INDUSTRY CONCENTRATION SEEN DRYING UP SECOND TIER

RICHARD TURCSIK

NEW YORK -- Manufacturer consolidation in the beverage industry is continuing at an unprecedented pace, threatening the existence of midsize players, said a leading industry consultant.

"The trend toward industry consolidation and concentration is accelerating at a far faster pace and is more universal and across the board than anything that we have ever experienced before," said Michael Bellas, chairman and chief executive officer of Beverage Marketing Corp. of New York here.

For example, in the soft drink category the top three players -- Coca-Cola, Pepsi-Cola and Dr Pepper/Seven Up -- are expected to account for 90% of the industry volume by the dawn of the 21st century, Bellas said at the Beverage Forum 97 conference, held here. The conference was co-hosted by Beverage Marketing and Beverage World.

And that is only the tip of the iceberg.

"Coca-Cola has publicly declared that it wants and expects to control a full 50% of the domestic market by the year 2000. We project that its share will come to more than 50%. In the United States by the year 2000, the top two soft drink companies could account for 80% to 85% of the market," Bellas said.

The second trend, which Bellas said is even more startling, is that second-tier companies have all but disappeared. In 1980, the fourth through seventh largest soft drink companies had a combined 17.4% share, but by 1996 their share had plummeted to a 7.2% share.

"Today, the soft drink industry is characterized by large and small companies only. Some middle-tier players, like National Beverage and Cott, have become specialty operations of private-label or supermarket brands. They have given up trying to compete with the industry leaders across the entire market landscape in areas like the fountain business, vending and down-the-street accounts," Bellas said.

The pattern is similar in the beer, wine, bottled water and fruit beverage sectors of the beverage industry. For example, juice manufacturers Tropicana, Minute Maid and Ocean Spray control 43% of that industry, with some of their growth coming at the expense of midtier manufacturers, such as Veryfine, Bellas said.