Strategic Management (64 International A)

Sheena T. Gabriela Rombang

Tarsisius Hani Handoko, Dr., M.B.A.
14/372753/PEK/19525

Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages

Case Summary
The global beverages industry has trying to sustain volume growth in mature markets
where consumers were reducing their consumption of carbonated drinks. During the mid2000s, alternative beverages known as an important part of beverage companies line up of
brands. It occurs because its market grow rapidly and give high profit margins due to the
premium price. Beverages producers had made various attempts at increasing the size of
the market for alternative beverages by extending existing product lines and developing
altogether new products. Beverages producers were also seeking additional growth by
quickly launching concentrated two-ounce energy shots to garner a share of the new
beverage category. Beverage producers also were forced to content with criticism from
some that energy drinks presented healt risks for consumers and that some producers
strategies promoted reckless behavior. But the primary concern of most producers was how
to improve their competitive standing in the marketplace.
Issues and Problem
There are several issues and problems that appear on alternative bevereage industries, such as :
1. The alternative beverage dollar value and volume sales increasing slowly after 2007 in
the global market. It occurs because the industry begin to enter the mature phase.
2. There are several researchs that show the unbeneficial from the alternative beverage
products.
3. Global economical crisis that make customer became more price sensitive
Analysis
General Environment from Alternative Beverages (PEST Analysis)
Politic Factor :
1. US government policy about content of alternative beverages.
Economic Factors :
1. The global beverage industry was projected to grow from $1.58 trillion in 2009 to
nearly $1.78 trillion.
2. Steady growth in the purchasing power of consumers in developing countries.
3. Market maturity and poor economic condition in US.
Social Factors :
1. Health concern from physician, healt proffesional, and member of law enforcement
about content and effect of consumed alternative beverages.
2. Demografic of consumer is different in every alternative beverage segments.
Technology Factors :
1. Technology development will effect production and distribution system.
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Case 2 : Competition in Energy Drinks
March, 4th 2015

Strategic Management (64 International A)

Sheena T. Gabriela Rombang
Tarsisius Hani Handoko, Dr., M.B.A.
14/372753/PEK/19525

2.

Medical research.

Based on the macro environments, we can conclude that the political factor impacts on the
low level because only few government regulation control about alternative beverages, the
economic factors impact on the moderate level because it is sensitive toward economic
condition, the social factors impact on the high level where the reason of consumers consume
the product is complex, and the technology factors impact on the moderate level.
Competitive Environment
1.

Competitive Rivalry
The number of sellers in the alternative beverage industry until the year 2009 is quite a lot but can
be grouped into two groups such as company which operating globally and company which
operate regionally Some company in this industry go into all segments of alternative beverages
and some focus their product only on a particular segment, as well as the different distribution
system of each company. Although the worldwide market share dominated by large companies
such as Pepsi, CocaCola and Redbull but when seen on a regional basis, per segment, or channel
distribution, the level of competition among company are thight enough cause the consumen buy
the product base on flavour, content, image and benefit offered by the product/brand or their
purpose to consume alternative beverages. In alternative beverage, product innovation is an
important thing that became the differentiation in competition. As an example, for energy drink
brand, innovation in flavour, the energy-boosting properties, and image. Efficient distribution
system also became key differentiation in competition.

2.

Threat of new entry

The high profit margins will make alternative beverage market attract more new entrants both
globally and regionally, it is also supported by rising demand for the alternative beverage. Sports
drink and vitamin-enhanced beverage carry 50 70% of the retail price than traditional drinks,
while in energy drinks pricing is 400% higher than carbonated soft drinks. In other hand to create
an alternative beverage, business need medium-high capital investment and its an unfair
competition if the new competitor should compete with the major player.

3.

Buyer power
Although it is worldwide sales volume of beverage alternatives continous to rise every year but
with poor global economic conditions create a demand for the premium beverage price decreased.
Consumers will be more price sensitive and will switch to other product or even other segment.
The currencies in one country also affect the buying power from one to other country.

4.

Threat of substitution
Nearly the same benefits offered by each type of alternative beverages to make each product, can
substitute each other as in sports drinks and vitamin-enhanced beverages.

5.

Supplier power
The number of suppliers in the alternative beverage industry is large. These supplier consist of an
ingredient makers, manufacturers of alumunium cans, plastic bottles and caps, label printers and
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Case 2 : Competition in Energy Drinks

March, 4th 2015

Strategic Management (64 International A)

Sheena T. Gabriela Rombang
Tarsisius Hani Handoko, Dr., M.B.A.
14/372753/PEK/19525
secondary packaging material except for unique supplements like taurine which only a few
suppliers. Therefore, suppliers are more aggresive in offering partnership in providing business to
alternative beverages company, especially secondary packaging material suppliers.

Identifying Opportunities and Threats

A. Pepsi
Opportunities

Huge market in the healthy products &

growing market for specialized foods for
ethnic groups.

Distinctive name, product & packaging.

Internet promotion (banner ads &

keywords) can increase their sales & more
computerized manufacturing & ordering
processes can increase their efficiency.

High U.S. FDA standards eliminate

overnight competitors.

Broadening of Product Base.

Growing Savory Snack and Bottled Water

market in US

Threats

More expensive products than Coke, such

a high price may limit lower income families
from buying a Pepsi product.

Not entirely patentable, constant

replicable by competitors.

Technological : Computer breakdowns,

viruses & hackers can reduce efficiency &
must constantly update products or other
competitors will be more advanced,.

Very elastic demand, almost pure

competition.

B. Coca-cola
Opportunities
The increasing number of consumer lifestyles
will softdrink.
The distribution of products that are easy to
many regions because of the extensive
network.
Cooperation with various parties, such as:
Mc.Donald, KFC
Development of new types of food products.
The growth of advertising on the internet
because internet usage has increased.

Threats

More expensive products than Coke, such

a high price may limit lower income families
from buying a Pepsi product.

Not entirely patentable, constant

replicable by competitors.

Technological : Computer breakdowns,

viruses & hackers can reduce efficiency &
must constantly update products or other
competitors will be more advanced,.

Very elastic demand, almost pure

competition.

Conclusion and Recommendation

Alternative beverage industry already mature, the competition on this industry is very tight with
so many major players that compete in several segments. Each player has their own strategy to
compete in this industry but the common strategies to compete in this industry are price, taste,
ingredients, volume and product diversification. From this case we recommend that each
company should be aware about changes that occurs in general and competitive environment by
using PEST, Porter five competitive forces, and try to create a scenario planning to face both best
and worst situation.
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Case 2 : Competition in Energy Drinks
March, 4th 2015