Structure and Competition in the Soft Drink Industry

This work is designed to study what sort of soft drink industry, a major area of the global beverage industry. The research will provide an release of the soda industry. Using Porter's "5 Forces" framework, the research looks for to map the framework of the industry. The research will further evaluate the macro-environment of the industry using the PESTEL platform to identify changes in the industry. In addition, the study seeks to recognize the structural motorists of change within the industry. The analysis undertaken intends to focus also on learning about the current level of industry life routine and what are the driving features that produce this industry worthwhile.

From the above scenarios, the research will identify the most likely scenario for future years of the industry

INTRODUCTION

The Soft Drink Industry involves establishments primarily engaged in making non-alcoholic, carbonated beverages, mineral waters and concentrates and syrups for the production of carbonated beverages.

Principal activities and products:

Aerated waters;

Carbonated beverages;

Mineral and springtime waters;

Soft drink concentrates and syrup; and

Soft drink preparation carbonating. (Hrsdc, 2005)

The soft-drink battleground has changed toward new international markets. While after the USA, Australia, Japan, and American European countries were the dominating soft-drink markets, the development has slowed down dramatically, nevertheless they remain important marketplaces for Coca-Cola and Pepsi. However, Eastern European countries, Mexico, China, Saudi Arabia, and India have grown to be the new "hot places. " Both Coca-Cola and Pepsi are forming joint bottling projects in these nations and in other areas where they see growth potential. (Fargos, 2005)

Soft drinks will be the largest beverage market portion in the global market and are forecasted to reach approximately $550bn in 2013 (business insights, n. d).

The key players in this industry are:

Coca -Cola Company

Pepsi Co

Cadbury

Nestle

Porter Five Forces

C:\Users\Admin\Desktop\cs soft beverages1\porters_five_forces. png Source - Porter(2004)

Bargaining Ability of Potential buyers :

Different level of bargaining power can be found among the band of buyers :

Vending machine - no buyer bargaining power

Fast food string- more bargaining power

Bargaining Electricity of Suppliers

Bargaining power of suppliers is weakened. The ingredients are easily available and there are many suppliers, lowering company's turning cost. Many substitutes for sugar can be utilized like corn syrup, sweetener.

Threat of Substitutes

The threat of substitutes can be reduced by extending the merchandise such as non carbonated drinks like juice, tea, espresso and plain water. Alcohol is a hazard too esp. as these businesses don't manufacture alcoholic beverage. But due to interpersonal, time and health constraints it's moderated.

Rivalry among Fighting Firms

one could characterize the soda market as a duopoly between Coke and Pepsi, leading to positive economic earnings. There is extreme rivalry between coca-cola and Pepsi. there is no price differentiation and consumer does not have any brand commitment.

Threat of New Entrants

It would be nearly impossible for a new bottler to get into the industry due to tremendous market presence of Coke, Pepsi, and some others. Soda industry require significant capital investment, which would deter admittance. Further existing bottlers had

exclusive territories where to send out their products

PESTEL ANALYSIS

Political Factors

Non-alcoholic beverages fall within the meals category under the FDA. The federal government plays a job within the procedure of manufacturing these products in conditions of regulations. A couple of severe penalties arranged by the government on companies if they make an effort to violate the laws. (Pbawa, n. d. )

Economic Factors

There is a deep impact of Downturn on Soft drink industry. If cost of organic material rises than creation costs will increase. The companies are vulnerable to exchange rate fluctuations, producing a drop in profits through forex earned versus production investment.

Social Factors

Many people are concerned about their much healthier lifestyles. They are really switching to water in bottles and diet colas rather than beer and other alcoholic beverages. Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. They are becoming more concerned with increasing their longevity

Technological Factors

The new technology of internet and television set designed to use special results make some products look attractive. This can help in offering of the merchandise. Advantages of cans and plastic bottles have more sales for Coca-Cola as they are easier to carry. As the new technology in presentation system grow the production higher.

Environmental Factors

Soft drink industry degrade the surroundings by transport and energy wastage, industries production and misuse process. They must have more friendly to the environment products and practices now. While coca cola and pepsi both are emphasizing on recycling of cans.

Legal Factors

Legal restrictions are placed set up so that companies' products do not fool and damage the consumer. Companies are required to aware the consumer about negative health impact of

Soft drink and also point out the ingredients and alert on product.

Structural Motorists of change

Social/demographic

The consumer has slowly and gradually become more health mindful. . Changing consumer demographics resulting in changing consumer tastes and increased demand for healthier products. There is a increased in competition from other non-alcoholic beverages, such as energy beverages and sports beverages.

