Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Team 2 - Competition in Energy Drinks, Sports Drinks,and Vitamin-Enhanced Beverages

No description
by

Zach Noyes

on 21 February 2013

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Team 2 - Competition in Energy Drinks, Sports Drinks,and Vitamin-Enhanced Beverages

Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages Macro-Environment Political Technological Sociological Economic Case Overview In the mid-2000’s alternative beverages were extremely popular.

Market share among producers of energy drinks, sports drinks, and vitamin enhanced water were at an all-time high exuding premium prices which consumers were willing to pay.

In 2008 the United States fell into a recession.

Coca-Cola and PepsiCo. relied on their respective distribution chains to maintain sales.

2008 and 2009 sales of:
-sports drinks fell 12.3%
-vitamin enhanced water fell 12.5%
-energy drinks increased 0.2%.

Blame is placed on market maturity. Industry Issues Health risks (arrhythmia & insomnia)
caffeine!!
Energy shot caffeine was not regulated by the FDA
Relaxation drinks (Vacation in a Bottle) contained hormones (human)
Sprite + Cough Syrup = Sizzurp
Caffeine + NoDoz = Seizures
Energy drinks + Alcohol = Bad News Industry Leaders PepsiCo Coca-Cola Red Bull GmbH Hansen Natural Corporation •Serious Player - 2010 world’s 4th largest food and beverage company; $43 billion in sales.
•Globalization - brands sold in 200 countries
•Product Lines - 2009 was the largest seller of beverages in the united states and Frito-Lay was four times bigger than its closest competitor
•Dominate - PepsiCo. upset Coca-Cola to become the largest seller of beverages in the U.S., not by selling more carbonated drinks, but by leading other beverage categories.
o Frappuccino - #1 ready-to-drink coffee
o Aquafina –#1 Bottled Water brand (sales)
o Tropicana- #1 Orange Juice brand (sales)
o Gatorade held commanding lead in sports drinks (75% market share)
•Strength in non-carbonated beverages made it the world’s largest seller of alternative beverages
(2009 market share of 26.5%, Coca-Cola @11.5%)
•Innovation – Produced more flavors and varieties of alternative beverages
o 12 flavors of Amp energy
o 2 flavors of No Fear energy
o 2 types of SoBe Adrenaline Rush
o 28 varieties of SoBe vitamin enhanced beverages
o Frappuccino Double shot energy drinks
oCharge energy, Rebuild Black Tea, Defend, and Bloodshot juice
•Multiyear distribution agreement with Rockstar energy drinks SWOT Industry SWOT Strengths
• Consumer demand for new and exciting products is relatively high
• Trends in health cause consumers to be open to new products
• Hitting targets = $$$
• Suppliers of secondary packaging materials aggressively compete for business with large producers
• Mass differentiation while maintaining quality

Weaknesses
• Competition has been focusing on markup prices, and brand image
•The economic recession reducing purchasing power of average individuals
•Consumers have begun looking for deals

Opportunities
• Increasing numbers of minority populations present avenues of new tastes and prospective flavors to introduce to the market
• Health food crazes have presented the opportunity to be the healthiest drink on the market
•Value is becoming more important. What will the consumer get out of buying your brand?
• New innovative products mean new market segments

Threats
• Increasing competition may lead to similar drinks and monotonous feelings about products
• New manufacturers who can beat prices of current distributors
• Health risks are out in the open Strengths:
-World’s 4th largest food and beverage company.
-Located in more than 200 countries.
-Owns the bestselling bottled water, ready to drink coffee, orange juice, and sports drink (Gatorade) in the United States.
-Has 14 energy drinks, 28 vitamin waters, and 75% of the market share of sports drinks w/ Gatorade.
-Extremely strong brand recognition

Weaknesses:
-Low brand awareness with SoBe and Amp (consumers are unaware these are Pepsi products)
-Trends that were predicted to be hits in 2011 and 2012 have not been.
-Innovation

Opportunities:
-Increase marketing across different channels (energy drinks to adults, sports drinks to the less active)
-Introduce a 2oz or even a 5oz energy shot to compete with 5-Hour and Mio.
-Continue to promote their Tea-energy line.

Threats:
- Coca-Cola
-Global expansion could be halted by the potential for more economic turmoil.
-Market maturity SWOT Strengths:
-World’s largest manufacturer, marketer, and distributor of nonalcoholic beverage concentrates.
-World leader in carbonated bev sales.
-Called the “world’s most valuable brand”
-Excellent global distribution system
-Market presence in Asia, highest alt bev sales.

