A Guide to the soft drink industry Free Essay Example

this report was developed to give public health advocates a window into the soft drink industry and reveal opportunities for intervention at various points of the supply chain, from production and distribution to marketing and sales. the report covers the main product lines of the industry: carbonated soft drinks, fruit beverages, bottled water, so-called functional beverages (including energy drinks and ready-to-drink teas and coffees), and sports drinks, across such powerful brands as Coke, Pepsi, Gatorade, and snapple.

We focus much of the discussion on the products that contain caloric sweetener – known as nondiet beverages in the industry – as these products are of particular concern to the public health community.

the soft drink industry is actually made up of two major manufacturing systems that, taken together, bring soft drinks to the market. these two systems fall into distinct categories: (1) flavoring syrup and concentrate manufacturing and (2) soft drink manufacturing. the supply chain is largely dependent on the syrup producer, as this is the driver for most downstream operations.

the majority of the bottled soft drinks follow a similar product life cycle, moving from syrup producer, to bottler, to distributor (if used), to merchant, to final consumer. the locations of the syrup manufacturers and the bottlers are closely linked to both the locations of strategic raw materials and major population centers in the united states and/or areas that see above-average temperatures, where demand for the soft drinks tends to be highest.

Once soft drinks are bottled and ready for distribution, a variety of distribution channels are leveraged to get the final product to the end consumer.

the industry as a whole faces challenges as a result of the slumping economy and changes in consumers’ consumption patterns due to increased health consciousness.

Marketing is an important component of the industry chain, used to generate demand and build consumer loyalty. it has undergone a number of changes over the last five years due to efforts to reduce advertising directed at children, to introduce new types of media, and to update marketing messages for consumers who are looking for more healthful alternatives.

Areas of growing interest for all industry players are the African-American and hispanic markets, which have been identified as key consumers and growth markets. While the industry adapts to changes in consumption www. nplan. org | www. phlpnet. org the soft drink supply Chain syrup Producer bottler Distributor merchant Consumer Breaking down the Chain: A Guide to the soft drink industry 5 patterns and new forms of media, researchers are investigating the impact marketing practices and pricing tactics have on consumers’ consumption patterns.

Rresearch shows that marketing for any product plays a significant role in setting norms and encouraging behavior among children, and that young children and economically disadvantaged consumers are the most vulnerable to food and beverage advertising. in addition, research has found that when it comes to discouraging consumption of sugar-sweetened beverages (ssBs), a price increase is more effective than education interventions. the soft drink industry is also in the middle of a growing policy debate in the united states regarding the taxation of sugar-sweetened beverages.

Surveys show mixed feelings about an ssB tax; a poll in new york City indicated more support if the proceeds went toward health-related initiatives. Meanwhile, the soft drink industry has responded strongly to proposed ssB taxes. internally, the soft drink industry is responding with efforts to influence consumer behavior by introducing smaller-size packaging, encouraging active lifestyles, and looking into alternative, noncaloric sweeteners. externally, lobbyist and other activist groups have successfully gathered support to defeat many of the proposed ssB taxes.

Soft Drink Terms There are many overlapping terms used to describe soft drinks. In this report, we tried to remain precise and consistent with our terminology. In figures and tables, we occasionally deviate from these terms due to the terminology used by the original data sources. Here are some of the most common terms: Soft drink: any type of nonalcoholic beverage produced by a soft drink manufacturer; includes bottled water, but not tap water Sugar-sweetened beverage (SSB): term used by public health advocates to describe a soft drink containing caloric sweetener (e. g., sugar, high-fructose corn syrup).

Nondiet: refers to beverages that contain calories, usually from an added sweetener Diet: refers to beverages with zero calories and usually sweetened with noncaloric sweeteners Carbonated soft drink (CSD): type of soft drink that is carbonated; includes both nondiet and diet soft drinks Fruit beverage: type of soft drink that either contains fruit juice or is fruit-flavored Juice drink: soft drink that contains juice and other ingredients Fruit-flavored drink: soft drink that is flavored to taste like fruit but does not contain juice Bottled: refers to beverages that are packaged in bottles or cans Fountain: refers to beverages that are produced on demand at a dispenser 6.

