Pepsi Coke Antitrust Case

Pepsi Coke Antitrust Case

BACKGROUND

On January 24, 1986, PepsiCo revealed its plan to purchase the Seven-Up Company from Phillip Morris Companies, Inc. for $380 million. One month later, Coca-Cola proclaimed it intended to purchase the Dr. Pepper Company for $470 million. At this point in time Coca-Cola, the leader in the soft drink market, held a market share of 38.6%. Pepsi, the number two supplier, respectively trailed Coca-Cola with a market share of 27.4%. Both companies heavily competed on price. This led to lower prices and increased consolidation in the soft drink industry. Price discounting and advertising were crucial in differentiating products. The ability to introduce new products also proved to be crucial in gaining market share.

Smaller companies had difficulty surviving in this industry, and were poised for a buyout. Seven-Up had a market share of 6.3%. A merger between PepsiCo and Seven-Up would have brought Pepsi?s market share up to 33.7%. Dr. Pepper, the third largest company, had a market share of 7.1%. A merger between Dr.Pepper and Coca-Cola would have resulted in a an overall market share of 45.7%. This would mean that nearly 80% of the entire market belonged to just two companies. The FTC ruled to disallow both mergers

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