Bangladesh Beverage Industry

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Introduction

Origin

This report has been prepared as a partial requirement for the course “Micro-Economics”. This report, on the present market scenario of the beverage industry, is to be submitted to the instructor of the course Mr. Sheikh Morshed Jahan, the instructor of the course.

Background

The soft drinks market in Bangladesh consists mainly of seven companies.

1. Abdul Monem Limited (Coca-Cola, Sprite, Fanta)

2. Agriculture Marketing Company Limited (Pran)

3. Akij Group (Mojo, Lemu, Frutika)

4. Global Beverage Limited (Virgin)

5. Globe Soft Drinks Limited (Uro Cola, Uro Lemon)

6. Partex Beverage Limited (RC Cola, Lychena)

7. Transcom Beverage (Pepsi, 7up, Mirinda)

Of these, Pran and Mojo are the only local brands. Coca-Cola, with its three varieties, namely, the cola-flavored Coca-Cola, the clear-flavored Sprite and the orange-flavored Fanta, is the number one soft drink producer in Bangladesh, as well as all over the world. Closing in on Coke is rival Pepsi. Pepsi is one of the oldest brands in Bangladesh. Pepsi first arrived in Dhaka in 1976 with the cola-flavored Pepsi, the clear-flavored 7up, the orange-flavored Mirinda and later introduced the mango-flavored Slice. Pran, on the other hand, started with jam, jelly and pickle. In 1995, it started producing mango bottled juice, and is currently operating all over the country. Virgin is renowned worldwide through its brand name. It was introduced in our country by Global Beverages Ltd. RC Cola entered the Bangladesh market in 1997, and was the first to introduce the cloudy lemon flavor. It has not been long since Akij group brought out Mojo and Lemu. They have already gained huge popularity. The recent success of Akij group is Frutika, which delivers the promise of no preservatives.

The soft drinks market experienced a drop in 2007 because of political uncertainty; slow down in investment and crackdown on illegal roadside outlets. This was after the market picked up in 2003 and hit a record high of over Tk 1000 crore in the 2005-2006 fiscal year. Since the start of 2008, the market has shown signs of recovery. Transcom Beverage Limited recorded a 20% growth between January and June and a 15% growth in turnover. The overall market has enjoyed a further 100 crore in 2007-2008 fiscal year. Mojo, Akij Group’s flagship brand, experienced a 22% growth in that time, while RC Cola secured 15% growth in sales.

According to industry people, the recovery of the market is mainly due to a hot summer and late arrival of the monsoon rain. They also attributed the recovery to relatively stable price level of soft drinks restoration of confidence among distribution channels as many retailers and distributors got panicked during the government's drive against illegal roadside outlets. However, the supply chain has recovered, and with it the lucrative market.

Objective

The broad objective of the report is to analyze the market of the beverage industry. The key research questions of the project are:

‘How are local beverage companies faring against their international competitors?’

‘What is the market structure of the beverage industry in Bangladesh?’

Scope

Firstly, we intend to find the answers to the basic economic questions related to our topic: what is to be produced, how will it be produced and for whom it will be produced. The market structure of the beverage industry is also the major concern of this report. The microeconomic theories used in our report will include the different pricing practices or price theory, income and substitution effects on the demand and supply. There will also be a comparative analysis of the domestic and international brands in the market. We will also analyze the non-price competition and the barriers to entry that exists in the market.

Limitations

The limitations of the report are as follows

1. Due to a time limit, we were not unable to collect primary...
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