Breaking down the Chain: A Guide to the soft drink industry: section name www. nplan. org | www. phlpnet. org sofT Drink inDusTry overview the u. s. soft drink industry is composed of two distinct subindustries, by classification standards, under the manufacturing industry title (north American industry Classification system: 31–33). the first industry is the flavoring syrup and Concentrate Manufacturing industry (nAiCs: 311930), and the second is the soft drink Manufacturing industry (nAiCs: 312111).

Flavoring Syrup and Concentrate Manufacturing Industry As of 2010, there were 151 companies in the u. s.soft drink industry that manufacture flavoring syrup concentrates, powdered concentrates, and related products for use in soda fountains or for manufacturing soft drinks. 1 their products are sold primarily to soft drink producers and grocery wholesalers.

Soft Drink Manufacturing Industry As of 2010, there were 1,209 companies in the u. s. soft drink industry that blend ingredients such as water, liquid beverage bases/syrup, and sweeteners, and then package and distribute these beverages for sale. 2 excluded from this industry grouping are alcoholic beverage producers and companies that only produce beverage ingredients or distribute beverages. Market Leaders Flavoring Syrup and Concentrate Manufacturing Industry the u.s. flavoring syrup and concentrate manufacturing market (see figure 1).

Is dominated by two main players, who made up 73% of the total u. s. market share in 2010: the Coca-Cola Company (40%) and PepsiCo, inc. (33%). 3 the remaining 27% of the market is composed of a variety of smaller companies. figure 1: market leaders in the flavoring syrup and Concentrate manufacturing industry The Coca-Cola Company 40% PepsiCo, Inc. 33% Soft Drink Manufacturing Industry the soft drink Manufacturing market in the united states is dominated by three players, who accounted for 66% of the total market share in 2010: the Coca-Cola Company (28·6%), PepsiCo, inc.

(26·8%), and the dr Pepper snapple Group (8·6%). 4 the remaining 36% of the market includes many small soft drink manufacturing companies (see figure 2). Among the other companies: JJ Other 27% DATA SOURCE: WWW. IBISWORLD. COM Cott Corporation (3·3% market share) – this toronto-based company is the world’s largest manufacturer of retailer-brand (private-label) soft Breaking down the Chain: A Guide to the soft drink industry 7 www. nplan. org | www. phlpnet. org figure 2: market leaders in the soft Drink manufacturing industry The Coca-Cola Company 28. 6% PepsiCo, Inc. 26. 8% Dr Pepper Snapple Group, Inc. 8. 6% Other 36% drinks and the fourth largest soft drink maker in the world.

Customers include safeway, J sainsbury, and Wal-Mart (until 2012, when the distribution agreement is expected to be terminated). 5 JJ national Beverage Corporation (1·3%) – this florida-based company is a holding company that focuses on holding and developing strong regional brands, especially within the carbonated soft drink (Csd) segment. its managed subsidiaries include faygo Beverages, Lacroix Water, everfresh Beverages, and shasta Beverages.

6 DATA SOURCE: WWW. IBISWORLD. COM Earnings Flavoring Syrup and Concentrate Manufacturing Industry flavoring syrup and concentrate manufacturing is an $8 billion industry in the united states based on revenue. it was forecast to generate a profit of $1·4 billion in 2010.

The industry’s annual growth rate declined by 1·4% from 2005 to 2010, but is expected to increase 0·8% from 2010 to 2015. 7 Soft Drink Manufacturing Industry soft drink manufacturing is a $47·2 billion industry in the united states based on revenue. it was forecast to generate a profit of $1·7 billion in 2010. the industry’s annual growth was 1·8% from 2005 to 2010, and it is expected to maintain this growth rate between 2010 and 2015.

