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Transcript of Strategic Management
Sports Drinks, and Vitamin
Case Study 2
Threat of Substitutes
Switching costs are low.
There are many substitute products available such as tap water, juice, tea, coffee.
Substitutes don't fully replicate consumer wants.
Threat of substitutes is weak to moderate.
Drivers of Change
The economic downturn
Change in the level of sales achieved due to the economic crisis and the high prices associated with alternative beverages.
Increase health awareness of consumers
People are more health-conscious and are made aware of the many health related issues associated with the consumption of energy drinks, sports drinks and vitamin-enhanced drinks.
New products and the enhancement of existing products
Customers changes in preferences and lifestyles has caused them to move away from carbonated soft drinks and other beverages to more energy drinks.
Group Strategic Map
Having a Goal
and Achieving it
Leading in most beverage categories in the US such as Aquafina for mineral water, Frappuccino for ready-to-drink coffee, Tropicana for orange juice and Gatorade for sports drinks.
Strong distribution and broader product line.
Weak presence in the energy drinks market.
International Markets. New product development.
Decline in carbonated sales. Others stronger in the energy market.
The world’s most recognizable soft drinks brand
Strong distribution channels
Weak presence in the alternative drinks market place
Expand their alternative product line/ create new products
Enter European market
PepsiCo dominating alternative beverage market.
Increasing trend for healthier beverages
Overall macro environment.
The soft drinks industry is changing. Consumer wants are changing.
Significant profit is available, but only to those who can meet consumer demand, both nationally and internationally.
Lifestyles are changing. Consumers are more educated and concerned about health issues around food and drink consumption. Carbonated drinks market is set to decline.
New, innovative, differentiated, consumer responsive products are required. Only those who can meet consumer needs effectively will succeed.
THANK YOU FOR WATCHING
Economic crisis and decline in sales 2009
Perceived health risks to consumers.
Global beverage industry projected to grow from $40.2 billion in 2009 to nearly 53.5 billion in 2014.
International market potential.
Innovation and creativity.
Product line expansion.
Threat of new entrants
High price point make them an attractive segment for both new entrants and established companies.
Steady growth in purchasing power in developing countries/ new markets.
Distribution channels expensive to establish.
Threat of new entrants is moderate to strong.
Bargaining power of buyers
Strong demand for goods
Bulk buyers like convenience stores charge slot fees.
Some seller’s brand are strong.
Seller’s product delivers results which are moderately important to buyers.
Buying power of buyers is weak to moderate.
The U.S. Food and Drug Administration forced the removal of energy drinks containing alcohol.
Recession in the US caused the US beverage industry to decline in sales.
Sales in sports drinks declined by 12.3 % between 2008 and 2009, and the sales of flavored and vitamin-enhanced waters had declined by 12.5% over the same period.
Decline has been offset by increased purchasing power in the developing countries.
Growth in purchasing power of consumers in developing countries is expected to contribute towards industry growth.
Consumers are continuing to develop preferences for bottled water, sports drinks, fruit juices, ready-to-drink tea, vitamin enhanced beverages, energy drinks, ready-to-drink coffee, and other types of beverage
Caffeine content of energy shots and energy drinks has previously not being regulated by the US Food and Drug Administration and could contain as much caffeine as the producer thought appropriate.
Health reports critical of certain ingredients in the some alternative drinks.
We hope you've been
Geographical Share of Alternative
Beverages Market 2009
United States 42.3%
(Total Dollar Value in 2009 $40.2 Billion)
Us Beverage Industry Volume Sales
By Segment 2009
Carbonated Drinks -2.33%
Bottled Water -2.7%
Sports Drinks -12.3%
Vitamin Drinks -12.5%
Energy Drinks 0.2%
KEY SUCCESS FACTORS
Innovative products lines
Strong and Dynamic Marketing
Highly recognizable brands
Efficient distribution Channels
Excellent marketing campaign; they've 'got wings'
World’s number one seller of energy drinks
Narrow product line
Expensive distribution channels
Diversify their line of beverages to capture wider market
Geographical expansion into Asia-Pacific area
Criticism of energy drinks mixed with alcohol
Restrictive legislation on energy drink caffeine content
Rapid growth since launch of Monster Energy drink in 2002
Weak international brand recognition
Reliance on contract bottlers
Reliance on others for distribution, one of which is Coca-Cola.
European market, other international markets
Restrictive legislation on energy drinks
Worldwide Market Share of Alternative
Beverage Market, 2009
Company Worldwide USA Asia-Pacific Europe
PepsiCo 26.5% 47.8% 12.4% 12.9%
Coca-Cola 11.5% 10.2% 13.7% NA
Red Bull 7.0% 10.6% NA 10.1%
Others 55.0% 31.5% 73.9% 77.0%
Market Share for Leading Energy Drinks Brands in the USA, 2009
Brand 2006 2007 2008 2009
Red Bull 43% 35% 40% 40%
Monster 15% 23% 23% 27%
Rockstar 11% 11% 12% 8%
NOS NA 2% 2% 4%
Amp 4% 5% 8% 3%
Develop its own energy 'shot' brand.
Purchase or form stronger alliance with Rockstar company
Improve product line and increase product innovation.
Increase focus on current international markets, but include Europe.
Red Bull GmbH
Expand product line.
Become a public company
Invest in distribution channels
Hansen Natural Corp.
Increase brand recognition.
Purchase bottle companies and invest in distribution channels