...2. What is competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants? Competition from substitutes is substantial. There were many substitutes to alternative beverages such as tea, soft drinks, fruit juices, bottled water and tap water. Even though substitute products had a bigger market share in the US, consumers had tended to buy more alternative beverages. This change in customer preference had weakened the competitive power of substitute beverages. Convenience store, grocery store, and wholesale club buyers had substantial leverage in negotiating pricing and slotting fees with alternative beverage producers because of their large purchases. New brands with low market shares were most vulnerable to buyer leverage since shelf space was limited while top brands such as Red Bull were almost always assured of shelf space. Coca-Cola and PepsiCo were least vulnerable since they offered a wide variety of beverages that convenience stores, grocery stores, and wholesale clubs wished to offer to consumers. As a result of this certain appeal, the two companies’ alternative beverage brands almost always found shelf space in retail stores. The bargaining power and leverage of suppliers was the weakest competitive force. Many suppliers for alternative beverage ingredients and they fight with...
Words: 575 - Pages: 3
...Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages Executive Summary Beverage companies were intent on expanding the market for alternative beverages by introducing energy drinks, sports drinks, and vitamin drinks in more and more emerging international markets. Energy drinks, sports drinks, and vitamin-enhanced beverages were the stars of the beverage industry during the mid-2000s. Rapid growth in the category, coupled with premium prices and high profit margins made alternative beverages an important part of beverage companies' lineup of brands. On the other hand, Fifth consecutive year data show that U.S. consumers had purchased fewer carbonated soft drinks than the year before. Carbonated soft drinks sales would continue to decline as consumers developed preferences for bottled water, sports drinks, fruit juices, readyto-drink tea, vitamin-enhanced beverages, energy drinks, ready-to-drink coffee, and other types of beverages. Even though the global beverage industry was projected to grow from $1.58 trillion in 2009 to nearly $1.78 trillion in 2014 as beverage producers entered new geographic markets, developed new types of beverages, and continued to create demand for popular drinks., beverage producers also were forced to contend with criticism from some that energy drinks, energy shots, and relaxation drinks presented health risks for consumers and that some producers' strategies promoted reckless behavior. Although sports drinks and vitamin-enhanced...
Words: 721 - Pages: 3
...Global and US beverage industry – macro environment * In 2009 the global sales of beverages industry was $ 1 581,7 billion, with a forecasted sales value of $ 1 775,3 in 2014. * In 2009 48,2% of the market share belonged to carbonated soft drinks, 29,2% to bottled water, 12,4% to fruit beverages, and the rest to alternative beverages. * Consumers were reducing their consumption of carbonated soft drinks, with a growth of – 2,3% in 2009. Consumer preferences have shifted. * The global growth of alternative beverages grew from 2005 to 2009 from $ 27,7 billion to $ 40,2 billion, with a projected value of $ 53,3 in 2014. * The $ value global market growth for alternative beverages grew at a 9,8 % annually between 2005 and 2009, and has a forecasted growth rate of 6,7 % between 2010 and 2014. * Of the alternative beverages market, the USA has 42,3 % of the share, Asia- Pacific has 31,5 %, and Europe has 22,2 % of the share. * In the US, sports drinks accounted for almost 60 % of alternative beverages sales, while vitamin- enriched drinks and energy drinks accounted for about 23 % and 18 % of 2009 alternative beverage sales. * Saturation rate for all types of beverages was high in developed countries. * Market maturity and poor economic conditions caused the US beverage industry to decline by 2,3 % in 2008 and by 3,1 % in 2009. * The entering of new geographic areas, the steady growth of the purchasing power of consumers in developing...
Words: 1778 - Pages: 8
...strategically relevant components of the global and U.S. beverage industry macro-environment?The strategically relevant components of the global and U.S. beverage industry macro-environment: • Global beverage companies such as Coca Cola and PepsiCo had relied on such beverages to sustain in volume growth in mature markets where consumers were reducing their consumption of carbonated soft drinks. • Coca-Cola, PepsiCo, and other beverage companies were intent on expanding the market for alternative beverages by introducing energy drinks, sports drinks, and vitamin drinks in more and more emerging international markets. • Beverage producers had made various attempts at increasing the size of the market for alternative beverages by extending existing product lines and developing altogether new products. • Expanding the market for alternatives beverages and increasing sales and market share, beverage producers also were forced to content with criticism from some that energy drinks, energy shots, and relaxation drinks presented health risks for consumers and that some producers’ strategies promoted reckless behavior, the primary concern of most producers of energy drinks, sports drinks, and vitamin-enhanced beverages was how to best improve their competitive standing in the market place. • Rapid growth in the category, coupled with premium prices and high profit margins made alternative beverages an important part of beverage companies’ lineup of brands...
