Alternative Drink Industry Analysis Essay
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1. Do a complete five-forces analysis of competition in the global alternative drink industry, then tell me which of the five competitive forces is strong, weak, and why. Especially in the force of rivalry (one of the 5 forces), you must identify the market size, growth rate, profit margins, what are the main categories in the alternative drink industry, who are the major competitors and their relative sizes, the competition scope, the main competition weapons) 2.
Briefly identify 6 to 7 key success factors in the alternative drink industry 3.
What are the other economic traits that are outside the industry but still can affect all competitors (for example, overall economy trend, long term innovation, globalization, maturity stage of the industry, relevant legislation, etc. )? Briefly explain how these factors can affect the industry. Notes: 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: • 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. The Alternative Beverage Segment Help Companies to Sustain Volume Growth in Mature Markets Where Consumers Were Reducing Their Consumption of Carbonated Soft Drinks. Also the Alternative Beverage Industry Offered 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 the others to sell their products. Packaging is readily available from many suppliers and is like a commodity. However, some rare ingredients providers had a moderate amount of leverage in negotiations with energy drink producers. Additionally, the producers of alternative beverages are important customers of suppliers and buy in large quantities. The threat of new brands varies by market maturity of each alternative beverage category. It has low threat for mature categories and moderate to strong in young categories.
During the early stages of developing a category, when famous brand leaders had not been established, the threat of entry in alternative beverage categories remained strong. As a result, entrepreneurs launching new beverages with novel formulas or well-developed image campaigns could quickly gain market share among consumers. However, as the category matured, consumer preferences developed and shaped retailers’ purchasing decisions. Once the category had established, its brand leaders, it became much more difficult for new entrants to gain shelf space in convenience stores, supermarkets, and wholesale clubs.
Therefore, in 2010, the threat of entry should be lower for all types of alternative beverages except energy shots and relaxation drinks. The competence among sellers of alternative beverage could be considered as the strongest competitive force. Among the sellers of energy drinks and other alternative beverages, competition is so strong and will grow stronger each year. Competition among major brands centers primarily on brand image, an appealing taste, attractive packaging, new product R&D, sales promotions and endorsements, and gaining better access to shelf space and strengthening distribution capabilities.
As for 2010, there was no evidence of strong price competition in any of the alternative beverage categories, which makes it difficult to argue that competitive rivalry is fierce or brutal. Factors that increase the strength of competitive rivalry included efforts on the part of industry rivals to expand the number and types of alternative beverages in their product lines, low switching costs on the part of consumers, active and aggressive efforts on the part of sellers to establish consumer brand loyalty, and strong emphasis on advertising, sales promotions, and endorsements.
MLA “Competition in Energy Drinks, Sports Drink, and Vitamin-Enhanced. ” 28 Sep. 2011. <http://www. “Competition in Energy Drinks, Sports Drink, and Vitamin-Enhanced. ” StudyMode. com. September 28, 2011.