Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages

Case Study disceptation in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages - emailprotected com 1. What are the st regulategic whollyy relevant components of the global and U. S. boozing patience macro-environment? How do the economic characteristics of the substitute(a) boozing segment of the perseverance differ from that of other drink categories? Explain. Demographics The total sale for drinkings in 2009 in the US was ab turn up 458. 3 billion gallons and it is one of the largest groceryplaces with clam regard as of 1,581. billion in 2009 and with a forecast of $1,775. 3 billion for 2014. 48. 2 share of industry gross gross tax income were from carbonated soft drinks and 29. 2 percent of bottle water industry sales. In 2009,The Alternative beverage industry included sports drinks, flavored or enhanced water and competency drinks pay up 4%, 1. 6%, and 1. 2% of industry sales severally. The global foodstuff for ersatz beverages in 2009 was $40. 2 bi llion, while it was $17 billion for alternative beverages in US commercialise. It was $ 12. 7 billion and $9. billion for Asia pacific and European markets respectively. Market ontogenesis The market growth has Brobdingnagian potential with the dollar apprize of the global market for alternative beverages grew at a 9. 8% one-yearly betwixt 2005 and 2009, entirely was pass judgment to slow down to 5. 7% yearlyly amongst 2010 and 2014. US is the country which has strongest growth internationally in terminal figure of alternative beverage sales with an annual growth rate of 16. 6% betwixt 2005 and 2009 and a forecasted growth rate of 6. 7% between 2010 and 2014.Europe and Asia-Pacific grew at annual rates of 5. 3% and 5. 6% between 2005 and 2009 and were expected to grow at a rate of 4. 4% and 5. 1% respectively between 2010 and 2014. However poor economic conditions in the US in 2008 and 2009 led to a 12. 3% dec soak up in sports drink sales and a 12. 5% disdain in flavore d and vitamin waters sales. It was also the ground why expertness drinks sales maturationd only 0. 2% between those years. Rivalry between competitors coca sens, Pepsico and cherrybull are the troika big players that made the industry rivalry become global.However, in that location were hundreds of shufflings resembling Otsuko which were specialty so far regional tick offs that did not throw a rear end print internationally but were doing well in their own terms. Beverage producers had made various(a) attempts at change magnitude the size of the market for alternative beverages by extending subsisting harvest-tide lines and growing altogether sweet products. Social Forces * Global beverage companies such as coca Cola and PepsiCo had relied on such beverages to circumvent up in volume growth in mature markets where consumers were reducing their employment of carbonated soft drinks. Expanding the market for alternatives beverages and increasing sales and market share, beverage producers also were forced to content with criticism from some that heftiness drinks, energy shots, and relaxation drinks presented health risks for consumers and that some producers strategies promoted reckless behavior, the primary concern of closely producers of energy drinks, sports drinks, and vitamin-enhanced beverages was how to crush improve their competitive standing in the market place. Driving Forces for this industry * Expanding Market share Desire to reach out to Consumer needs and meet the demand * Personalization of the Market Segments* filthing * Market coat * Maximization of Growth Potential General Economic Conditions * Global growth is projected to grow at 3. 5 percent in 2012, thus accelerate somewhat to 3. 6 percent from 2013-2014. In 2012 It is expected that emerging economies will be slow in growth by 0. 7 pct points on average, going from 6. 3 percent growth in 2011 to 5. 6 percent in 2012, partly as a terminus of slower export growth and partly because several of them have been outgrowth above trend and the GDP Growth for the world is predicted to be at 3. . Things control a little slow but are filling up slowly and there is no recession in clutch so far. This could really help the industries like Food, Beverages, Health surge up like they already are into the market with more percentage of market share and consumer usage based on the increasing numbers in the trend. Impact of Economic Factors * Demand on beverages and alternative beverages should remain bestowitive or stable * Branded alternative beverages with national and international posture should do well * Business opportunities should be encouraged with fair and promote interest rates 2.What is emulation like in the alternative beverage industry? Which of the louver competitive forces is strongest? Which is weakest? What competitive forces seem to have the sterling(prenominal) effect on industry captivatingness and the potential lucrativene ss of unexampled entrants? The Beverage industry is highly competitive and the segments that come into picture when it comes to competition are Distribution, Shelf management, Licenses, Brand name and Image, Pricing, Labeling and Packaging, Marketing and Advertising, Quality and taste, manage and Consumer promotions and Branding. Competition with non-alcoholic beverages * Competition with Carbonated beverages * Competition with regional beverage producers and mystic label soft drink suppliers * Competition in maintenance of diffusion mesh topology * Competition on forest and pricing* Competition on Branding, Labeling, Marketing, Packaging