Beverage Competition

Topics: Energy drink, Energy drinks, Red Bull Pages: 9 (3065 words) Published: November 12, 2011
Analysis of Case 5
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. About the market size, The worldwide total market for beverages in 2009 was $1,581.7 billion. The sales of beverages in the U.S. during 2009 totaled nearly 28,859 billion gallons, with carbonated soft drinks accounting for 48.2 percent of industry sales and bottle water making up 29.2 percent of industry sales. Sports drinks, flavored or enhanced water, and energy drinks made up 4.0 percent, 1.6 percent, and 1.2 percent of industry sales, respectively, in 2009. The global market for alternative beverages in 2009 was $40.2 billion (12.7 billion liters), while the value of the U.S market for alternative beverages stood at $17 billion (4.2 billion liters) in 2009. The market for alternative beverages in the Asia-Pacific region in 2009 was $12.7 billion (6.2 billion liters) and the European market size in 2009 was $9.1 billion (1.6 billion liters). About the market growth rate, The dollar value of the global beverage industry had grown at a 2.6 percent compounded annual growth rate between 2005 and 2009 and was forecasted to grow at a 2.3 percent annual rate between 2010 and 2014.The dollar value of the global market for alternative beverages grew at a 9.8 percent annual rate between 2005 and 2009, but was expected to slow to a 5.7 percent annual rate between 2010 and 2014.The U.S. had the strongest growth internationally in alternative beverage sales with an annual growth rate of 16.6 percent between 2005 and 2009 and a forecasted growth rate of 6.7 percent between 2010 and 2014. Europe and Asia-Pacific grew at annual rates of 5.3 percent and 5.6 percent, respectively, between 2005 and 2009 and were expected to grow at annual rates of 4.4 percent and 5.1 percent, respectively, between 2010 and 2014. However, poor economic conditions in the U.S. in 2008 and 2009 led to a 12.3 percent decline in sports drink sales and a 12.5 percent decline in flavored and vitamin-enhanced waters sales between those two years. The poor economy also helped slow the growth of energy drink sales to just 0.2 percent between 2008 and 2009. The global market for alternative beverages was segmented by product type (sports drinks, energy drinks, vitamin-enhanced beverages, energy shots, and relaxation drinks). with the demand in each segment varying significantly. In the U.S., sports drinks accounted for nearly 60 percent of alternative beverage sales in 2009, while vitamin-enhanced drinks and energy drinks accounted for about 23 percent and 18 percent of 2009 alternative beverage sales, respectively. Rivalry in the industry could be considered global, with the three largest sellers of alternative beverages worldwide competing in most international markets. However, there were hundreds of regional and specialty brands of alternative beverages brands that did not compete internationally.

2.What is competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants? The bargaining power and leverage of buyers—a ________competitive force Convenience store, grocery store, and wholesale club buyers had considerable leverage in negotiating pricing and slotting fees with alternative beverage producers because of their large purchases. New brands or brands with low market shares were most vulnerable to buyer leverage since shelf space was limited. Brands highly demanded by consumers such as Red Bull were almost always assured of shelf space. Coca-Cola and PepsiCo were least vulnerable since they offered a wide variety of beverages that convenience stores, grocery stores, and wholesale clubs wished to...
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