Competition in energy drinks, sports drinks and vitamin enhanced beverages Kyle Holloway
Spring Hill College
Alternative beverages such as sports drinks, energy drinks, and vitamin-enhanced beverages developed into an important competitor for the beverage industry and saw rapid growth in the mid-2000s. Alternative beverages compete on the basis of differentiation from each other in the market and traditional drinks, such as carbonated soft drinks and fruit juices. The largest sellers of alternative beverages are the global food and beverage giants, such as Coca-Cola and PepsiCo., that have already built respected brands in snack foods, carbonated soft drinks, and fruit juices prior to joining the alternative beverage industry. Along with these global giants, companies that utilized the blue ocean strategy, such as Red Bull GmbH and Hansen Natural (now known as Monster Beverage), were able to develop respected brand images and a decent share of the alternative beverage market. Success in this industry is based on companies that exploit innovation, capitalize on consumer trends, and have brand loyalty. IDENTIFICATION
When the U.S. saw an economic recession starting in the year 2008, the premium-priced alternative beverage market was hit hard. While the alternative beverage segment of the beverage industry provided opportunities for bottlers, the poor economy decreased demand for higher-priced beverages, with sales of sports drinks declining by 12.3 percent and flavored and vitamin-enhanced water declining by 12.5 percent over 2008 and 2009 (Gamble, 2011, p. 264). A great deal of the industry’s growth was stunted in these years but the industry is projected to grow at a rate of 5.88% on average for the next five years (Appendix 1). Industry analysts believe that “carbonated soft drinks would remain the most consumed beverage but would continue to see a decrease in annual sales due to a consumer preference for bottled water, sports drinks, fruit juices, vitamin enhanced drinks, ready to drink tea, coffee, and other beverages,” suggesting that the alternative beverages are likely to keep growing in the maturing beverage industry (Gamble, 2011, p. 264). Global beverage companies, such as Coca-Cola and PepsiCo, have struggled to reverse the decline in carbonated soft drinks consumption in the U.S and have relied on the alternative beverages in order to maintain volume growth in mature markets where consumers were reducing their intake of carbonated soft drinks due to consumer health concerns, such as diabetes and obesity (Esterl, 2013). Coca-Cola, PepsiCo, and other companies expanded the alternative beverage market through introducing energy drinks, sports drinks, and vitamin drinks into international markets. In addition, companies, such as Hansen Natural Corporation and Red Bull GmbH, have seen high profits as well through their development and sales of alternative beverages. Sports drinks are most frequently purchased by those who engage in sports, fitness, or other strenuous activities, where vitamin enhanced beverage are mostly purchased by the adult consumers interested in increasing their intakes of vitamins. While the profile of the energy drink consumer is presented as teenagers, in earlier years, teenagers were the face of carbonated soft drinks’ traditional target market (Gamble, 2011, p. 266) Today’s youth are “often turning to water, energy drinks and coffee instead” of carbonated soft drinks (Esterl, 2013). Of the five competitive forces, the strongest in the alternative beverage industry is the competitive force associated with rivalry among competing sellers to attract customers. With many competitors fighting for market share, competition between rivals has become fierce. This rivalry, mixed with many different substitutions – which include bottled water, carbonated soft drinks, etc. – drive the alternative beverage industry. The weakest of the five competitive forces is...
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