8 Product Segments and Major Market Brands Products produced in this industry are broadly referred to as soft drinks but can be further divided into six main segments based on industry revenue:9 Carbonated Soft Drinks (CSDs) JJ JJ JJ JJ.

45% of industry revenue includes well-known brands and lesser-known household and privatelabel brands sold in supermarkets and discount chains top brands: Coke (Coca-Cola), Pepsi (PepsiCo), Mountain dew (PepsiCo), and dr Pepper (dr Pepper snapple Group) Accounts for 33% of the total volume of liquid soft drink produced in the Americas during 2009 Fruit Beverages JJ JJ JJ 15·2% of industry revenue includes 100% fruit juices, juice drinks (which contain less than 100% juice), and fruit-flavored drinks with no juice top brands: tropicana (PepsiCo) and Minute Maid (Coca-Cola) 8 Breaking down the Chain: A Guide to the soft drink industry www. nplan. org | www. phlpnet. org Bottled Waters JJ JJ JJ

12·6% of industry revenue includes bottled spring and filtered water along with flavored waters and waters enhanced with vitamins and minerals top brands of enhanced waters: Glaceau Vitaminwater (Coca-Cola) and Propel (PepsiCo) Functional Beverages JJ JJ JJ JJ 11·3% of industry revenue includes energy drinks, relaxation drinks, and ready-to-drink (rtd) teas and coffees top brands of energy drinks: red Bull (red Bull) and Monster energy (hansen natural) top brands of rtds:

Arizona (hornell Brewing), Lipton (PepsiCo), snapple (dr Pepper snapple Group), and nestea (Coca-Cola) Sports Drinks JJ JJ JJ 8·7% of industry revenue includes both liquid and powdered sports formulas top brand: Gatorade (PepsiCo) Other JJ JJ 7·2% of industry revenue includes ice manufacturing, dairy-based drinks, and soy-based drinks.

Major Markets the final products of soft drink production are distributed to six main segments. supermarkets and general merchandisers (such as Wal-Mart and target) represent the largest channel the ultimate consumer utilizes to purchase soft drinks, accounting for 48% of the market. the remaining five segments included in the soft drink market are:10 Food Service and Drinking Places JJ JJ 20% of market includes fast-food outlets, takeout outlets, full-service restaurants, and bars Convenience Stores and Gas Stations JJ JJ 12% of market includes stand-alone convenience stores and stores attached to gas stations Vending Machine Operations JJ JJ.

11% of market includes vending machines in transportation outlets or other areas of convenience www. nplan. org | www. phlpnet. org Breaking down the Chain: A Guide to the soft drink industry 9 Other JJ JJ 8% of market includes smaller outlets such as drug stores, community centers, and private clubs Exports JJ JJ 1% of market includes exports to Canada, Japan, and Mexico Future Outlook Flavoring Syrup and Concentrate Manufacturing Industry While the prospects for the flavoring syrup and concentrate industry in the united states are closely tied to the success of the soft drink manufacturing industry, it is projected to fare somewhat more favorably than the manufacturing industry from a profit perspective.

The reason for this is that two highly recognizable companies dominate the industry: Coca-Cola and PepsiCo. this power allows the flavoring syrup and concentrate producers to pass on increases in input cost and sustain high margins. 11 in 2010, revenue was expected to grow 0·5% to $8 billion. over the next several years, the industry revenue is expected to grow 0·8% annually to $8·3 billion in 2015. this modest but slow growth can be attributed to the decreased demand for Csds and consumers’ increasing interest in healthy foods. these negative consumer trends are tempered by a growing demand for functional beverages, sports drinks, and juice drinks with less than 100% 12 juice. Soft Drink Manufacturing Industry.

Forecasts for the soft drink industry are made using volume (in gallons) and revenue (in dollars). the outlook for the soft drink manufacturing industry in the united states has dimmed, showing signs of stress as a result of changes in consumer behavior. that said, according to freedonia Group, an international industry research firm, the volume of soft drink production is expected to increase 1·4% per year to 22·1 billion gallons in 2014. 13 from a revenue point of view, the soft drink production industry is a $47·2 billion 14 industry with an average annualized growth rate of 1·8%. Profitability is expected to increase from approximately 3·5% in 2010 to about 4·5% in 2015.

