Review of Industrial Organization 12: 295–299, 1997.
Strategy, Structure, and Antitrust in the Carbonated Soft-Drink Industry, Timothy
J. Muris, David T. Scheffman, and Pablo T. Spiller, Westport CT: Quorum Books,
1993, 272 pages, $59.95.
Like another carbonated soft drink (CSD) study recently reviewed here,
egy, Structure and Antitrust is really an essay justifying the vertical integration
of CSD bottling operations
undertaken by PepsiCo (Pepsi) and the Coca-Cola
Company (Coke) over the past ﬁfteen years. Like the earlier volume, the research
presented by Muris, Scheffman, and Spiller (MSS) was partially funded by Pepsi
and the authors include Federal Trade Commission (FTC) ofﬁcials from the Rea-
gan era. Despite the similar credentials of the authors, similar sponsorship, similar
subject matter, and similar bottom line, I found Strategy, Structure, and Antitrust
to be a more satisfying read because of its less polemic style, greater appreciation
of institutional factors, and more detailed empirical work.
Although I reacted positively to the book overall, there are some signiﬁcant
shortcomingsofcommissionand omissionthatdetractsigniﬁcantlyfromthe overall
quality of the research. I turn to these after a brief section-by-section capsulization.
MSS have organized their work in a logical and helpful manner. Chapter 1 intro-
duces the study and Chapters 2, 3, and 4 provide a brief history of CSDs generally
and the evolution of the CSD bottling systems of Pepsi and Coke speciﬁcally.
Chapters 5 and 9 are the book’s “where’s the beef” chapters. Here the authors
present their main arguments and cite more speciﬁc evidence that vertical inte-
gration of their respective bottling systems by Coke and Pepsi was 1) necessary
because of major changes in marketing strategies and 2) effective in expanding
output and reducing per unit costs in at least some speciﬁc situations.
Tollison et al. (1991) reviewed here in the October 1993 (Vol. 8, No. 5, pp. 645–648) issue.
Bottling franchises from CSD concentrate companies provide for exclusive territories and a
requirement that the bottler not hold any other CSD franchises in the same ﬂavor category. Franchise
agreements typically allow a bottler to produce at least some private label CSDs without regard to
territory or ﬂavor. Most areas have a Coke bottler, a Pepsi bottler, and one or more “third” bottlers.
Third bottler are afﬁliated with neither Coke nor Pepsi. The leading franchise afﬁliation for most
third bottlers is a 7Up, Dr Pepper, or Royal Crown Cola franchise. The Coke bottling system refers
to all the bottlers with Coke franchises. The Pepsi bottling system refers to all the bottlers with Pepsi