in this competition. Concentrate companies normally grant bottlers exclusive franchises to produce and distribute the company's products, to stores and vending accounts, within a defined territory. In return for these perpetual franchises, bottlers are obliged to use their best efforts to promote the company's product line, and are typically barred from dealing in same-flavored products of other concentrate companies. Although most bottlers are not owned by the concentrate companies, the companies provide substantial marketing assistance, research data and a variety of short- and long-term promotional benefits.
In view of the structure and operation of this industry, the relevant line of commerce in evaluating the acquisition is assuredly not what Coca-Cola Company suggests -- "all . . . beverages including tap water" -- even though it is true that other beverages quench thirst and that "the human stomach can consume only a finite amount of liquid in any given period of time."
The market or submarkets delineated need not be this broad (anything potable) nor as unduly narrow (concentrate flavoring) as lawyers or economists may choose to suggest.
Although other beverages could be viewed as within the "outer boundaries of a product market . . . determined by the reasonable interchangeability of use or the cross-elasticity of demand between [carbonated soft drinks] and substitutes" for them, carbonated soft drinks represent at minimum a well-defined and the major beverage submarket sufficient to "constitute [a] product market for antitrust purposes."
The Court is guided here by Brown Shoe Co. v. United States, from which this quotation is adopted, where the Supreme Court counsels reliance on "such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct consumers, distinct prices, sensitivity to price changes, and specialized vendors" as guides for defining the appropriate market.
Such indicia are present here. Carbonated soft drinks are the leading beverage in the United States, accounting for approximately 22.3 percent of per capita beverage consumption. They are among the most heavily promoted and widely distributed consumer products in existence, and generate significant revenues; wholesale carbonated soft drink sales totaled $ 23.5 billion in 1984. Moreover, the major participants in the market do a nationwide business and specialize mainly in carbonated soft drinks. They make pricing and marketing decisions based primarily on comparisons with rival carbonated soft drink products, with little if any concern about possible competition from other beverages such as milk, coffee, beer or fruit juice.
The national carbonated soft drink market, and segments of it, are thus the proper market within which to measure the probable effects of the acquisition at issue.
The Market Is Highly Concentrated
There is general agreement that the market for carbonated soft drinks is already highly concentrated. It consists of a few major concentrate companies and a number of minor concerns, not all of which do business nationally. The major concerns, their 1985 national market shares and their principal soft drink products are approximately as follows: n14
Company Co. / Cumulative Principal Products
1. Coca-Cola 37.4 / 37.4 Coca-Cola Classic, Coke,
Company diet Coke, cherry Coke, Tab,
Sprite, Minute Maid orange and
lemon-lime flavors, Fanta
flavors, Mellow Yellow,
Fresca and Mr. PiBB
2. PepsiCo, Inc. 28.9 / 66.3 Pepsi-Cola, Diet Pepsi,
Mountain Dew and Slice
lemon-lime, apple and
3. Philip Morris 5.7 / 72.0 7-Up, Diet 7-Up, Like Cola
4. Dr Pepper 4.6 / 76.6 Dr. Pepper,
Company Diet Dr Pepper
5. R.J. Reynolds 3.0 / 79.6 Sunkist Orange Soda,
Canada Dry flavor line
6. Royal Crown 2.9 / 82.5 RC Cola, Diet RC, Diet Rite,
assorted other flavors
7. Proctor & 1.3 / 83.8 Orange and other Crush
Gamble flavors, Hires Root Beer
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