While it is anticipated that the Csd demand will soften as consumers become more health conscious, this consciousness will cause a change in behavior that leads more consumers to functional beverages and bottled water, resulting in the forecasted increase in profitability. 15 Consumption from a volume perspective is expected to increase as a result of an anticipated increase in consumer spending as the recession ends, above-average expansion of the 55-and-older age groups, faster-paced lifestyles that demand convenience products, and rising demand for 16 functional beverages. 10 Breaking down the Chain: A Guide to the soft drink industry www. nplan. org | www. phlpnet. org.

While the industry is expected to experience modest growth driven by more innovative products and the changing demographic trends, the actual industry growth rate is expected to lag behind GdP growth. 17 Growth is expected to be slow in this post-recession economy, existing demand patterns are expected to change as consumers become more health conscious (switching from ssBs to diet drinks or functional beverages), and competition among the industry leaders is expected to remain intense and cut further into margins. Demand Determinates Flavoring Syrup and Concentrate Manufacturing Industry As previously mentioned, demand for syrup and concentrates is heavily dependent on the demand for soft drinks.

This is due to the fact that bottlers are legally tied to a manufacturer and must purchase all the syrup necessary to meet their downstream demand from the syrup/concentrate producer. As a result of this strong correlation, the demand determinates of the flavoring syrup and concentrate manufacturing industry in the united states are the same as the demand determinates described below for the soft drink manufacturing industry.

Soft Drink Manufacturing Industry A number of factors determine demand for soft drinks. the first determinant is price, as the demand for soft drinks is relatively price-elastic. this means that as the price of soft drinks increases, the demand decreases to a greater degree, relative to the price change. demand for soft drinks is also relatively income-elastic, meaning that as consumers’ incomes decrease, the demand for soft drinks decreases to a greater degree, relative to the income change, and vice versa.

Consumer lifestyles and tastes also affect demand for soft drinks. the reduced emphasis on family meals and the increased desire for convenience food and takeaway products may increase demand for soft drinks, especially rtd products, as they are packaged to meet this grab-and-go lifestyle. Along the same lines, as people become busier, they look for soft drinks to provide energy and rejuvenation, thereby spurring growth in the functional beverage categories. While this presents an opportunity, it is not expected to override the other factors that are negatively impacting demand for soft drinks at this time.

18 health issues are a hot topic with many consumers and, as a result, are driving demand in both directions. soft drinks developed to be low-calorie, low-sugar, and preservative-free are in line with consumers’ health consciousness, and demand for these products is increasing. At the same time, the public debate about nutrition, and specifically about ssBs, has reduced demand for nondiet Csds or shifted demand to diet Csds. 19 www. nplan. org | www. phlpnet. org Breaking down the Chain:

A Guide to the soft drink industry 11 Three major Players overview of The this section briefly outlines the major players in the u. s. soft drink manufacturing industry and the flavoring syrup and concentrate manufacturing industry emphasis is placed on defining the different operational structures the three major players (Coca-Cola, PepsiCo, and dr Pepper snapple Group) have in place, in addition to looking at future growth opportunities and recent acquisitions.

The Coca-Cola Company Coca-Cola is a leading manufacturer, distributor, and marketer of soft drink concentrates and syrups. 20 it owns or licenses more than 500 brands across all categories of soft drinks. the company is headquartered in Atlanta, Georgia. until 2010, Coca-Cola sold its syrups and concentrates to a number of contracted independent bottlers that would produce, bottle, and distribute the final product. in february 2010, Coca-Cola bought out the remaining interests in Coca-Cola enterprises, the main contracted bottler, giving the Coca-Cola Company control over 90% of the north American volume.

