For analyzing its profitability, Michael E. Porter's five competitive forces could be utilzed.

[Threat of new entrants] Barriers to entry into the CSD industry are very high. Coca-Cola and Pepsi spent $234 million and $145 million for advertisement according to Exhibit 8. Therefore, large amount of initial investiment needed for new companey to expose their brand continuously. Even if new companey can rase the sufficient capital for start-up, it is unlikely to find bottlers. They are limitted to carry competing brands by franchise agreements with boths Coke and Pepsi. Thus, barries to entry is extremly high and the threat of new entrants affecting to profit of Coke and Pepsi have been minimized. [Threat of substitutes] According to Exhibit 1, there are a number of alternative substitues such as Beer, Milk, Bottled water,Coffee, Juices, Tea, Sports drinks and etc. But none of them had been drunk more than CSD for more than 30 years. Thus,the threat of substitutes affecting C&P fs profitability was limited. [Bargaining power of suppliers] Most components for Coca-cola and pepsi are syrup, sugar, bottles and cans. These products are relatively easy to obtain and there are many choices of suppliers. Thus, the bargaining power of suppliers affecting to profit are minimized. [Bargaining power of customers] In this case, the major customers are supermarkets(29.1%) and fountain outlets(23.1%). Long standing contracts and aquistion of fountain outlets serve to weaken coustomer's bargaining power. [Rivalry among existing competitors] Coca-cola and pepsi are majior competitors stayed in center of this industory for many of these years. Their efforts for advertising, creating new producting and promoting are also grow its market consistently. Thus, their proficts were not affected even though their rivalry was high. There were a number of factors that Coca-Cola could dominate the U.S. industory through the 1950s. First, Coca-Cola had been fighting with imitation products to protect its brand and there were no strong competitors at that time. Pepsi was invented in 1893, h owever they struggled and declared bankruptcy in 1923. Second, there were big movement of American troops during world war II. They promised to sell Coca-cola for 5 cents to every man in uniform. Eventually, this had to be an effective advertisement and building its strong br and. Pepsi pushed advertising and promotion through several campaing. In 1950 Pepsi encouraged bottlers to foucs on take-home sales targeted family co nsumption. In 1963 Pepsi launched its "Pepsi Generation" marketing campaing targeted the yo ung and "young at heart". In 1974 Pepsi launched the "Pepsi Challenge" to demonstrate consumers actually p referred Pepsi to Coke by using blind taste tests.