Academic journal article The Journal of Consumer Affairs

Double-Cola and Antitrust Issues: Staying Alive in the Soft Drink Wars

Academic journal article The Journal of Consumer Affairs

Double-Cola and Antitrust Issues: Staying Alive in the Soft Drink Wars

Article excerpt

This case study is the story of the underdog in the soft drink wars. It is a testament to the meaning of brands and the lengths that loyal consumers go to for Double-Cola, one of many small regional brands that struggle to compete againts industry giants. It also offers insights into current antitrust issues within the regulatory environment and the lack of protection given to small brands in their fight to stay alive. Consequences for consumers, bottlers, and small manufacturers are explored.

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The Double-Cola Company is one of several small soft drink companies that compete fiercely for market share in the beverage industry. Headquartered in Chattanooga, Tennessee, it produces Double-Cola, its flagship brand; Ski, an orange-lemon drink; Cherry Ski; the Jumbo line of eight fruit flavors; Double-Dry Ginger Ale; and a variety of diet and caffeine-free versions of the original brands. Although Double-Cola Co. products were once distributed nationally, they currently have regional distribution primarily in the Southeast and Midwest with a strong following in rural areas. Unfortunately for small soft drink companies such as the Double-Cola Co., the prize of less than one percent market share is won only by fighting a daily battle for survival, especially against industry giants Coca-Cola and Pepsi-Cola.

The following investigation is a case study of the successes and failures of one small company in the soft drink wars. It is a testament to the meaning of brands and the lengths that loyal consumers go to keep Double-Cola as their favorite beverage. And it is an evaluation of how adequately the current regulatory environment serves the needs of these consumers as well as Double-Cola's owners and bottlers. It addresses criticisms that the regulatory environment permits an uneven playing field that is perceived as anti-competitive at best and illegal at worst. This is the story of the underdog in the soft drink industry.

To gain these insights we look at the competitors, the historical factors that have led to the growth of some--but not all--brands, the narratives that consumers provide, and the impact of potentially predatory business practices within the retail environment, such as shelf access lees and cooperative merchandising agreements.

COMPETITORS WITHIN THE CURRENT MARKET ENVIRONMENT

The total U.S. beverage market is both large and competitive. Brands of soft drinks compete not only against each other but also against other types of beverages including coffee, milk, alcoholic beverages, sports drinks, bottled water, and vegetable juices. The beverage industry produces annually close to 53 billion gallons, with soft drinks taking up the largest category at 15.3 billion gallons for a 29% share (Prince 2001). The typical American consumes about 55 gallons of soft drinks annually (about 19 ounces per day), in comparison to 22 gallons of beer, 22 gallons of milk, and 17 gallons of coffee (Bentley 2002).

According to Beverage Digest (2002) data, Americans spend about $62 billion on soft drinks each year. Consumption is fairly stable, with the same companies and brands holding their rankings fairly consistently from year to year. Top-10 Beverage Digest figures for 2001 show that Coca-Cola brands dominate the soft drink market with 43.7% share and Pepsi brands follow with 31.6% share. The two companies thus create a duopoly, controlling a vast 75.3% of the soft drink market. The third ranked company, Cadbury Schweppes PLC, which owns 7-Up, Dr Pepper, and U.S. interests for Royal Crown Cola, has a market share of 15.6%, less than half that of Pepsi. The fourth-ranked, Toronto-based Cott Corporation, which produces a number of private label drinks including Wal-Mart's Sam's Choice, is even farther in the distance with a 3.8% share. All other companies and private labels, including the Double-Cola Co., are left to fight over the remaining 5.3% of the total market (see Table 1). …

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