and Promotions. talk terms power of Buyers Strong * public convenience store, grocery store, and sweeping stealers had considerable leverage in negotiating pricing and slotting fees with alternative beverage producers because of their flock purchases. New entrants with comparatively lower market shares are approximately bear upon with t his like how it is mentioned in the case where the shelf space is limited to net greases like Coke, PepsiCo and rubicund bull for that particular market segment. The larger brands like ascorbic acid and Pepsi also already have spaces worked out with them for their other products and this makes it easier for the bigger brands to get their newer products in the shelfs too. * Delis and restaurants have low shifting be to other brands but they have less volumes likend to stores and less space, shelfs and so forth nd also will not have the alike(p) negociate power that a store enjoys. * Demand is highly dynamic Bargaining Power of Suppliers Weak * Suppliers for alternative beverages do exist in huge numbers and the competition is high * The producers of alternative beverages are important customers of suppliers and obtain in large quantities. * Packaging is readily available affright of Substitutes median(a)* Many substitutes like tea, bottled water, juices, nutrition water etc. have surfaced but the market is not as big as alternative beverages and this customer preference had weakened the competitive power of substitute beverages. Many substitutes that sess quench the thirst of the consumers * Price point of substitutes is less compared to alternative beverages f interimellum of New entrants Weak * Brand leaders already exist in the industry with competitive prices and well established scattering system * Convenience stores and Shelves across the stores are already in partnership with existing big-wigs * node loyalty towards branded products is high * Need for large financial resources and property * High Brand equity for already existing and successful brands Threat of Rivalry Strong Competition centers among major brands based on brand build, appealing taste, packaging, R&D, Marketing and Distribution capabilities * Attempts by all the brands to increase the number and types of products in their product line * Low chemise costs for the c onsumers of the industry * Strong marketing campaigns by each brand to gain customer loyalty The Bargaining power of consumers and rivalry that exists between the competitions in this industry contributes to the attractiveness of the industry.The numbers are promising, the industry is dynamic and increase in demand each year. The factors that affect the potential profitability of the new entrants are the Brand image, Distribution network and Product line breadth. 3) How is the market for energy drinks, sports drinks and vitamin-enhanced beverages changing? What are the underlying drivers of change and how major power those forces individually or collectively make the industry more or less attractive? * Driving forces of the alternative everage industry are symbiotic on the creating/sustaining market demand, dynamics of the growth rate and product renewing. * manufacturing leaders established Segments within the alternative beverage industry have consolidated as markets have matu red and leaders have been established. Red Bull GmbH and Hansen Natural Corporation remained independent in 2010, coca plant-Cola controlled such brands as Powerade sports drink, Fuze vitamin-enhanced beverages, glaceau vitamin water and NOS.In addition, Coca-Cola distributed Hansens Monster energy drink in parts of the United States, Canada, and six European countries. * Changes in Long term Growth Rate The recession had an impact on sales of sports drinks and flavored or enhanced water and has stalled growth in the market for energy drinks there was also growing market maturity for most categories of alternative beverages. The annual rate of growth for the dollar value of the global market for alternative beverages was forecasted to decline from the 9. percent annual rate occurring between 2005 and 2009 to an anticipated annual rate of 5. 7 percent for 2010 through 2014. While dollar value growth rates were expected to decline only slightly in Europe and Asia-Pacific, the annual r ate of growth in the U. S. was projected to decline from 16. 6 percent during 2005 2009 to 6. 7 percent between 2010 and 2014 * Product invention The industry is continuing to evolve with introduction of new products that enable arise of new category of products.The recent introduction of energy shots is an example of how an innovation that has given rise to an altogether new sub-segment in the industry. * The creation of new product segments, the increasing positive trends in growth rate and increasing market share for each product are a grave indication and inviolable drivers of change that increase the attractiveness of the market for an rising industry. 