Carbonated Drinks Industry Case Study Example | Topics and Well Written Essays - 2000 words

Carbonated Drinks Industry - Case Study Example It is in this aspect that Coke is differentiated. Unlike other products intended for a specific market niche, Coke targets a wide market range - from the mass market to the high end segment. This is in line with the vision of former company president Robert W. Woodruff, that everyone on Earth consumed Coke. To limit the scope, this paper assesses Coke in the context of the carbonated drinks segment in the UK. It evaluates the supply conditions given the prevailing market structure and competition among softdrink suppliers. Furthermore, this paper discusses the barriers to entry and political or social factors impacting the industry. It also considers the factors that drive demand, prospects in the carbonated drinks segment given changing demand trends and potential entry of new players. The 5-billion UK carbonated drinks market has more than adequate supply of carbonated drinks (The UK Softdrinks Market 2004). Notable colas include Coke; Pepsi Cola, Coke's major rival; Zamzam Cola, which is named after Mecca's holy spring; Virgin Cola, which is marketed under Sir Richard Branson's company; and Mecca Cola, which is promoted as Muslim people's alternative to US-made softdrinks. (McCaffrey 2005) In terms of market structure, the UK carbonated drinks sector may be character... Although there are numerous players in the industry, the cola drinks offered are differentiated depending on the preference of the market niche targeted (Gans, King, Stonecash & Mankiw pp.76-8). For instance, Mecca Cola is differentiated as it is advertised as the cola for Muslims. Bearing the catchphrase "No more drinking stupid, drink with commitment," (McCaffrey 2005) supplier creates a different brand that appeals to Muslim communities and their sentiments on Western culture. On the contrary, the UK carbonated drinks market may be classified as oligopolistic since it is dominated by few major suppliers. Quantitatively, oligopoly is derived by using the four-firm concentration ratio, measuring the percentage market share of the four largest firms in an industry (Samuelson & Nordhaus 2001 pp. 89-93). A ratio of beyond 40% generally renders the market as oligopolistic (Tirole 1988). According to Canadean, Coca-Cola Company alone has captured 45.3% of the market share of the UK carbonated softdrinks category in 2004. This indicates that the total market share of the two giant suppliers have gone above the threshold, thus, the industry may be deemed oligopolistic. Competition Unlike other oligopolistic industries wherein collusion of firms to raise prices is observed (Samuelson & Nordhaus 2001 pp. 89-93), Coca-Cola and Pepsi continue to battle each other in the marketing arena. Albeit their rivalry has spanned for almost a century, non-price competition has prevailed. These firms utilise extensive media mileage to compete with each other and foster brand loyalty. This is evidenced by the substantial allocation of firms for advertising cost. Instead of pricing, though the retail prices of Coke and Pepsi Cola do not substantially vary, they are observed to