher business opportunity

6. Development in society Concentrate: Health awareness increasing (1) For bottlers: environmental factors and recycling is becoming more central New distribution channels e.g. online shifting power structures - increasing power of retailers more international markets = a different way of competing Information spread, e.g. contamination of coke could have negative effects. more substitutes are entering the market - increasing competition

7. decreasing margins more marketing costs keep up the competition, costly to differentiate

8. Threat of new entrants – h igh many new substitutes to soft drinks are entering the market new ways of using soft drinks are emerging which often decrease the margins (such as soda-streamer). Rivalry: high Power of the suppliers (high to low) increasing for retailers, more choices and more info for end consumers - increasing Threat of substitutes (high) plenty in varying forms and prices Bargaining power of buyers rather low, decreasing due to globalization)

9. Porter, ME, "What is Strategy" Porter, ME, “The Five Competitive Forces that Shape Competitive Strategy” Case: Cola Wars Continue