21 the north American business segment consists of the company’s operations in the united states, Canada, Puerto rico, the Virgin islands, and the Cayman islands. the segment operates three business units: sparkling beverages, still beverages, and emerging brands. the north American business segment owns and operates nine still beverage production facilities, 10 principal beverage concentrate and/or syrup manufacturing plants, and four bottled water facilities; leases one bottled water facility; and owns a facility that manufactures juice concentrates.

22 PepsiCo, Inc. PepsiCo is one of the largest food and beverage companies in the world. its products include a variety of salty, sweet, and grain-based snacks as well as Csds and non-Csds. the company is responsible for the manufacturing, marketing, and sales of these goods. it has 18 brands in its portfolio and is headquartered in new york. 23 12 Breaking down the Chain: A Guide to the soft drink industry www. nplan. org | www. phlpnet. org PepsiCo is divided into three business units:

PepsiCo Americas foods (PAf), PepsiCo Americas Beverages (PAB), and PepsiCo international (Pi). these three business units are further divided into six reportable segments: frito-Lay north America (fLnA); Quaker foods north America (QfnA); the Latin American food and snack businesses (LAf); PAB; europe; and Asia, Middle east, and Africa (AMeA). 24 fLnA is responsible for marketing the company’s branded snacks.

QfnA is responsible for the manufacturing, marketing, and distribution of cereals, rice, pasta, and other branded products. LAf is responsible for the marketing and distribution of branded snacks in Latin America. PAB is responsible for selling beverage concentrates, fountain syrups, and finished goods under various Pepsi brand names. PAB also manufactures or uses contract manufacturers to market and sell rtd beverages and water. in north and south America, PAB owns or leases approximately 20 plants and production processing facilities, and approximately 65 warehouses, distribution centers, and offices. in addition, the company has an ownership interest in approximately 80 bottling plants.

the company’s contract manufacturers also own or lease approximately 55 plants and production processing facilities, and approximately 50 warehouses and distribution centers. in March 2010, PepsiCo completed the acquisition of its two largest bottlers, Pepsi Bottling Group and PepsiAmericas. Dr Pepper Snapple Group the dr Pepper snapple Group is a leading integrated brand owner, bottler, and distributor of soft drinks in the united states, Canada, and Mexico. 25 the company has 15 brands and is headquartered in Plano, texas. the company is divided into three business segments: beverage concentrates, 26 bottled beverages, and Latin American beverages.

The beverage concentrate segment manufactures and sells beverage concentrates in the united states and Canada. the majority of the manufacturing is done at the dr Pepper snapple plant in st. Louis, Missouri. the company uses a combination of third-party bottlers and proprietary manufacturing systems to produce the final products. nearly half of the company’s annual u. s. volume is distributed by its company-owned bottling and distribution network. the remainder is driven through third-party/licensed bottlers and distributors, including those in both the Coca-Cola and PepsiCo bottling systems, as well as independent bottlers, brokers, and distributors.

27 in 2009, 72% of dr Pepper snapple total volumes were distributed through the former CocaCola and PepsiCo bottling partners (these bottling partners were recently acquired by the Coca-Cola Company and PepsiCo inc. , respectively). Pepsi Bottling Group, inc. (PBG) and Coca-Cola enterprises, inc.

(CCe) were the two largest customers of dr Pepper snapple’s Beverage Concentrate segment, and constituted 25% and 23%, respectively, of net sales during 2009. www. nplan. org | www. phlpnet. org Breaking down the Chain: A Guide to the soft drink industry 13 the Bottled Beverages segment manufactures and distributes bottled soft drinks and other products, including dr Pepper snapple brands, third party–owned brands, and certain private-label soft drinks, in the united states and Canada.

28 finally, the Latin American Beverage segment primarily manufactures beverages in Mexico and distributes throughout Latin America. the major brands contained in this segment are Penafiel, squirt, Clamato, and Aguafiel. 29 As of december 2008, the company operated 24 manufacturing facilities across the united states and Mexico. the group’s distribution network consists of approximately 200 distribution centers in the united states and approximately 25 distribution centers in Mexico.

