Pepsico: Alternative Beverage Market Case

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Strategic Management E-Case: Alternative Beverage Market

Analysis of the Global Specialty Beverage Industry
The industry in which PepsiCo produces and distributes its specialty beverages is vast and ever changing. With sales of carbonated soft drinks declining the past five years in a row, PepsiCo needed to look elsewhere to stimulate growth in its core business. PepsiCo thought it had found this growth in the alternative beverage industry. Pepsi expanded its line of beverage to include brands such as Gatorade, Propel, Frappucino, Aquafina, and SoBe. The industry, which experienced massive growth in the mid 2000’s, has seen a more recent decline in sales of 12.3% for it’s specialty beverage segment between 2008 and 2009. This decline in sales is largely attributed to the economic climate of the United States, where consumers are limiting spending on specialty goods that may not be deemed necessity. This new market seemed an attractive choice to stabilize PepsiCo with its premium pricing points and high profit margin, however Pepsi wasn’t the only company with this attractive new market in its sights. Coca-Cola, Red Bull, 5-Hour Energy, and many other companies looked to gobble up percentages of this market as they could.

Five Forces Analysis
PepsiCo operates in a market with low barriers to new entry, driving competitive pressures from its competition up. Many new companies have enters the specialty beverage market and taken a significant chunk of market share. An example would be Five Hour Energy, which in 2009 held an 85% share of the energy shot market. The competitive pressure stemming from supplier bargaining power varies greatly in the industry. Some supplier categories such as manufacturers of aluminum cans, plastic bottles and caps, and most particularly labels and packaging, have many different suppliers, sparking competition amongst them for Pepsi’s business. However in other areas, such as supplements like taurine, suppliers have...
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