Competition In Energy Drinks Sports Drinks Marketing Essay

Published Date: 23 Mar 2015

1. What are the strategically relevant components of the global and 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.

After analyzing the case study, we can conclude that the rapid growth of Coca Cola and PepsiCo is inclusive of high profit margin and premium pricing as compared to any alternative beverage so these are the strategically crucial elements of the U.S beverage market and of the international market. Each group demands for different types of alternative beverages which in turns divide the global market into various types of products such as energy drink, sports drink, relaxation drinks. In the year of 2009, the US drink data was calculated and collected as of sport drink at 60%, vitamins enriched drinks and energy drinks about 23% and alternative beverage sales at 18% (M.A. Heckman).

In the context, when consumers are focusing on reducing the consumption of their carbonated soft drink, alternative beverages are the medium of the soft drinks companies to maintain the sales volume growth as well as furnishing to different demographics. The sales volume of the drinks is dependent on the demand of the group for example children prefer juices, adults like energy shots, athletes go for vitamins enhanced drinks. These demand patterns for alternative beverage drinks are totally different from the usual carbonated soft drinks that people used to drink and consume before. Now, alternative beverages offer wide variety of products which consumers can consume as per their preferences and activities (M.A. Heckman).

2. What is the competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is the weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

An Innovation is the vital source for creating the competition in the globalised market and alternative beverages are facing tough competition on the basis of differentiation from the traditional drink or the fruit juices. Alternative beverages are inclusive of vitamin enriched drinks, energy boosting drinks, sport drinks etc. and to develop the brand loyalty it totally relies on the test, properties and ingredients of the drink. To meet with the competition, company works on the advertisement, brand name, nutritional properties, packaging and unique flavors (M.A. Heckman).

PepsiCo and the Coca Cola share a big market and their products holds a strong presence on the consumers mind and the production of alternative beverages is very easy job for them. This action can dominate such channels of the alternative beverages. Therefore, from all the five competitive forces, strongest is the action of the firm which is already focusing on offering a variety of beverages (M.A. Heckman).

However, the weakest competitive force is the bargaining power which is exercised by the buyers only. At the time when alternative beverages were introduced in the market, company’s use to sell them at high prices and customers pay for it and now if customers are eager to buy on higher price for the product company will have to sell it on the same price (M.A. Heckman).

The established companies like PepsiCo and Coca cola seem to have a greater effect on the new entrants because they already have a huge number of loyal customers that follows their brand and are brand loyal. If they introduce a new product in contradiction to the new entrants, customers more willingly adopt their products more than the new company launches. (M.A. Heckman).

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 which slows down the demand and sales of the product. Due to recession customers are becoming more money conscious and spending very less in the alternative beverage segment and it indicates that the market becomes mature and there is no scope for longer growing (M.A. Heckman).

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. For example in the year of 2010, Coca Cola controlled the Red Bull GmbH and Henson natural corporation. However, the individual or collective effect of the industry driver of change is likely to make the alternative beverage companies less attractive until and unless such companies gain an initial mover benefits (M.A. Heckman).

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 which 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 (M.A. Heckman).

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.

There should be an innovating Product skill which can differentiate the alternative beverage from the traditional drinks (M.A. Heckman).

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?

According to the case, 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 (M.A. Heckman).

PepsiCo has 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 (M.A. Heckman).

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 (M.A. Heckman).