Soft Drink Industry

An important factor in the sales growth of soft drinks has been innovation. The earliest successful purveyors had better ideas, better products, and better locations. To expand their businesses, they needed to develop better packaging, better production methods, and improved distribution. The important milestones on the road to success are acknowledged as (1) addition of flavors to mineral waters; (2) development of the fluted crown closure (bottle cap), capable of withstanding the pressures exerted by carbonated beverages; and (3) mass-produced glass bottles of uniform size, allowing development of faster bottling machinery. With a uniform package, the next innovation was the sale of franchise agreements, which allowed a franchisee to bottle and sell product exclusively within a prescribed geographic territory. Franchising the product quickly expanded its sales area with little capital cost to the franchisor. The Coca-Cola Company (Coke) and the Pepsi-Cola Company (Pepsi) quickly had large networks of hundreds of bottling plants each, few of which were owned by the parent company. Bottlers were independent businessmen operating within their territories as they wished with some minor constraints by the franchise contract. The most significant restriction was they must buy the flavor syrup from the parent company and follow the formula specifications.

Bottlers, being independent businessmen, became very competitive with bottlers of rival brands. Early "turf battles for space in neighborhood stores and gas stations gradually evolved into the corporate marketing competition known as the cola wars. The advertising and distribution rivalry between Coke and Pepsi is legendary for its competition for priority in shelf space, sales outlets, stadium rights, and the bragging rights of being the "Official Soft Drink" of any and every event.

Bottlers also came to recognize the value of cooperation with their rivals on certain issues that adversely affected their business. The issues that finally brought them together were taxes and bottle "misappropriation," the stealing of empty bottles by a competitor to be refilled with the rival brand. The second issue led to the development of distinctive bottle designs for each brand and the controversial imposition of bottle return deposits. Bottlers formed regional and statewide organizations to discuss and resolve common issues.

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