Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages
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. The strategically relevant components of the global and U.S. beverage industry macro-environment are essentially the expansion of the market for alternative beverages by introducing energy drinks, sports drinks, and vitamin drinks in international markets, and increasing the market size of alternative beverages by extending current product lines and developing new products. Numerous factors affect the achievement of this strategy and they include: Size of the Market:
It is without question that the global beverage industry is a large one, with the dollar value of the market being $1581.7 billion in 2009 and volume sales (in billions of liters) being $458.30. Regarding the distribution of sales in regards to beverage type, carbonated soft drinks came on top with 12,919.3 (millions of gallons) being sold and leading to a market share of 48.2%. Next in volume of sales was bottled water with a sales volume of 8,435.3 and 29.2% market share. Fruit beverage sales were 3,579.2 and a market share of 12.4%. In the alternative beverage category, sports drinks sales were 1,157.8 and a market share of 4%, ready-to-drink tea sales were 901.4 with a market share of 3.1%, flavored or enhanced water sales were 460 with a market share of 1.6%, energy drink sales volumes were 354.5 with a market share of 1.2%, and ready-to-drink coffee sales volume was 51.5 with a market share of 0.2%. In 2009, the industry worldwide sales of alternative beverages were 40.2 billion, with sales in the US accounting for 42.3% of the sales. Asia-Pacific accounted for 31.5%, Europe 22.2%, and the Americas (excluding the US) 4%. Growth Rate:
There has been a steady growth in the value of the global beverage industry over the years. Between the years 2005 and 2009, there has been a constant increase in the dollar value of sales, and this increase has also been forecasted between the years 2010 and 2014. Regarding the alternate beverages, we see an increase in sales over the years that even surpasses that of the global beverage industry. Market Segmentation:
The market for global alternative drinks has been in existence for a while, and beverages have been chosen and selected into groups based on the type of products. The different groups include sports drinks, energy drinks, vitamin-enhanced beverages, and relaxation drinks, with comfort and relaxation been of utmost importance to the consumer. In 2009, the alternative beverage drink with the most sales was sports drinks with sales of nearly 60%. Vitamin enhanced followed in sales by 23% and energy drinks came closely behind with sales of18% during that same year. Scope of Competition:
The major worldwide producers of beverages are Coca-Cola, PepsiCo, and Red Bull. There are also smaller companies in the same industry, by their production do not compare to the three major companies. Among the most important competitive features of the alternative beverage industry include product innovation, efficient distribution systems, and distinct differentiation. 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 in the alternative beverage industry is in favor of the three major producers, especially Coca-Cola and PepsiCo. Since their alternative beverage product offerings are numerous, and they supply to grocery stores, convenience stores etc. who have a high demand for their products, they avoid vulnerability to buyer leverage and always have shelve space in these...
...Competition in EnergyDrinks,
Sports Drinks, and
The beverage industry, like most food service industries in these economic times, faces many challenges. Not one company is excluded from the challenges of economic conditions, demographics, social and global forces, and regulatory, political, and legal factors.
The global economic conditions affect the energydrink industry in many ways. This industry depends highly on the disposable income of its customers. People are very cautious with their money these days and if additional income does not exist to purchase these items, then the companies suffer. In recent projections, however, this does not seem to be the case. The global industry factors show a projected growth of $20 trillion in sales between 2009 and 2014, and demand for these alternative beverages is expected to increase globally as customer purchasing power increases.
Social factors play an important part in the industry’s strategy, as well. With customers concerned with healthy lifestyles and exercise, the alternative beverage industry has increased sales in the last decade. Customers demanding low calorie, energy & vitamin-enhancing drinks turn to these types of beverages for their needs instead of carbonated soft drinks. Alternative...
...of carbonated soft drinks.
• Coca-Cola, PepsiCo, and other beverage companies were intent on expanding the market for alternative beverages by introducing energydrinks, 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 energydrinks, 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 energydrinks, 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.
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...
...Summary of “Competition in EnergyDrinks, Sport Drinks, and Vitamin-Enhanced Beverages”
* Beverages were popular in the mid-2000s. However, nowadays consumers are reducing their consumption of carbonated soft drinks.
* To handle this issue, beverage companies such as Coca-Cola and PepsiCo introduced alternative beverage such as energydrinks, sport drinks, and vitamin drinks, and also new relaxation drinks.