The company manages the transportation of its products using a combination of a group-owned fleet of more than 5,000 delivery trucks and third-party logistics providers. 30 14 Breaking down the Chain: A Guide to the soft drink industry www. nplan. org | www. phlpnet. org suPPly Chain overviewt he soft drink industry supply chain is largely dependent on the syrup producer, as this step in the process is the driver for most downstream operations.

The majority of the rtd beverages, such as Csds and sports drinks, follow a similar product life cycle, moving from syrup producer to bottler to distributor (if used) to merchant to final consumer. the location of the syrup manufacturer is closely linked to the locations of strategic raw materials and major population centers in the united states and/or areas with higher demand for the beverages. similarly, the bottling operations are located in close proximity to both the syrup manufacturing facilities and population centers.

Once bottled and ready for distribution, the final product gets to the end consumer through a variety of distribution channels. Operating Model specific details about the operating model used by the soft drink industry are considered to be proprietary and, therefore, are not readily available. this section lays out a general overview based on secondary research and literature reviews of the operating model for two different forms of soft drinks: bottled Csds and fountain beverages. CSDs the process of making bottled Csds starts when the syrup manufacturer blends the raw materials such as flavorings, chemicals, and (depending on the beverage type) the sweetener based on the recipe.

While the recipe for each Csd is different, the basic raw materials include:31 Carbonated water: on average, 94% of a soft drink sweetener (sugar, high-fructose corn syrup [hfCs], or noncaloric sweetener): on average, 6–12% of a soft drink other minor ingredients, including: Acids (most commonly citric acid) to sharpen the background taste and enhance the “thirst-quenching experience by stimulating saliva flow”32 Additives to enhance taste, mouthfeel, aroma, and appearance emulsions (most commonly gums and pectin) to enhance appearance Preservatives Antioxidants (BhA, ascorbic acid, or other naturally occurring additives) to maintain color and flavor JJ JJ JJ JJ JJ www. nplan. org | www. phlpnet. org.

Breaking down the Chain: A Guide to the soft drink industry 15 figure 3: Carbonated soft Drink (CsD) operating model overview syrup Producer Blend raw materials to form syrup concentrate for specific beverage Is this a diet beverage? no yes Add artificial sweetner to syrup concentrate Package syrup concentrate for shipment Bottler Receive syrup concentrate Is this a diet beverage? yes no Add sugar/ HFCS to syrup Add water, carbonate, and bottle in appropriate container Package for shipment and ship Ship direct to merchant? no yes Distributor Receive product Repackage if necessary Send to merchant or final customer merchandiser/final Customer Receive product Make available to consumer.

As seen in figure 3, the syrup for diet drinks includes the noncaloric sweeteners, whereas nondiet soft drink syrup does not include any type of sweetener (hfCs, sugar, or noncaloric sweeteners). instead, sweeteners such as hfCs or sugar are added by the bottler. 33 once the syrup is prepared, it is sent to a bottler. if a nondiet soft drink is being produced, the bottler will then incorporate the sweetener into the syrup and mix the ingredients together in batch tanks.

When ready, the syrup is mixed with the main ingredient, distilled water, via proportioners, which regulate the flow rates and ratios of the liquids. the proportioners ensure that correct quantities of syrup and water are used, and then the mixture is carbonated.

once carbonated, the soft drink is ready for packaging into cans or bottles of various sizes. the containers are immediately sealed with pressure-resistant closures, either tinplate or steel crowns with corrugated edges, twist-off lids, or pull tabs. 34 once bottled, the soft drinks are packaged in specific quantities and containers (e. g. , 12-can boxes, six 24-oz. bottles joined with plastic rings, plastic racks that hold six 2-liter bottles) for resale to distributors or merchants.