Weaknesses:
-Struggling to build market share in alternative beverages, still 3rd largest seller of alt beverages in US.
-Trailed Pepsi in all segments of alternative beverages.
-Very poor market share in Europe

Opportunities:
-Increased brand awareness in Europe.
-Compete with Gatorade and Amp by increasing awareness of Powerade, NOS and Full Throttle.
-Peace time in most of Africa gives Coke a chance to build a brand image there.

Threats:
-Changing consumer preferences due to market maturity.
-Large amount of protests in foreign countries (drinking water) (bad publicity)
-Infrastructure. • Serious Player- world’s leading manufacturer, marketer, and distributor of non-alcoholic beverages with 2009 sales at nearly $31 billion.
o World’s most valuable brand (Coke)
o 2009- third largest seller of alternative beverages in the United States
• Globalization - more than 200 countries
o Global bottling distributors
o Country and region specific beverages
 Europe- Bonaqua sparkling water
 Japan- Georgia ready-to-drink coffee
 Latin America- Hugo fruit and milk protein drinks
• Product Lines – Coca-Cola, Diet Coke, Fanta, and Sprite ranked top 5 best-selling non-alcoholic beverages worldwide in 2009.
• Dominate- global distribution ( independent bottlers, semi-independent bottlers, and company owned bottlers) made for an “unstoppable international powerhouse”
• Innovation – rebuilding market share in 2009 and 2010 centered on new product development and the introduction of existing brands into new country markets
o 2009 - glacéau vitaminwater is introduced in 9 countries:
 Africa, France, South Korea, Japan, Belgium, Portugal, Hong Kong, China and Sweden
o 2009 – region specific drinks
 Cascal- fermented fruit drink to U.S.
 Burn energy- India
• Multi-year distribution agreement with Hansen Natural Corp.
o United States
o Canada
o Six European countries Red Bull Gives you Wings • Serious Player- in 2009 world’s number one seller of energy drinks
o Third largest producer of alternative beverages worldwide
o Second largest seller of alternative beverages in the United States and Europe
o Combine sales of Powerade, Full Throttle, NOS, TaB, Rehab, glacéau vitaminwater, and Fuze
• Globalization – Launched in Austria in 1987 sold more than 1 million cans
o Company expanded to Hungary and Slovenia in 1992, Germany and the UK in 1994, United states in 1997
o 2010- exported to more than 160 countries
• Product Lines – Red Bull only produced 4 products
o Red Bull Energy Drink (original)
o Red Bull Sugarfree
o Red Bull Cola
o Red Bull Energy Shots
• Dominate – Sponsored or endorsed almost every high energy sport world wide
o Auto racing to free style biking to wakeboarding to snowboarding and golf
o Hip Hop and hard rock music concerts
o Soccer teams
 NYC, Salzburg, Austria, Leipzig, Germany, São Paulo, Brazil
o Hockey team
 Salzburg, Austria played under the Red Bull name
• Innovation - good times and good feelings
o Flugtag (flight day)
• Other
o 3.906 billion cans shipped in 2009
o 3.921 billion cans shipped in 2008 SWOT • Serious Player- launch of Monster Energy drinks in 2002 revenues to $180 million and profits from $3 million to $20 million in 2004.
o Second best-selling energy drink in the United States in 2009
 Annual revenue $1.3 billion
 Net earnings $208 million
• Globalization
o HNC contracts Coca-Cola to distribute Monster Energy drinks in Great Britain, France, Belgium, the Netherlands, Luxembourg, and Monoco
o Entered into distribution deals with in Mexico and Australia to make it available there
• Product Lines – all energy all the time- Monster Energy Drinks accounted for 90% HNC revenues in 2009
o Monster Energy, X-Presso Monster Hammer, Nitrous Monster Energy, Monster Hitman Energy Shooter, Hansen Energy Pro, and Lost Energy
o Juices and Teas
 Peace Tea, Rumba, Samba, Tango energy
o Blue Sky natural sodas, SELF Beauty Elixir
• Dominate – outsourcing
o 100% of its production of energy drinks and other beverages outsourced to contract bottlers in the U.S.
 Distribution in the U.S. was 50-50 between Anheuser-Busch and Coca-Cola.
• Innovation- Follow the Leader (Red Bull)
o Decided to match Red Bull With 16oz containers (double of Red Bulls) but for the similar prices
o Marketing approaches through eye catching in store promos, point of sale materials
o Extreme Sports endorsements
 Snowboarding, BMX, skateboarding, skiing, snowmobiling, auto and motorcycle racing
o Teamed with Vans (sneakers) to co-sponsor music festivals
• Distribution
o Energy drinks can be found anywhere, but other HNC beverage brands were typically found only in health food stores SWOT Five Forces Rivalry Buyer bargaining power is strong.