Words: 1614 - Pages: 7
...Case Discussion: Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages Assignment Questions: 1. What are the strategically relevant components of the global and U.S. beverage industry macro-environment? How do the economic characteristics of the alternative beverage segment of the industry differ from that of other beverage categories? Explain. Global beverages companies like Coca Cola had relied on those beverages to sustain volume growth in mature markets where consumers were reducing their consumption of soft drinks. These companies wanted to expand the market for alternative beverages by introducing new drinks into emerging markets. Beverage producers made numerous attempts to increase the size of the market for those types of beverages by growing product lines and increasing sales and market share. They were faced with criticism of alternative beverages as presenting health risks or not yielding the advertised results. Rapid growth in the market and premium prices/high margins made the alternative beverage market an important part of beverage company strategy. The economic characteristic of the alternative beverage segment if the industry is differ from that of other beverage categories. Alternative beverages competed on the basis of differentiation from traditional drinks such as carbonated soft drinks or fruit juices. The market started out with low competition, however that is rapidly changing as many new product lines enter and profit...
Words: 1047 - Pages: 5
...the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants? Since the recession in 2008 in the U.S., the alternative beverage industry has been negatively influenced. Consumers then realized the high price of soft drinks, which made the sales dropped every year. Sociologically, consumers are concerned about health problems that they can get from soft drinks. In particular, energy drinks with mixed alcohol effects became physician's warnings and caused consumers to raise awareness and demand innovation. In addition, companies have to improve their technological advances in order to promote their brands. Many companies became more innovative and competitive by producing products with advanced chemicals to lower calories and health issues. To become the leading sellers in the alternative beverage industry, companies have to advance their competitive prestige.Substitutes are a strong competitive force. If buyer's bargaining power gets stronger, substitutes will be introduced. Substitutes can attract buyers with competitive price, They also join the market after so companies can adapt positive feedback from consumers to advance substitutes.Supplier bargaining power is the weakest. Unique improved supplements can only be found from a few sources. There are plenty of packaging suppliers. Most alternative drink...
Words: 678 - Pages: 3
...Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages Case Discussion: Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages Assignment Questions: 1. What are the strategically relevant components of the global and U.S. beverage industry macro-environment? How do the economic characteristics of the alternative beverage segment of the industry differ from that of other beverage categories? Explain. Global beverages companies like Coca Cola had relied on those beverages to sustain volume growth in mature markets where consumers were reducing their consumption of soft drinks. These companies wanted to expand the market for alternative beverages by introducing new drinks into emerging markets. Beverage producers made numerous attempts to increase the size of the market for those types of beverages by growing product lines and increasing sales and market share. They were faced with criticism of alternative beverages as presenting health risks or not yielding the advertised results. Rapid growth in the market and premium prices/high margins made the alternative beverage market an important part of beverage company strategy. The economic characteristic of the alternative beverage segment if the industry is differ from that of other beverage categories. Alternative beverages competed on the basis of differentiation from traditional drinks such as carbonated soft drinks or fruit juices. The market started out with low competition...
Words: 304 - Pages: 2
...BUS 470 Case 5 – Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages Porter’s five-forces model reveals that the overall alternative beverage industry attractiveness is high. Some beverage companies, such as PepsiCo and Coca-Cola, have mastered the art of brand building in the alternative beverage market and have been rewarded with rapid growth rates. The rising population of health conscious consumers is increasingly leaning towards alternative beverages that are believed to offer greater health benefits. The strongest competitive force, or most important to strategy formulation, is the threat of entry of new competitors. Competitive pressure from rival sellers is high in the alternative beverage industry. The number of brands competing in sports drinks, energy drinks, and vitamin-enhanced beverage segments of the alternative beverage industry continue to grow each year. Both large and small vendors are launching new products and fighting for minimal retail shelf space. More and more consumers are moving away from traditional soft drinks to healthier alternative drinks. Demand is expected to grow worldwide as consumer purchasing power increases. Another strong competitive force is buyer bargaining power. Convenience stores and grocery stores have substantial leverage in negotiating pricing and slotting fees with alternative beverage producers due to the large quantity of their purchase. Newer brands are very vulnerable to buyer power because...
