Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry

Business Model Trends in the Beverage Industry

In the beverage industry, there exists two basic forms of business model:

The vertically integrated business.
-Makes syrups
-Bottles beverages
-Distributes and markets all products

The fragmented company.
-Makes syrups
-Has arms-length relationships with bottling and distribution partners
-Buys brands and then markets products

Most companies utilize the latter model, but recent activities suggest a shift toward the former. In reality, today’s largest beverage companies are becoming a hybrid of both. This shift results in the model displayed in Figure 1, and denotes two clear summary trends:
Outsourcing of the first step in the model by simply buying brands that become popular on their own. Large beverage companies rarely develop their own new products these days.

Integrating down the supply chain to absorb bottling and distribution operations. This trend is aimed at cutting costs through the elimination of margin-sharing with partners. This trend demonstrates Coca-Cola’s goal in its acquisition of CCE’s North American operations, to be covered in depth later in this document.

More posts from a paper on Coca-Cola M&A Activity (including merger with CCE):

Coca-Cola M&A Activity, CCE Acquisition: Executive Summary
Coca-Cola M&A Activity: Introduction
Coca-Cola M&A Activity: Product Trends
Coca-Cola M&A Activity: Demand and Economic Trends
Coca-Cola M&A Activity: Business Model Trends in the Beverage Industry
Coca-Cola M&A Activity: Beverage Industry Business Model Trends (2)
Coca-Cola M&A Activity: Company Strategic Objectives
Coca-Cola M&A Activity: Company Strategic Objectives (2)
Coca-Cola M&A Activity: Company Portfolio Analysis
Coca-Cola M&A Activity: Company Portfolio Analysis (2)
Coca-Cola M&A Activity: Company Portfolio Analysis (3)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor)
Coca-Cola M&A Activity: PepsiCo M&A Portfolio Analysis (Largest Competitor) (2)
Coca-Cola M&A Activity: Other Beverage Industry M&A Activity
Coca-Cola Acquisition of CCE North America: Deal Structure
Coca-Cola Acquisition of CCE North America: Deal Structure (2)
Coca-Cola Acquisition of CCE North America: Major Legal and Financial Players
Coca-Cola Acquisition of CCE North America: Regulatory and Shareholder Approval of the Transaction
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success
Coca-Cola Acquisition of CCE North America: Implementation Analysis: Likelihood of Acquisition Success (2)
Coca-Cola Acquisition of CCE North America: Conclusion to M&A Deal Analysis
Coca-Cola CCE Merger: Table of Contents and Works Cited List