The cost to switch is practically nothing because competitors price their products so closely to one another. New Entrants


Barriers to entry are low, making entry threats strong.

Distribution is an extremely important part of getting alternative beverages known and sold.

Companies are looking to tap into new geographic segments Suppliers Competition Among Suppliers is Strong.


Suppliers bargaining power is weak.

The suppliers are entirely dependent on the companies for much of their revenues. Buyers Substitutes Substitutes are strong.

Since buyer's bargaining power is so strong, it is inevitable that substitutes would follow the same pattern.

When it comes to alternative beverages, especially energy drinks, good substitutes are readily available for a very competitive price.
Energy drinks are not regulated by the USDA.

The USDA classifies energy drinks as a dietary supplement.

The company producing the beverage regulates exactly how much caffeine is to be added. In any given energy drink there is between 80 and 500 milligrams of caffeine.

There are 100 milligrams in an 8oz. cup of coffee.

The USDA has a set limit for the amount of caffeine that can be out into soft drinks at 71mg per 200 parts. The average can of Coke has 35mg. The 2008 recession in the United States hit the alternative beverage industry particularly hard.

Consumers started to see the prices of alternative beverages as too high.

There was a direct correlation between the decline in the United States and the decline globally, in alternative beverage consumption.

Carbonated soft drink sales fell every year between 2005 and 2009. Health factors play a significant role in social forces pertaining to alternative beverages, particularly energy drinks.

Reckless behavior, mild heart problems, insomnia, effects of mixing the product with alcohol, and physician’s warnings all became featured news stories.

Consumers were demanding innovation. Technological advances included ways companies utilized the internet to promote brand image.

Factors such as new and/or improved chemicals that can be used in products to promote health and lower calories. Financial Analysis Year Ending -> Dec 31, 2011 Dec 25, 2010 Dec 26, 2009 Dec 27, 2008 Dec 29, 2007
Return on sales
Gross profit margin 52.49% 54.05% 53.51% 52.95% 54.30%
Operating profit margin 14.48% 14.41% 18.61% 16.09% 18.19%
Net profit margin 9.69% 10.93% 13.75% 11.89% 14.33%
Return on Investment
Return on equity 31.29% 29.86% 35.38% 42.47% 32.83%
Return on assets 8.84% 9.27% 14.92% 14.29% 16.34% PepsiCo Strengths:
-Top seller of energy drinks in the United States and Europe.
-3rd largest seller of alternative beverages in the United States and Europe.
-Promotes products through various unique sporting events.
-Easily recognizable slogan.

Weaknesses:
-Privately held, limits their ability to raise capital.
-Strongly focused in the teenage demographic.

Opportunities:
-Increase growth by producing other types of beverages with the Red Bull name.
-Establish a market presence in Asia and South America.

Threats:
-Health risks associated with energy drinks.
-Emergence of larger brands in the energy drink market.
-Smaller competitors such as GlaxoSmithCline, who only sell energy drinks in Europe, taking away market share. Strengths:
-Multi-year distribution agreement with Coca-Cola to distribute Monster Energy drinks.
-Producer of the 2nd best-selling energy drink brand in the United States.
-Brand Awareness in the health food market.

