Historical Profitability

This begs the question of why a company making a 35 percent pre tax profit would be interested in acquiring bottling companies when the bottling companies' margins are significantly lower. The answer is complex. One reason is that large multi national companies such as Coke and Pepsi often want to control all aspects of the process of delivering goods or services to customers to ensure that end users receive the kind of care and support they deserve. Another reason that concentrate manufacturers are considering acquiring bottlers is that even though bottlers recorded a pre tax profit of 'only' 9 percent in 2000, a 9 percent pre tax margin would be considered excellent in other industries. Another reason that the bottlers are attractive acquisition targets for the concentrate manufacturers involves how rapidly the sales of bottled beverages are growing. Even if there is no saving resulting from economies of scale and the pr

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ountable. Another difference is the bargaining power of buyers. A retailer can choose to carry and to feature one beverage manufacturer's products over another. While there are consumers that are loyal to one brand of soft drink, there are many others that are relatively indifferent to the type of product they drink and therefore the threat of substitutes, and in particular competitor products on sale taking market share away from one bottler in favor of another bottler supplying merchandise to the same retailer. The bargaining power of suppliers is relatively high for a bottler. The bottler is a franchisee. In exchange for the right to sell under the company's brand name, they bottler must purchase the concentrate only from the producer. This results in limited to non existent bargaining power with respect to pricing, delivery, allocation and terms imposed on the franchisee bottler by the franchisor concentrate manufacturer. Finally, there is significant competitive rivalry between and among bottlers for limited shelf space and the prime retail locations that generally produce higher sales. In addition, each company in the bottling business is part of the larger struggle to between and among soft drink brands to take market
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Approximate Word count = 1357
Approximate Pages = 5 (250 words per page)

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