* While trying to expand their market, beverage industry also got the criticism about the effect of excessive consumption of high-caffeine-content, alcohol drinks, and relaxation drinks.
* As beverage producers entered into new geographic markets, developed alternative beverages, and continued to create demand for popular drinks, the dollar value and volume sales of the global beverage industry for year 2005-2009 are increasing. It also forecasted to be increased until 2014.
* The distribution of alternative beverages is really good. Consumers can find it in almost places such as convenience store, wholesale clubs, natural foods, supermarkets, and several events. The facts showed that convenience stores accounted for about 75 percent of energy sales in 2010.
* The suppliers included the markers of such nutritive and non-nutritive ingredients,...
...Competition in EnergyDrinks, Sports Drinks, and Vitamin-Enhanced Beverages
June 17, 2013
Three Musketeers: Anatalio, John Patrick
Cadao, Ana Graciela
Sanchez, Maria Leona
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.
SEGMENTATION: The global market for alternative beverages was divided by product type (sports drinks, energydrinks, and vitamin-enhanced beverages) with different demands for each group. Sports drinks accounted for nearly 60% of alternative beverage sales in 2009, while vitamin-enhanced drinks and energydrinks got about 23% and 18% of 2009 alternative beverage sales, respectively, in the US.
RIVALRY: The worldwide competition between three major producers (PepsiCo, Coca-Cola and Red Bull) made the industry rivalry become global. In U.S., Pepsico has engulfed almost half or 47.8% of the market shares last 2009. The only region where Coca-Cola beats Pepsico is in Asia-Pacific. Coca-cola has 13.7% of the market shares while Pepsico has 12.4%. Worldwide, Pepsico is still leading among the three with 26.5%...
...COMPETITION IN ENERGYDRINKS, SPORTS DRINKS, and VITAMIN-ENHANCED BEVERAGES
Since the mid-2000s, demands in the global beverage industry shift from carbonated soft drink to alternative beverages. Because of this market grows rapidly and gives high profit margins, it make changes in beverage manufacturing and encourage new entrant to focus solely on alternative beverages. Alternative beverages segment is comprised ofenergydrinks, sports drink, and flavored or enhanced water. Each segment has different consumer types and different distribution channel. In developed countries, such as USA, this carbonated soft drink market has reached a mature stage but energydrink and ready-to-drink tea is still inclined. However, beverage industry is steady growth in developing countries.
Alternative beverages competed on the basis of differentiation from traditional drinks such as carbonated soft drinks or fruit juices. All energydrink brands attempted to develop brand loyalty based on taste, the energy-boosting properties of their ingredients, and image. The strongest competitive force is buyer because buyer costs to switch brands are low. Consumers will be more prices sensitive and will switch to other product or even other segment. The...
...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 were sold at lower prices. The competitive force with the greatest effect on profitability of new entrants is a threat of entry.
The market for energydrinks, sports drinks and vitamin-enhanced drinks is changing in several ways. There is innovation of products with the rise of drinks containing additional nutrients and introduction of energy shots. Furthermore, the industry is also considering consolidation options...
...Five Forces of Competition on EnergyDrinks Industry
Rivalry Among Competing Sellers
Increasing Market Size
There are already many brands in the energydrinks industry. Simultaneously, existing beverage producers are coming up different products to capture increasing the size of the market for alternative beverages by extending existing product lines and developing altogether new products.
Increasing marketing strategies
The competition among producers becomes more and more fierce. Because many Sellers put active and aggressive efforts on establishing consumer brand loyalty and strong emphasis on advertising, sales promotions and endorsements.
Therefore, we conclude that rivalry in this industry is strong.
Potential New Entrants
Powerful big company existing
There are many global brands (such as Coca Cola, PepsiCo, Red Bull, Hansens Natural) with stronger product differentiation, greater distribution channel and brand loyalty. For new entrants, it is difficult to seize market share from these big companies.
High initial cost
Another barrier to entry is high fixed costs for warehouses, trucks, equipment and labor. New comers cannot compete in price without economies of scale.
High saturation rate
According to this case, saturation rate for all types of beverages was high in developed countries. Indeed, sales of sports drinks and vitamin-enhanced water had...