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? The strategic group maps show the industry participants competing with axes of Geographic foot print and Brand. The Map shows that Industry giants like Coke and Pepsico are positioned strongest in the industry due to already existing contracts, supply chain, distribution network and shelf spaces in retail spaces. * Red Bull is seeing a successful brand in Europe and the U. S. Hansens Monster is also doing good standing up to the other market giants with distribution partnership with coke giving it the required space and opportunity to grab the market and because can be considered at a favorable position. * Rock angiotensin converting enzyme has also been at a favorable position due to the same reason of distribution network partnership with PepsiCo* Companies with a single brand and regional distribution like Otsuko, Vitamin water etc. appeared to be at an unfavorable place with chances of competition gulping the market share of the low players very soon. ) What key factors determine the success of alternative beverage producers? The place success factors for Alternative Beverage producers are * Constant Product foundation garment A company must be able to identify what a consumer is looking for and also maintain the ability to adapt with the changing market trends. They must be able to keep up and not lag behind. * Price Price is always a factors in many cases and in this case consumers with a low brand preference will buy a product based on its competitive pricing * Brand Loyalty Consumers are particular about what brand they purchase and they stick to it in most of the cases.This stresses for a superior brand image and quality * Distribution system Probably one of the most important, Effective distribution channels will not only help reduce costs but also helps a company remain competitive. * Size and photographic plate Successful alternative beverage producers were required to have sufficient sales volumes to keep marketing expenses at an acceptable cost per unit basis. 6) What recommendations would you make to Coca-Cola to improve its competitiveness in the global a lternative beverage industry? To PepsiCo? To Red Bull GmbH? Recommendations to Pepsi Pepsico have to launch a major image make campaign for the most promising products it has. * Pepsico also needs to develop its own energy shot brand try to convince Rockstar to add an energy shot to its distribution agreement. * In addition, Pepsi should negotiate for distribution rights to European and Asia-Pacific market with Rockstar or launch its energy drink brands in attractive international markets. * PepsiCo can expand its foot print and guidance on other international markets in energy drinks for more international mien and to utilize the demand of a branded and standard product.Red Bull is presently the number in the energy drinks category and they should really take benefit of that and come up with more product line extensions and more products so people can identify with that brand and try other products too. They should concentrate on more on product innovation and product line ex tensions. Recommendations to Coca Cola * Coca cola should improve its product by innovating and building up good image to recapture the market share it bewildered in energy drinks category. * Coca cola should also try to wee more rapid growth in vitamin-enhanced beverages and energy shots product. Coke should focus on products and Branding efforts to gain market and regain lost market share in energy drinks * It should build up its strength in term of alternative beverage sales in by engage acquisitions and focus on building its strength of sales in Asia and defend quickly to solve the problem of lacking competitiveness in the European market for alternative beverages. * Coca cola can use a combination of new flavors and formulations, brands, line extensions, improved image building, and distribution capabilities to increase sales of alternative beverages internationally.Recommendations to Red Bull GmbH * Redbull should improve the performance of its lately introduced energy sho ts and continue to expand into rapidly growing country markets for energy drinks. * It is necessary for the company to maintain its lead in the U. S. and European energy drink market with additional product line extensions based upon product innovation. * It should develop sports drinks or vitamin-enhanced beverages that can further exploit the appeal of the Red Bull brand 7. Using the data in Ex. 11, 12, 13 compare Pepsi, Coke, and Hansen.Who has been the most profitable? Who has better managed their expenses? Which business has shown the most growth? Which of the three would you give the strongest grade for their performance? * Using the data from Exhibit 11,12 and 13 for Coke, Pepsi and Hansen, Hansen seems to be the most profitable so far as it became the largest marketer of energy drink in the US by leading most of alternative beverage categories. PepsiCos global market share in 2009 was 26. 5 percent, overcome by 11. 5 percent to Coca-Cola.The Coca Cola has better managed the ir expenses it was the third-largest seller of alternative beverage and in the top five best-selling non-alcoholic beverages worldwide in 2009. But they have lot of signal detection up to do. I would give the strongest grade for performance to Hansen for its market share, scat of products, product innovation and distribution strategies. Hansen also managed to have higher revenue growth and higher cash flow growth. Net Revenue 2007 2008 2009 CAGR Pepsi 39374 43251 43232 3. 17% Coca Cola 28857 31944 30990 3. 40% Hansen 904465 1033780 1143299 4. 50% Net Income 2007 2008 2009 CAGR Pepsi5674 5166 5979 1. 76% Coca Cola 5981 5807 6824 4. 49% Hansen 149,406 108032 208716 11. 70% Operating profit 2007 2008 2009 CAGR Pepsi 7182 6959 8044 3. 85% Coca Cola 18451 20570 19902 2. 55% Hansen 230986 163591 337309 13. 40% The company growth rate analysis of the three companies in terms of revenue, income and profit show that Hansen has higher percentage of growth rate well above the industry average. Hansen has greater revenues in the industry segment and higher customer demand and financial success.