Packaging and distribution

The most soft drinks are sold in aluminium cans and Family pet plastic bottles. Also, they are sold in volume through soda pop fountains. Bottles, the majority of which comprise Family pet plastic, Only a very small portion of soft drinks remain packaged in a glass bottles. Companies are trying to make presentation more eco friendly such as much companies have introduced re-sealable packs which may be resealed after taking in.

The industry distributes its products through supermarkets and food markets, drug stores, convenience stores and gas outlet stores, mass merchandisers and warehouse outlets. The foodservice and hospitality industry, specifically fast food outlets, is another method of circulation. Vending machines provide a distribution channel for the products. Now the companies can immediately sell to the buyer, reducing their reliance on distributors, lowering costs and heightens direct connection with the consumers. (Hrsdc, 2005)

Industry Life Cycle

The soft drinks market is now in the matured level of the life cycle. Growth in the industry has remained stagnant. It really is natural for product to visit in decline level but coca cola and Pepsi

Delay this drop by constantly expanding the merchandise or brand to be able to increase the cycle.

Coca Cola has maintained its leadership for quite some time. The real reason for is the fact it constantly growing its brand image and reinforcing the main product good thing about preference and refreshment to ensure that brand remain in maturity stage. . As with a mature industry, it is characterised by high competition, price wars and competitive advantages through economies of range. Just as their home market is saturated so many companies are now turned towards abroad markets. Other ways to extend the merchandise in a life cycle is to adapt it as consumer 's needs change. For instance when consumer's attitude towards health and diet is changing than coca cola has released diet coke. Also these companies have intense and high advertising spends to be able to maintain a reminder of these products in the brains of the consumers. (Irish Times, 2000)

Future Scenario

The soda industry can have 3 possible scenarios in its long-term future that happen to be as follows:-

Health conscious

Now days and nights consumer tend to be worried about their health. Individuals are also aware of the negative health impact of soft drinks (esp. carbonated), like minimizing bone density, overweight etc. So consumers are looking to the healthier choices. So may be the soft drink industry will decline or will be rooted out of the market. Due to the negative image of the soda industry, there could be some restriction or limitation on supply just like hard drink industry. There could be age or number limitation like in alcoholic beverages or tobacco. This might lead to drop of sales for soda industry. Or it might carry on at the same rate as now with constant and predictable growths. There already is a growing demand for healthy juices, fruits drinks, cereals etc. thus the industries should continue product invention and expansion of the products.

Diversification and Market share

As saturation is taking place in soda industry, companies begins diversifying into new product categories and marketplaces. Also, developing a diverse product line can make the industry very stable, which is appealing to investors and collectors.

Soft drink industry could diversify into many section. . . So they have to diversify based on the consumer needs. Kids portion will be another market that companies will directly begin to target because this is the market where soda industry get the majority of it sales. So there could be low calorie refreshments that can do good for the kids and will be the trend in all households. Soda industry also diversify on alcohol consumption. They will make the combo of little percent of alcoholic beverages with soda which has already been popular to entice the hard drink customers. As alcoholic beverages is a substitute threat for soda this would minimize their risk.

Another Possible future is, to grow their global market talk about. That is very important to maintain since it is the source of the majority of their profits. If they lose global

market show, their gains will decline substantially. So soft drink should take over the local drinks in various countries. Each country has its local product based on traditional flavours and preferences. The soft drink companies could increase into this new market too. So soda industry should acquire local companies and processing these drinks on the mass scale.

Special drinks

By continually adding new products, soft drink industry can increase their gains and allow the organization to keep to grow. They must introduced special beverages to attract the client. The global soft drinks market is estimated to reach a value of around $ 49. 9 billion by the end of 2014. Much like all functional carbonated drinks (FSDs), the initial target segment who primarily bought this idea - 16 to 30 season olds - are getting older and entering another type of lifecycle that requires less energy excitement.

Maintaining desire for the sports refreshments sector will be essential in order for steady growth to continue. Sports drinks blood sugar enhancing refreshments and others that specifically enhance certain needs of the body Along with new and impressive flavours, which also require an even of familiarity and recognition is very important to rivalling in the saturated soft drinks industry. Consumers also want to note that the product is naturally good for them. The greater portions of super fruit or vegetables a glass or two contains so that it tastes good over a normal soft drink

. PROBABLY Scenario

The probably scenario would be the diversification and growth for future years of the industry. As this industry has already been in saturated level so this situation will be very helpful. You will see some level when people get uninterested in the carbonated drinks. . Diversification and enlargement will generate more opportunity for innovation, profits and new market in these sectors individually by showing of customers and resources and also improve performance of the key industry.

If the industry wishes to keep moving and doesn't want to slipped in decrease level than industry have to look at the diverse and broaden strategy in other sections to keep income going.

. REEFERNCES

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