Words: 410 - Pages: 2
...S. beverage industry macro-environment are market growth rate, market size, segmentation and scope of rivalry. Economic characteristics of alternative beverage segment differ from other beverage categories in several ways. The market size for alternative beverage was $40.2 billion globally and $17 billion in the United States, while the market size for other beverages was $ 1,548.3 and $28.9 billion globally. Market growth rate for alternative beverages between 2005 and 2009 was 9.8 percent while for other beverages it was 2.6 percent. Question two The competition in the alternative beverage market was strong. Pepsi and Coca-Cola were competing for the top spot in the production and distribution of their beverages. The strongest competitive force was bargaining power and leverage of buyers. Most stores were negotiating for lower prices since they bought the beverages in large quantities. Since Pepsi and Coke had an established brand, their alternative beverages found automatic shelf space in most stores and wholesale clubs. The weakest of the five competitive forces was the bargaining power and leverage of suppliers. The reason is that the packaging from different suppliers was similar, thus it was easy to substitute the packaging from most suppliers, and thus they had weak bargaining power. The competitive force that seems to have the greatest effect on industry attractiveness is competition from substitutes. This is why there were many substitutes to alternative beverages that...
Words: 799 - Pages: 4
...competition in the alternative beverage industry. Both large and small marketers are launching new products and fighting for limited retail shelf. More and more consumers are moving away from traditional soft drinks to healthier alternative drinks. Demand is expected to grow worldwide as consumer purchasing power increases. PepsiCo was the worldwide leader of alternative beverages with a global market share of 26.5% and a 47.8% share of the U.S. market in 2009. Coca-Cola held a global market share of 11.5%. Although Coca-Cola was the worldwide leader in carbonated soft drink sales, they trailed PepsiCo in alternative beverage sales. Fast on the heels of the larger marketers are Red Bull, Monster, and “other” mainly consisting of privately held bottlers. Red Bull was the world’s number one seller of energy drinks which made it the third-largest producer of alternative beverages worldwide and the number two seller of alternative beverages in the U.S. and Europe. In 2009, Monster was the second-best-selling energy drink brand in the U.S. with revenues growing to more than $1.3 billion. There are hundreds of regional and specialty brands of energy drinks, sports drinks, and enhanced beverages in the U.S. and internationally. Of these, Rockstar was the most noteworthy privately held alternative beverage company. Which of the five competitive forces is strongest? Competitive pressure from rival sellers is high in the alternative beverage industry. The number...
Words: 325 - Pages: 2
...Porter’s five-forces model reveals that the overall alternative beverage industry attractiveness is high. Some beverage companies, such as PepsiCo and Coca-Cola, have mastered the art of brand building in the alternative beverage market and have been rewarded with rapid growth rates. The rising population of health conscious consumers is increasingly leaning towards alternative beverages that are believed to offer greater health benefits. The strongest competitive force, or most important to strategy formulation, is the threat of entry of new competitors. Competitive pressure from rival sellers is high in the alternative beverage industry. The number of brands competing in sports drinks, energy drinks, and vitamin-enhanced beverage segments of the alternative beverage industry continue to grow each year. Both large and small vendors are launching new products and fighting for minimal retail shelf space. More and more consumers are moving away from traditional soft drinks to healthier alternative drinks. Demand is expected to grow worldwide as consumer purchasing power increases. Another strong competitive force is buyer bargaining power. Convenience stores and grocery stores have substantial leverage in negotiating pricing and slotting fees with alternative beverage producers due to the large quantity of their purchase. Newer brands are very vulnerable to buyer power because of limited space on store shelves. Top brands like Red Bull are almost always guaranteed space...
