Industry Analysis: Soft Drinks
Meghan Deichert, Meghan Ellenbecker, Emily Klehr,
Leslie Pesarchick, & Kelly Ziegler
Strategic Management in a Global Context
February 22, 2006 1
Industry Analysis: Soft Drinks Barbara Murray (2006c) explained the soft drink industry by stating, “For years the story in the nonalcoholic sector centered on the power struggle between…Coke and Pepsi. But as the pop fight has topped out, the industry 's giants have begun relying on new product flavors…and looking to noncarbonated beverages for growth.” In order to fully understand the soft drink industry, the following should be considered: the dominant economic factors, five competitive sources, industry trends, and the industry’s key factors. Based on the analyses of the industry, specific recommendations for competitors can then be created.
Dominant Economic Factors Market size, growth rate and overall profitability are three economic indicators that can be used to evaluate the soft drink industry. The market size of this industry has been changing.
Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry, illustrated in Table 1. Datamonitor (2005) also found that the total market value of soft drinks reached $307.2 billion in 2004 with a market value forecast of $367.1 billion in 2009. Further, the 2004 soft drink volume was 325,367.2 million liters (see Table 2). Clearly, the soft drink industry is lucrative with a potential for high profits, but there are several obstacles to overcome in order to capture the market share. The growth rate has been recently criticized due to the U.S. market saturation of soft drinks. Datamonitor (2005) stated, “Looking ahead, despite solid growth in consumption, the global soft drinks market is expected to slightly decelerate, reflecting stagnation of market prices.” The change is attributed to the other growing sectors of the non-alcoholic industry including tea and coffee (11.8%)
Leslie Pesarchick, & Kelly Ziegler
Strategic Management in a Global Context
February 22, 2006 1
Industry Analysis: Soft Drinks Barbara Murray (2006c) explained the soft drink industry by stating, “For years the story in the nonalcoholic sector centered on the power struggle between…Coke and Pepsi. But as the pop fight has topped out, the industry 's giants have begun relying on new product flavors…and looking to noncarbonated beverages for growth.” In order to fully understand the soft drink industry, the following should be considered: the dominant economic factors, five competitive sources, industry trends, and the industry’s key factors. Based on the analyses of the industry, specific recommendations for competitors can then be created.
Dominant Economic Factors Market size, growth rate and overall profitability are three economic indicators that can be used to evaluate the soft drink industry. The market size of this industry has been changing.
Soft drink consumption has a market share of 46.8% within the non-alcoholic drink industry, illustrated in Table 1. Datamonitor (2005) also found that the total market value of soft drinks reached $307.2 billion in 2004 with a market value forecast of $367.1 billion in 2009. Further, the 2004 soft drink volume was 325,367.2 million liters (see Table 2). Clearly, the soft drink industry is lucrative with a potential for high profits, but there are several obstacles to overcome in order to capture the market share. The growth rate has been recently criticized due to the U.S. market saturation of soft drinks. Datamonitor (2005) stated, “Looking ahead, despite solid growth in consumption, the global soft drinks market is expected to slightly decelerate, reflecting stagnation of market prices.” The change is attributed to the other growing sectors of the non-alcoholic industry including tea and coffee (11.8%)
Cited: American Beverage Association (2005). Soft Drink Facts. Retrieved February 21, 2006 from http://www.ameribev.org/variety/facts.asp Cadbury Schweppes. (2004). 2004 Annual Report. Retrieved February 17, 2006 from http://www.cadburyschweppes.com Datamonitor. (2005, May). Global Soft Drinks: Industry Profile. New York. Reference Code: 0199-0802 Hein, Kenneth. (2004). Brand Loyalty 2004. Retrieved February 12, 2006 from http://www.brandkeys.com/news/press/102504Brandweek.Loyalty.pdf Murray, Barbara. (2006a). The Coca-Cola Company. Hoovers. Retrieved February 13, 2006, from http://premium.hoovers.com/subscribe/co/factsheet.xhtml?ID=10359 Murray, Barbara. (2006b). Pepsi Co. Hoovers. Retrieved February 13, 2006, from http://premium.hoovers.com/subscribe/co/profile.xhtml?ID=11166 Murray, Barbara. (2006c). Carbonated Beverages. Hoovers. Retrieved February 13, 2006, from http://premium.hoovers.com/subscribe/ind/overview.xhtml?HICID=1049 Murray, Barbara. (2006d). Cadbury Schweppes Inc. Hoovers. Retrieved February 13, 2006, from http://premium.hoovers.com/subscribe/co/profile.x html?ID=41767 Murray, Barbara. (2006e). Comparison Data. Hoovers. Retrieved February 13, 2006, from http://premium.hoovers.com/subscribe/co/fin/comparison.xhtml?ID=10359 PepsiCo Inc. (2004). 2004 Annual Report. Retrieved February 17, 2006 from http://www.pepsico.com Sicher, J. D. (2005). Beverage Digest/Maxwell ranks U.S. soft drink industry for 2004. Retrieved February 10, 2006 from http://www.beverage-digest.com/pdf/top-10_2005.pdf