If sent to a distributor, the goods may be repackaged into smaller quantities or sold directly to customers. 16 Breaking down the Chain: A Guide to the soft drink industry www. nplan. org | www. phlpnet. org

Fountain Beverages When making the syrup (also called “post-mix” or “beverage base”) used with fountain beverage dispensers, the process again starts when the syrup manufacturer blends the raw materials, such as flavorings, chemicals, and sweeteners (similar to those described above). unlike with bottled Csds, the sweetener (hfCs, sugar, or noncaloric sweetener) is added into the syrup when it is produced. As seen in figure 4, once the syrup is prepared, it is packaged and either sent to a fountain beverage distributor or sold directly to institutions. these syrups are packaged in a form specifically to be used in domestic or commercial fountain soft drinks.

Soft drink fountains used at home typically require a smaller bottle of liquid beverage base. fountain beverage bases used in restaurants, pubs, and other food service providers are sold in greater quantities, using a fitting that is specific to the make of a soft drink fountain (usually specific to the company that produces the beverage base).

35 if the syrup is sold to fountain beverage distributors, the distributors will then resell the fountain syrup to customers. once at the place of final use, the beverage base container is attached to the fountain dispenser, which mixes carbonated water with an exact amount of the beverage base as the soft drink is dispensed in the cup just prior to being served to the final consumer.

Figure 4: fountain Beverage operating model overview Concentrate Producer Blend raw materials to form syrup concentrate for specific beverage Add artificial sweetener/sugar/HFCS to syrup concentrate Package syrup concentrate for shipment Ship direct to final customer no yes fountain Distributor Receive product Send to merchant or final customer final Customer (institutions, restaurants, etc. )

Receive product Attach to fountain Fountain dilutes concentrate with carbonated water when dispensed Make available to consumer www. nplan. org | www. phlpnet. org Breaking down the Chain: A Guide to the soft drink industry 17 figure 5: estimated number of syrup and Concentrate manufacturing facilities in each state36 NEW ENGLAND Additional States.

1 VT 2 NH 3 MA 4 RI 5 CT 6 NJ 7 DE 8 MD 9 DC FL WA AK OR ID MT ND MN GREAT LAKES MID ATLANTIC ME 1 2 3 54 6 NY WI MI PA OH IL IN WV KY NC TN VA ROCKY MOUNTAINS WY SD PLAINS NV NE UT CO KS IA 9 WEST 7 8 CA MO AZ HI OK NM AR MS S O U T H E A S T SC AL GA SOUTHWEST TX LA Region west rocky mountains southwest Plains Great lakes southeast mid-atlantic new england % of Syrup and Concentrate Facilities* 26% 1% 10% 5% 16% 19% 20% 4%.

Syrup Producers the geographic distribution of companies that primarily manufacture soft drink syrup and concentrate products has generally followed soft drink establishments, such as bottlers, that have mainly been located near major population centers and in areas that commonly experience prolonged periods of hot weather. however, since 2002, there has been a significant shift, as companies that primarily manufacture soft drink syrup and concentrate products have moved to areas where key raw materials, such as sugar, are more easily accessible. 37 figure 5 shows estimates of how many syrup producers operate in each state in the country.

As the map indicates, California is the state with the greatest number of syrup manufacturers, and the southeast region holds 19% of the total market. this high concentration in the southeast is due in part to the region’s proximity to raw materials and the high demand patterns generated by the warm climate. the Mid-Atlantic region has another 20% of the total syrup manufacturing facilities, which is mainly to serve the densely populated northeast.

the Great Lakes region holds 16% of the total syrup manufacturing operations due to its proximity to the heartland of the nation, which produces corn for hfCs, one of the main raw materials needed for syrup production. the last significant geographic area is the southwest, where texas alone accounts for 10% of the total syrup manufacturing facilities in the united states. the syrup manufacturing presence in texas is driven by the large number of Csd processing plants in that state and the proximity to raw materials such as corn and sugar from southern plantations and seaports.

38 *rounded note: the stAte-By-stAte nuMBers of syruP And ConCentrAte MAnufACturinG fACiLities Are estiMAtes BAsed on stAte-By-stAte PerCentAGes rePorted By iBis. 18 Breaking down the Chain: A Guide to the soft drink industry | www. phlpnet. orgfigure 6: estimated number of soft Drink Bottling facilities in each state.