Energy Drinks Essay

The strategically relevant components for the global and U. S. beverage industry macro-environment are market growth rate, market size, segmentation and scope of rivalry. Economic characteristics of alternative beverage segment differ from other beverage categories in several ways. The market size for alternative beverage was $40. 2 billion globally and $17 billion in the United States, while the market size for other beverages was $ 1,548. 3 and $28. 9 billion globally. Market growth rate for alternative beverages between 2005 and 2009 was 9. 8 percent while for other beverages it was 2. 6 percent. Question two The competition in the alternative beverage market was strong. Pepsi and Coca-Cola were competing for the top spot in the production and distribution of their beverages. The strongest competitive force was bargaining power and leverage of buyers. Most stores were negotiating for lower prices since they bought the beverages in large quantities. Since Pepsi and Coke had an established brand, their alternative beverages found automatic shelf space in most stores and wholesale clubs. The weakest of the five competitive forces was the bargaining power and leverage of suppliers. The reason is that the packaging from different suppliers was similar, thus it was easy to substitute the packaging from most suppliers, and thus they had weak bargaining power. The competitive force that seems to have the greatest effect on industry attractiveness is competition from substitutes. This is why there were many substitutes to alternative beverages that were sold at lower prices. The competitive force with the greatest effect on profitability of new entrants is a threat of entry. Question three The market for energy drinks, sports drinks and vitamin-enhanced drinks is changing in several ways. There is innovation of products with the rise of drinks containing additional nutrients and introduction of energy shots. Furthermore, the industry is also considering consolidation options in an attempt of reducing distribution costs, for example Coca-Cola distributed Hansen’s Monster energy drink. The drivers of change are changes in the long-term growth rate, industry consolidation and introduction of new innovative products into the industry. The forces individually or collectively may not cause big changes in the attractiveness of the industry. The reason for that is there is no evidence that the big companies of alternative beverages will practice unhealthy and aggressive competition for market dominance. Question Four My strategic group map of energy drinks, sports drink and vitamin enhanced beverage industry is categorized by considering the scope of geographic distribution of producers and brand portfolio. Pepsi and Coca-Cola are positioned favorably since they compete internationally and have a strong brand portfolio. Hansen Natural is a dominant brand company since Monster energy drink accounts for 90 percent of its sales. The success of this company is mainly contributed by strong supply chain due to its partnership with Coca-Cola and Anheurser-Busch distributions. Rockstar Inc is also successful in this map since it has a strong distribution chain offered by Pepsi. However, Dream Water and Living Essentials are positioned poorly in this map since their distributions are only regionally located and they only offer a single brand. Question five Several key success factors determine the success of alternative beverage producers. One of these factors is the brand image. Producers with a strong brand image created by extensive advertisement campaigns and endorsement from celebrity athletes enjoyed big sales. Furthermore, products with strong supply chain and distribution network, for example Coca-Cola and Pepsi, had bigger market share. Companies with good innovative skills due to extensive research and product development had more sales since they developed new categories such as energy shots. Companies with huge sales volume enjoyed economies of scale and thus they were able to cover their sales and distribution costs. Question six Coca-Cola should adopt several recommendations to improve its competitiveness in the alternative beverage industry. It should consider increasing its sales in Europe and Asia by conducting extensive market campaigns in these regions. Moreover, it should consider increasing its innovation efforts in order to regain its market share in energy drinks. Another recommendation is considering 5-Hour energy in an attempt of increasing its overall brand portfolio. Pepsi should consider adopting image building campaigns brands such as Amp and Double Shot since their overall market share in Europe has been declining. The company should also consider developing its own energy shot brand in order to diversify its brand portfolio; It would be a good idea to consider introducing energy shots to Europe, Middle East and Austria, since these markets are feasible. Red Bull GmbH should increase its innovation efforts in an attempt to increase its market share in Europe and United States. It should also improve its performance in the new energy shots it introduced in the market.