Alternative Beverage Industry

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1. What is competition like in the alternative beverage industry? Discuss fully.

There is tremendous growth and competition in the alternative beverage industry. Both large and small marketers are launching new products and fighting for limited retail shelf. More and more consumers are moving away from traditional soft drinks to healthier alternative drinks. Demand is expected to grow worldwide as consumer purchasing power increases. PepsiCo was the worldwide leader of alternative beverages with a global market share of 26.5% and a 47.8% share of the U.S. market in 2009. Coca-Cola held a global market share of 11.5%. Although Coca-Cola was the worldwide leader in carbonated soft drink sales, they trailed PepsiCo in alternative beverage sales. Fast on the heels of the larger marketers are Red Bull, Monster, and “other” mainly consisting of privately held bottlers. Red Bull was the world’s number one seller of energy drinks which made it the third-largest producer of alternative beverages worldwide and the number two seller of alternative beverages in the U.S. and Europe. In 2009, Monster was the second-best-selling energy drink brand in the U.S. with revenues growing to more than $1.3 billion. There are hundreds of regional and specialty brands of energy drinks, sports drinks, and enhanced beverages in the U.S. and internationally. Of these, Rockstar was the most noteworthy privately held alternative beverage company. Which of the five competitive forces is strongest?

Competitive pressure from rival sellers is high in the alternative beverage industry. The number of brands competing in sports drinks, energy drinks, and vitamin-enhanced beverage segments of the alternative beverage industry continue to grow each year. In 2009, 231 new vitamin-enhanced beverages were introduced in the U.S. PepsiCo, Coca-Cola and Red Bull are the three main competitors worldwide with “other” taking 55% if the worldwide market. PepsiCo takes the lead in the U.S.; however, the “others” group leads the market in Asia Pacific and Europe. Even with a -2.3% growth rate, carbonated soft drinks are the leading category of beverages with a market share of 48.2%. Companies are competing with new favored drinks and increasing their selection of alternative beverages in order to try and capture a larger portion of the market. Which of the five competitive forces is weakest?

The competitive threat of supplier bargaining power is weakest within the alternative beverage industry. The suppliers to the alternative beverage industry include makers of nutritive and non-nutritive ingredients such as sugar, aspartame, and fructose to name a few. Suppliers also include manufacturers of aluminum cans, plastic bottles/caps. With numerous suppliers of these materials, suppliers have competed aggressively for the business of large alternative beverage producers. While unique drinks ingredients and supplements might be available only from a few suppliers, most packaging supplies needed for the production of alternative beverages are readily available from a large number of suppliers. What competitive forces have the greatest effect on industry attractiveness and the potential profitability of new entrants? The relative strength of the alternative beverage segments will likely attract new entrants over the next several years. Smaller companies are competing in the distribution area. Hiring large distributing companies to deliver their products to various customers, i.e. convenient stores and grocery stores is a barrier for new entrants. Brand name recognition is a barrier for new companies when entering the market of alternative beverages. Coca-Cola has been called the world’s most valuable brand. Brand loyalty increases profits and market shares. There are loyal consumers of PepsiCo and Coca-Cola products that would be hard to convince to switch products. However, consumers have control over brand loyalty. If the price is right, they...
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