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 US 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 economic characteristics of the alternative beverage segment of the industry differ from that of other beverage categories. Alternative beverages are attempting to break new ground and capture more of the market share in the overall beverage industry. One aspect that is common versus the traditional categories is the method of marketing.
Alternative beverages, such as energy drinks, attempt to brand through alternative sports, concerts, and any other events that promote an alternative lifestyle. Traditional carbonated drinks companies are typically viewed as “mainstream” and oversaturation of the overall market. Alternative beverages have to differentiate themselves on how they add value to customer’s lives. For example, health conscience customers are drawn to low calorie vitamin beverages.
These beverages are attempting to capitalize on the well known trend that each year, more consumers decreasing their consumption of carbonated drinks and are potential growth opportunities in the alternative beverage industry. 2. What is the 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. 3. How is the market for energy drinks, sports drinks and vitamin-enhanced beverages changing?
What are the underlying drivers of change and how might those forces individually or collectively make the industry more or less attractive? Today, Customers are becoming more health conscious and they are aware about the positive and the negative effects of the drinks. Therefore they reduced their consumption of the alternative beverages that slows down the demand and sales of the product. Change in the product innovation, long term growth rate and industry consolidation are the driving force of the alternative beverages.
The second forces segmented with the alternative beverage industries have consolidated as the market has established and leaders have been occupying the competition. 4. What does your strategic group map of the energy drink, sports drink, and vitamin-enhanced beverage industry look like? Which strategic groups do you think are in the best positions? The worst positions? Strategic group map of the energy drink, sport drink and vitamin-enhanced beverages shows that companies are competing in the scope of brand portfolio favor and geographical distribution.
It indicates that the company, which is competing globally, and having broad brand portfolios is positioned well in the market. However, companies that are working regionally and on national distribution only or having a single brand seems to be holding the worst position in the industry. As per the case analysis PepsiCo and Coca cola are in the best position, as they comprise of wide range of products and Red Bull considered as being in the worst position as they are having a low variety of products. 5. What key factors determine the success of alternative beverage producers?
•The success of alternative beverage producers is determined by the following key factors: •The taste should be appealing and unique to the customers. •To establish the brand image, company should advertise and promote in an effective way that spreads awareness about the products. •In order to achieve the good sales volume and market share, Company should have access to the distribution of the products. 6. What recommendations would you make to Coca-Cola to improve its competitiveness in the global alternative beverage industry? To PepsiCo? To Red Bull GmbH?
In my opinion, Coca- Cola should research the country by studying various parameters relating to the taste, customer preferences and their demand than introduce the product in the market. They should try and introduce new flavors also and should discontinue the non-preferable and unprofitable products. PepsiCo has the largest market share in US as well as in the global market. In the case study it is mentioned that PepsiCo had introduced alternative drinks like Blood Shot, Charge, Defend and Rebuild but customers are not aware about this product and they hardly holds any knowledge about their availability in the market.
Therefore, PepsiCo should enhance their marketing and promotional activities. PepsiCo could also try for more energy drinks segment. Red Bull GmbH should improve their strategy to increase their market share. As red bull is a very popular flavor therefore they should introduce more varied flavors instead of focusing only on one flavor. They should enhance their water line drinks or sport line drinks. The company can research the market requirement thoroughly and can develop a new line of products to become competitive in the market.