A

The high profitability of the soft drink industry is as a result of combined factors of top products’ demand and regional market monopolies. There are limited soft drink operators in the market, while the products themselves are complements of other foods and beverages. Low competitions and high market demands lead to the making of large sales volumes, which in turn makes the companies in the industry make high profits.

The soft drink industry has been dominated by Coke and PepsiCo, which are regionalized, hence, minimizing competition/ increasing monopoly. This duopoly of companies has been created by the franchise agreement signed by two companies with the existing bottlers to limit the quantity of product supply. Through this practice, Coke and PepsiCo being the core shareholders of bottling companies, create entry barriers to any potential new competitor by increasing the entry expenses. At the same time, they enjoy the benefits of early market entry with low costs.