Cola WarsTo begin with, the soft drinks industry is a profitable industry because its products such as Pepsi or Cola are widely sold across the world. The industry relies heavily on its concentrate producers and bottlers to reach its market. This is further analyzed through Porter’s five competitive forces; - Threat to new entrants: When an entrant wants to enter this industry, he will need a distribution channel. However, most bottlers in the industry are bound by a contract or agreement with dominant companies such as Pepsi or Coke, which do not allow them to “offer other competing brands” (p. 3). So it would be difficult for new businesses to get a distribution channel. Additionally, competing companies must face the barriers of mergers and acquisitions. As with Pepsi's purchase of "PBG and Pepsi America", newcomers from an independent bottling company will have difficulty finding other distribution channels (p. 12). Additionally, dominant companies like Coca-Cola spend “$2.34 million” on advertising costs, which helps the company achieve brand equity and build loyalty (p. 19). And brand loyal customers are not interested in trying competing products. Therefore, the new entrant would have to invest in marketing to promote its brand, which would prove costly for CSD companies which alone invest around $100 million just in automated warehousing plants (e.g. 3). Additionally, when the cost of inventory, employee payroll, and management tasks are added to the list, the cost of expenses and investments increases. For example, Coca-Cola's long-term assets in 2009 totaled approximately $10.4 million (p. 15, Exhibit 3a). Thus, the cost of starting a business would require the business to financially invest considerable amounts during the initial start-up.