Dr Pepper Snapple Group Inc

The Coca-Cola Company (KO), founded in 1892, is the world’s largest soft drink maker. It sells more than 3,500 products worldwide.

Growing populations and better standards of living in emerging markets will drive demand for beverages. The long-term prospects for growth in emerging economies are promising.

The World Health Organization suggests that sugar should account for only 5% of total energy intake per day. A single soda can contains around 40 grams of sugar.

Coca-Cola and PepsiCo spend enormous amounts of money on innovation, advertising and marketing, and on strengthening their distribution network. It would be difficult for a new entity to make the substantial capital investments required to compete with these firms.

Soft-drink makers continually invest in branding. In 2013, Coca-Cola and PepsiCo spent $3.3 billion and $3.9 billion, respectively, on advertising and marketing activities.

Market intelligence firm Euromonitor International estimates the middle class around the world will include 1.5 billion households by 2020, a 25% rise over 2012.

US consumption spending accounts for over two-thirds of the country’s gross domestic product. A favorable trend in consumer spending on non-durable goods is a positive indicator for the non-alcoholic beverage industry.

Coca-Cola and PepsiCo’s wide distribution network gives them significant pricing power. Carbonated soft drinks have similar prices due to the intense competition in the industry.

Soft drinks contain considerable amounts of sugar, which is a form of carbohydrate. Consumption of excess sugar releases a hormone called dopamine, which induces pleasure in the brain. Caffeine, another key ingredient, stimulates the nervous system.

The non-alcoholic beverage industry broadly includes soft drinks and hot drinks. In the US, soft drinks, or liquid refreshment beverages, lead food and beverage retail sales. In this series, we’ll focus on the soft drinks market.