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

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Case Study: Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages -------------------------------------------------
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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. Demographics:

The total sale for beverages in 2009 in the US was about 458.3 billion gallons and it is one of the largest markets with dollar value of 1,581.7 billion in 2009 and with a forecast of $1,775.3 billion for 2014. 48.2 percent of industry sales 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 energy drinks made up 4%, 1.6%, and 1.2% of industry sales respectively. The global market for alternative beverages in 2009 was $40.2 billion, while it was $17 billion for alternative beverages in US market. It was $ 12.7 billion and $9.1 billion for Asia pacific and European markets respectively. Market growth: The market growth has huge potential with the dollar value of the global market for alternative beverages grew at a 9.8% annually between 2005 and 2009, but was expected to slow down to 5.7% annually between 2010 and 2014. US is the country which has strongest growth internationally in term of alternative beverage sales with an annual growth rate of 16.6% between 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% decline in sports drink sales and a 12.5% decline in flavored and vitamin waters sales. It was also the reason why energy drinks sales increased only 0.2% between those years. Rivalry between competitors:

Coca Cola, Pepsico and Redbull are the three big players that made the industry rivalry become global. However, there were hundreds of brands like Otsuko which were specialty yet regional brands that did not have a foot print internationally but were doing well in their own terms. 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. Social Forces:

* 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. * 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. Driving Forces for this industry:

* Expanding Market share
* Desire to reach out to Consumer needs and meet the demand * Personalization of the Market Segments
* Branding
* Market Size
* Maximization of Growth Potential
General Economic Conditions:
* Global growth is projected to grow at 3.5 percent in 2012, then 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 percentage points on average, going from 6.3 percent growth in 2011 to 5.6 percent in 2012, partly as a result of slower export growth and partly because several of them have been growing above trend and the GDP Growth for the world is predicted to be at 3.6....
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