According to the In the News below, To that end, the company is spending $15 mil
ID: 1112764 • Letter: A
Question
According to the In the News below,
To that end, the company is spending $15 million on a new advertising campaign—the largest in RC’s history—designed to cast the blue-collar drink of the Midwest and South as the hip alternative to “corporate colas,” as it refers to market leaders Coke and Pepsi. Accompanying the ad blitz are new products, including a sour-tasting, Windex-colored Nehi and a long-neck brew called RC Draft, formulated specifically for younger palates.
“This company spent no money on advertising during the 1980s, and we lost an entire generation of cola drinkers who grew up in that decade,” said John Carson, Royal Crown’s chief executive. . . .
“Anybody in the soft drink business trying to compete with Pepsi and Coke has an uphill battle—they have huge amounts of marketing muscle, financial resources, experience and bottling agreements,” said John Sicher, co-editor of Beverage Digest, an industry publication. “But RC’s new tactics are smart. They are tossing out a bunch of beverages targeted toward younger drinkers. Against Coke and Pepsi, guerrilla warfare is the only thing that might work.”
—Anthony Faiola
Source: The Washington Post, © September 14, 1995. All rights reserved. Used with permission.
Instructions: Enter your responses rounded to one decimal place.
(a) What was the four-firm concentration ratio in the U.S. soda market in 2009?
(b) What is the maximum value of the Herfindahl-Hirshman Index in the U.S. soda market? (The smallest number of firms in the "other" category is five, with market shares of 2.1, 2.1, 2.1, 2.1 and 0.7.)
To that end, the company is spending $15 million on a new advertising campaign—the largest in RC’s history—designed to cast the blue-collar drink of the Midwest and South as the hip alternative to “corporate colas,” as it refers to market leaders Coke and Pepsi. Accompanying the ad blitz are new products, including a sour-tasting, Windex-colored Nehi and a long-neck brew called RC Draft, formulated specifically for younger palates.
“This company spent no money on advertising during the 1980s, and we lost an entire generation of cola drinkers who grew up in that decade,” said John Carson, Royal Crown’s chief executive. . . .
“Anybody in the soft drink business trying to compete with Pepsi and Coke has an uphill battle—they have huge amounts of marketing muscle, financial resources, experience and bottling agreements,” said John Sicher, co-editor of Beverage Digest, an industry publication. “But RC’s new tactics are smart. They are tossing out a bunch of beverages targeted toward younger drinkers. Against Coke and Pepsi, guerrilla warfare is the only thing that might work.”
—Anthony Faiola
Source: The Washington Post, © September 14, 1995. All rights reserved. Used with permission.
The U.S. Soda Market Market share of soft drink makers, 2009. Pepsi 30.8 Coca-Cola 42.7 Dr. Pepper Snapple Group 15.3 Others 9.1 Royal Crown 2.1Explanation / Answer
a) Four firm concentration ratio = 42.7 + 30.8 + 15.3 + 2.1 = 90.9
b) HHI = 42.72 + 30.82 + 15.32 + 2.12 + 2.12 + 2.12 + 2.12 + 2.12 + 0.72
= 1823.29 + 948.64 + 234.09 + 4.41 + 4.41 + 4.41 + 4.41 + 4.41 + 0.49
= 3028.56
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