3) New Entrants or Threat of New Entrants:
The threats of new entrants competing with CSD producer (Coke, Pepsi) and Bottler are very low. Coke and Pepsi have acquired very high brand quality and high level of customer around the world by spending large amount of investment on their marketing and advertisement. This brand loyalty and loyal customer gives Coke, Pepsi and their bottler advantage in the market from economies of scales, access to distribution channels and favorable government policy.
Carbonate Soft drink industry (producer and bottler) requires very large investment for infrastructure, marketing, advertisement and promotion. There is very high level of capital requirement for plant, equipment, patent, research, marketing and advertising. Coke and Pepsi tend to offset some of this cost from their bottler to increase bottler profit margin. Coke and Pepsi offset some of this cost to bottler by licensing their exclusively patent to bottler. Bottler who has exclusive right to sell their product in assign territory has very high initial cost and therefore has very low threats of new entrants. The bottler operation is partially licensed and controlled by their respective soft drink corporation which gives them advantage in their region compare to new competition. Soft drink bottler also requires very large investment for infrastructure, labor, materials and distribution channel. The initial investment requirement is quite high and therefore the new entrants in