Advertising intensity within the carbonated soft drinks industry

A study of advertising expenditures for a period of six years of about twenty brands of carbonated soft drinks shows that both demand and supply side factors affect advertising intensity. The main demand side influence is the need to advertise more for the new subcategory of diet brands. Brand market share has a negative impact on advertising intensity because of threshold effects and accumulated market goodwill. Total market growth also has a negative influence on advertising intensity. This occurs ostensibly because consumers get more familiar with the product category because of increased consumption. The main supply side determinant is the interfirm rivalry between the two largest firms. The results show that the two largest firms do not get any benefits of economies of scale in advertising, but instead spend significantly more on advertising their brands compared to the competition.