Words: 396 - Pages: 2
...Marcela Beas Dr. Pepper Snapple Group March 5th, 2013 Current Situation Analysis Mission/Vision Statement The Dr. pepper Snapple Group fuses its vision and mission statements saying, “At Dr. Pepper Snapple Group, it is our vision to be the best beverage business in the Americas. Our brands have been synonymous with refreshment, fun and flavor for generations, and our sales are poised to keep growing in the future.” This stamen is straightforward and informatively average. It establishes the company’s goal and core values. Also, it highlights DPS’ interest in future sales growth. The company includes its business strategy stating that it focuses on building and enhancing leading brands, pursuing profitable channels, packages and categories, leveraging an integrated business model, strengthening routes to markets, and improving operating efficiency (Dr. Pepper Snapple Group). External Analysis Government policies and regulations affect business development and growth. Products have to be consistent with the USDA’s dietary guidelines and adhere to the FDA’s standards for health claims. Due to the current post-recession economy, growth is expected to be slow since existing demand patterns are expected to change as consumers become more health conscious. Moreover, global awareness and concern regarding the impact of climate change continues to be a focal point as business seek to achieve better business in terms of reduced cost and risk while achieving positive impact on...
Words: 1991 - Pages: 8
...Group 8 - Core B Session 4 - Case Notes 08/24/2006 Professor: Arvind Bhambri Case: Cola Wars Continued: Coke versus Pepsi in the Twenty-First Century Intro: Syllabus Page 16 The Soft Drink industry has been assigned as the vehicle for tackling the topic of industry analysis and competitive dynamics. The case covers developments in the soft drink industry through 1993. It describes how the industry evolved into its current structure largely following Coca-Cola’s leadership. What is particularly interesting is determining why the major competitors in the industry have been able to earn above normal returns for close to 100 years, and why the industry is organized the way it is. The case allows us to analyze how the actions and reactions of competitors over time work to create their own industry structure. The case also allows us to examine how prior strategic commitments to particular strategies create competitive positions, which in turn constrain the future competitive moves of firms. Since competitive positioning determines a firm’s long-run performance, we need to thoroughly grasp the essentials of what makes some competitive positions and competitive strategies more viable, and others not, and why. Discussion Questions: 1. 2. 3. Why has the soft drink industry been so profitable? a. Since 1970 consumption grew by an average of 3% b. From 1975 to 1995 both Coke and Pepsi achieve average annual growth of around 10% c. American’s drank more soda...
Words: 1436 - Pages: 6
...Alternative Beverage Industry Analysis PepsiCo Justin Baumgartner Cover Letter: To: Mr. Morgan From: Justin Baumgartner Re: Environmental and Industry Analysis – Alternative Beverage Market Recommendations for PepsiCo’s strategy in Alternative Beverages Date: September 19, 2012 Attached you will find my analysis of the alternative beverage markets in 2009. The analysis includes an assessment of the competition in the alternative beverage market using Michael Porter’s Five Competitive Forces framework. I have also identified key drivers for change and key success factors for competing successfully in this market. Using information, I have then provided a set of recommendations for PepsiCo’s future strategy in alternative beverages. Briefly, my analysis of competition in alternative beverages shows the market to be very competitive. The drivers for change that will influence competition in this industry in the future are technology/globalization and changing in societal concerns, attitudes, and lifestyles. The key success factors that all firms competing in this market must be addressed are product differentiation, size of their organizations, and brand loyalty. This analysis suggests my recommendation to you regarding PepsiCo’s strategy to be brand loyalty, globalization, and product innovation. I hope you will find this information to be valuable to your firm and I thank you for the opportunity to provide this service. Alternative Beverage Industry...
Words: 1785 - Pages: 8
...global market leader in energy drinks is considering further market expansion November 16th, 2015 Executive Summary Red Bull, an original in the energy drink market, was founded in 1984 by marketing guru Dietrich Mateschitz and formula developer Chaleo Yoovidhya. The product is often used for boosting energy, increasing focus, and as a mixer for alcoholic drinks. Red Bull is well recognised for its extreme marketing strategies. For example, Red Bull has a “Mobile Energy Team,” which is largely made up of university students. The Mobile Energy Team regularly travels from University to University to promote Red Bull and provide samples of the product. A second example of Red Bull’s marketing strategy is their support for extreme sporting events, for example; Nascar driving. However, with the increase of new entrants in the functional drink market, Red Bull’s market share has decreased. This decrease leads straight into the problem statement; What strategy(ies) can Red Bull, the global market leader, use to further expand into current and emerging markets within the next three years in order to increase market share and sales? Several symptoms from the case where used to create an Industry Competitive analysis, a Fishbone analysis, and a SWOT analysis. Ultimately, after evaluating the Industry Competitive analysis, the Fishbone analysis, and the SWOT analysis, three alternatives were chosen to be further explored. These three alternatives can be summarized as: 1....
Words: 3961 - Pages: 16
