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Alternative Drink Competition

Case 5 - Competition in Energy Drinks, Sports Drinks, and Vitamitn-Enhanced Beverages
by Raul Gonzalez on 12 September 2013

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Transcript of Alternative Drink Competition

Alternative Drink Industry
Case 11 - Competition in Energy Drinks, Sports Drinks, and Vitamin-Enahanced Beverages
Doris Acosta
Clifford Vilbon
Pilar Reyes
Raul Gonzalez
Lianeth Abelleira
Rosy Alfonso
BY:
Alternative Drink Industry
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.
Industry Overview
In the beverage industry competition is extensive. There are many substitutes beverages from tea, soft drinks, and bottled water, fruit juices. Even though there are many substitute products everywhere in the US many decide to buy alternative beverages. Since they are so many substitute beverages, when customer change their preference it weakens the competitive power of substitute beverages.

Because of their large purchases Convenience stores, grocery stores and wholesale club buyers have a significant influence in the negotiation of the pricing and slotting fees with the producers
Competition in the Alternative Industry
Convenience stores, grocery stores and wholesale clubs find it hard for to represent new brands due to limiting self-space. When products are already popular such as red bull or coca-cola offering a wide variety of products that convenience stores, grocery stores, and wholesale clubs wish to offer to consumers.

Coca-Cola and PepsiCo were least vulnerable since they offered a wide variety of beverages.

The bargaining power and leverage of suppliers was the weakest competitive force.

The threat of new brands varies by market maturity of each alternative beverage category.
Competitive alternative beverages (optional) Competition grows stronger by the year.

Primary focus on brand image
Attractive packing
New product research and development
Increase of distribution capabilities
Better taste
Variety
Strongest:
Competitive Rivalry
within the Industry
Strongest Competitive Force
Weakest: The bargaining power and leverage of suppliers was the weakest competitive force. Customers tend to buy more optional products.
Weakest Competitive Force
Competitive Forces
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?
Rivals expand the number and types of alternative beverages in their product lines

Low switch cost for consumers.

Seller great efforts to establish consumer brand loyalty.
Attractiveness to potential entrants
Competition is strong and will keep on growing every year in the product line.

Competition among all brands center mostly on:
Brand image
Attractive packing
New product,
New product research and Development
Sales promotions
Better access to self-space
Strengthening distribution capabilities.
(Continued)
(continued )
(Continued)
How is the market for energy drinks, sports drinks and vitamin-enhanced beverages changing?

What are the underlying drivers of change and how might those forces individually or collectively make the industry more or less attractive?
Industry Changes
Drivers of Change
New entrants
Rapid growth
Innovation in flavors and formulation
Marketing innovation and distribution system
Expanding target market
Increase regulation and attention to ingredients by stakeholders
What is driving those changes?
The global beverages industry was projected to grow
The high growth of purchasing power in developing countries
Increase in demand in developing countries
Widening Market to include adult parents and office workers

New entrants are stifling profits
Changes in the industry’s long-term growth rate:
Product and marketing innovation can make the industry more attractive by differentiation the product
In order to maintain premium pricing industry has had to continually innovate the product
New Entrants into the market are also driving product and marketing innovation in order to compete
Product and Marketing Innovation
Globalization was projected to increase through 2014
Analysts believed that Europe, Australia, South America, and the Middle East were attractive markets of energy shots.
Poor economic conditions in US because there is a global economic crisis that makes the consumer becomes more price sensitive
Increasing
Globalization
The content of energy shots and energy drinks was not regulated by the U.S FDA
The high caffeine consumption was heart arrhythmia and insomnia.
Monster Energy placed warning on its labels
The concern of the relaxation drink within the alternative beverage
the consumption of relaxation
The FDA warned against the use of kava and valerian root as a food additive
Regulatory influences and government policy changes
Consumers shifted from carbonated soft drink to alternative beverages
Health concerns from physician
Physicians also warned that the combination of energy drinks
Changing
societal concerns, attitudes, and lifestyles

•Product innovation and differentiation
•Product Image and Brand recognition
•Efficient distribution system
•Volume and market share
KEY Success Factors
M
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C
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Product innovation and differentiation
Product Image and Brand
Efficient distribution system
What key factors determine the success of alternative beverage producers?
6. What recommendations would you make to Coca-Cola to improve its competitiveness in the global
alternative beverage industry?

To Pepsi Co?

To Red Bull GmbH?
What does your strategic group map of the energy drink, sports drink, and vitamin-enhanced beverage
industry look like?

Which strategic groups do you think are in the best positions? The worst positions?
Conclusion
Competition in the Alternative Drink Industry
World Wide Market
US Market
Percentage of Top Brands
Percentage of Top Brands
# of Brands
** Other actually contains 440
some of which may belong to Pepsi or Coca-cola
** Other actually contains 440
some of which may belong to Pepsi or Coca-cola
Strategic Maps
# of Brands
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