Weaknesses:
-Relies on Monster for 90% of sales.
-Outsources 100% of its distribution (both strength and weakness)

Opportunities:
-Expand on the Hansen Natural brand

Threats:
-Bad press – recent studies show the negative effects high amounts of caffeine have on the body.
-Expansion of the energy drink segment by larger companies (Coke and Pepsi) Coca-Cola Year Ending -> Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007
Return on sales
Gross profit margin 60.86% 63.86% 64.22% 64.39% 63.94%
Operating profit margin 21.82% 24.06% 26.56% 26.44% 25.13%
Net profit margin 18.42% 33.63% 22.02% 18.18% 20.73%
Return on Investment
Return on equity 27.10% 38.09% 27.52% 28.37% 27.51%
Return on assets 10.72% 16.19% 14.02% 14.33% 13.82% Hansen Natural/ Monster Beverage Corp. Year Ending -> Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007
Return on sales
Gross profit margin 52.50% 52.20% 53.60% 52.10% 51.70%
Operating profit margin 23.40% 23.36% 25.76% 13.83% 22.52%
Net profit margin 14.67% 14.24% 15.94% 9.13% 14.56%
Return on Investment
Return on equity 29.23% 25.60% 35.68% 24.76% 35.39%
Return on assets 21.01% 18.49% 26.09% 14.18% 27.43% Recommendations PepsiCo.

• Focus advertising dollars on their current energy drink line.

• Innovation.

• Continue to promote their Tea and juice-energy lines.

• Expand beyond their current energy drink line of Amp and
No Fear by offering different sized cans.

• Continue to distribute Rockstar energy drinks. Coca-Cola • Increase alternative beverage drink brand awareness
in Europe.

• Continue to implement their “2020 Vision” corporate
strategy.

• Increase infrastructure in Africa.

• Continue to budget.

• Capture Europe’s energy drink market. Hansen Natural/ Monster Beverage Corp. •Expand on the Hansen Natural Brand.

•Address their public image. Red Bull GmbH • Branch out with additional lines of
alternative beverages.

• Expand market penetration in South America. Sources bevindustry.com/polls/29/results

brafton.com/news/a-genius-content-strategy-give-red-bulls-marketing-wings.

businessweek.com/magazine/content/11_22/b4230064852768.htm

Coca-Cola.com

Financials.Morninstar.com/ratios

Monsterenergy.com

PepsiCo.com

Redbullusa.com

Thompson, A.A. (2012). Competition in energy drinks, sports drinks, and vitamin-enhanced beverages. Crafting and Executing Strategy, 18th ed, C75-C87. Since the Case Team 2
Jordan Berthiaume
Zach Noyes •Sales declined 13% in emerging and developing markets in 2012.

•Sales declined 21% in AMEA in 2012. (Asia, Middle East, Africa)

•Organic growth of 7% in Europe in 2012.

•Vastly increased the Gatorade line.

•Hired Weber Shandwick.

•Introduction of Kick-Start, a breakfast energy drink. PepsiCo. Coca-Cola •Sponsorship of the Lotus F1 Team
with Burn Energy Drink.

•Holding true on spending $5 billion
in India. Burn is produced in India.

•Coca-Cola Africa Foundation. Red Bull GmhB •Improved product efficiency.

•Red Bull Total Zero.

•Currently building a plant in
Brazil. Hansen Natural Co. •Official change of name to
Monster Beverage Corporation.

•Still is linked to many deaths. Entry Threats are Strong.
Rivalry between competitors is strong.


Between 2008 and 2009 buyer demand for alternative beverages began to slow in growth rate as a whole.

The products these companies offer are very weakly differentiated.

Monster is directly modeled after Red Bull.
Coca-Cola and Pepsi are in constant competition. Corporate Strategy
&
Future
Vision Coca-Cola “2020 Vision”

Thought of by the Board of Directors in 2009

Implemented in 2012

Goal is to spend $30 billion to gain an increased market share globally.
-$5 billion in India.

Painting South Africa Red campaign
Coca-Cola wants to double their annual revenue from $100 billion (2012) to $200 billion (2020).

Coca-Cola also strives on their relationship with local “mom and pop” shops and boosting local economies. PepsiCo. “Performance with Purpose”

Delivering sustainable growth by investing in a healthier future for people and our planet.

Broad array of choices

Healthy, convenient, and fun

Increased global expansion … $500-600 mil.
Long term growth for shareholders, increasing returns in the form of higher dividends and share repurchases.

Local relevance (red-caviar potato chips is Russia) Hansen (Monster Bev. Corp.) Expand the Monster Energy brand into new international markets with additional launches in South America, Central and Eastern Europe, and Asia. Red Bull GmhB Although there really isn’t any sort of strategy listed for Red Bull they have a top notch advertising campaign with their “gives you wings” marketing strategy. http://www.bevindustry.com/polls/29/results Marketing
Profiles Energy Drinks: Teenagers

Vitamin-enhanced: Health conscious adults.

Sports drinks: Athletes/Strenuous activities.
Full transcript