Dhiani Dyahjatmayanti

Nadia Karina
R. Susetyo Fajar Kusumo
CASE OVERVIEW
Alternative
beverages (energy
drinks, sport drinks,
and vitamin-
enhanced beverages)
industries were the
stars of the beverage
industry during the
mid-2000s.
Alternative
beverages become
an important part of
beverage
companiess lineup
of brands as a result
of rapidly growth
along with premium
price & high profit
margin.
Beverage producers
had made various
attempts to
increasing the
market size for
alternative beverages
by extending exist
product lines and
developing new one.
CASE OVERVIEW
Some others also
moved to capture
demand for new
relaxation drinks.
Beverage
producers even
have to face with
the criticism that
their products
contain health risks
for consumers.
The most primary
concern of many
beverage
companies was to
improve their
competitive
standing in the
marketplace to the
best.
MARKET SIZE
$1,581.7
billion
458.3
billion
of liters
Worldwide
U.S
2009
Total Market
Total Sale
48.2% carbonated soft drinks
29.2% bottle water
4.0% sport drinks
1.6% flavored water
1.2% energy drinks
Market Dollar Value
($ billions)
Volume Sales
(billions of liters)
Global 40.2 12.7
U.S 17 4.2
Asia-Pacific 12.7 6.2
European 9.1 1.6
GENERAL ECONOMIC CONDITIONS
Between 2008-2009, the premium-priced alternative
beverage market had been hit especially hard by the
lingering economic downturn in the U.S.







Market maturity & poor economic conditions caused the
U.S beverage industry to decline by 2.1% (2008) & by
3.1% (2009)
Energy drink 0.2%
Sport drinks 12.3%
Flavored & vitamin-enhanced waters
12.5%
GENERAL ECONOMIC CONDITIONS
Industry Conditions in 2010
The global beverage industry was projected to grow
from $1.58 trillion in 2009 to nearly $1.78 trillion in
2014.
A great deal of industry growth was expected to result
from steady growth in the purchasing power of
consumers in developing countries, since the saturation
rate for all types of beverages was high in developed
countries.
POLITICAL, LEGAL, AND REGULATORY FACTORS
Health, safety,
competition,
consumer rights and
individual laws.
Regulations
Ingredients : the
caffeine content, not
use kava & valerian
root as a food additive
Advertising &
distribution policies
U.S. FDA
TECHNOLOGICAL FACTORS
Innovation in brands,
flavors, and
formulations was
expected to be
necessary for
supporting premium
pricing and volume
increases.
Industry analysts
believed that such
exotic flavors as
cardamon, hibiscus,
and cupuacu might
prove to be hits in
2011 and 2012.
THE FIVE-FORCES MODEL
OF COMPETITION
RIVALRY IS STRONGER

Rivalry Among Competing Sellers
Beverage 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.

Low switching costs on the part of consumers.

Active and aggressive efforts on the part of sellers to establish
consumer brand loyalty & strong emphasis on advertising, sales
promotions & endorsements

NEW ENTRANTS IS WEAKER
Potential New Entrants
There are many global brands (Coca Cola, PepsiCo, Red Bull, Hansens
Natural) with strong product differentiation & brand loyalty.
Restrictive government policies (FDA Regulatory).
Alternative beverage sellers also needed to have efficient
distribution systems to supermarket and convenience store channels
to be succesful in the industry
SUBTITUTE IS STRONGER

Competition From Subtitute

There were many substitutes to alternative beverages
such as tea, soft drinks, fruit juices, bottled water and
tap water.

SUPPLIERS
IS WEAKER
There are many supplier
ingredients & they fight to
sell the products.
Packaging is readily available
from many suppliers and is
commodity like.
Some rare ingredients
providers had a moderate
amount of leverage in
negotiations with energy
drink producers.
The producers are important
customers of suppliers and
buy in large quantities.
Bargaining
Power
of
Suppliers
BUYERS IS
STRONGER
Bargaining
Power of
Buyers
Consumers can obtain the products easily
and well-informed
High sizes of the regional markets for
alternative beverages.







Of all distributors, delis and restaurants
had low switching costs from brand to
brand, but had less ability to negotiate
for deep pricing discounts because of
volume limitations.
Country Percentage (2009)
United States 42.3%
Asia-Pacific 31.5%
Europe 22.2%
Americas (excluding U.S.) 4.0%
Total 100%
Which is weakest/strongest?
Suppliers Rivalry
INDUSTRY DYNAMIC ANALYSIS
THE CHANGE IN THE LONG-TERM
INDUSTRY GROWTH RATE
A great deal of industry growth
was expected to result from
steady growth in the
purchasing power of the
consumers in the developing
countries.


THE CHANGE IN THE LONG-TERM
INDUSTRY GROWTH RATE

Industry analysts believed that while carbonated soft drinks
would remain the most consumed beverage in the US for
some time, annual sales would continue to decline.


THE CHANGE IN THE LONG-TERM
INDUSTRY GROWTH RATE
Product innovation had been among the most important
competitive features of the alternative beverage industry.

Alternative beverages competed on the basis of
differentiation from traditional drinks (carbonated soft
drinks or fruit juices).


Energy Drink
Taste, the energy-
boosting of their
ingredients, and
image.
PRODUCT INNOVATION
PRODUCT INNOVATION
Vitamin-Enhanced
Beverages
Brand name and
packaging,
advertising, unique
flavors, and nutritional
properties.
MARKETING INNOVATION



Alternative beverages were usually purchased for
immediate consumption


Distribution
Convenience stores, delis, restaurants, vending machines,
sporting events, concerts, outdoor festivals, carnivals


MARKETING INNOVATION



Japans Alinamin V Energy Drink
Energy Drinks
Image


Brand name and packaging, clever
ads, endorsements from celebrities
and extreme sports athletes and
sponsorships of extreme sports
events and music concerts.





REGULATORY INFLUENCES &
GOVERNMENT POLICY CHANGES

Caffeine content of energy drinks were not regulated by
the US FDA

Melatonine hormone of relaxation drinks

The FDA warned against the use of Kava and not
approved valerian root as food additive







CHANGING SOCIETAL CONCERNS,
ATTITUDES, AND LIFESTYLES

Energy drinks, sports drinks, and vitamin-enhanced
beverages contain ingredients that is not healthy (chemical
ingredients)




Growing concerns about health, associated with what
theyve consumed


INDUSTRYS DRIVER OF CHANGE
Drivers of change are unlikely to dramatically alter the
attractiveness of the alternative beverage industry in the next 3-5
years.

Even with a slowing economy, there is no indication that the larger
producers such as Red Bull GmbH, Coca-Cola, or PepsiCo are
prepared to compete aggressively on price for volume and market
share gains.

It is more likely that these larger producers will rely on product
innovations and acquisitions to increase sales and market shares.

However, the individual & collective effect of industry drivers of
change are likely to make the industry less attractive for lesser-
known independent brands unless such companies gain a first
mover advantage in the development of a new beverage category.


STRATEGIC GROUP
STRATEGIC GROUP MAPS
Key succes factors
The strategy element, product and service
attributes, operasional approaches, resources,
and competitive capabilities with the greatest
impact on competitive success in the
marketplaces.
Key succes factors
Key succes factors the industrial beverages
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
Consumer income is high, more tend to
eat out, convenience is important to
U.S.
High U.S. FDA standards eliminate
overnight competitors
Broadening of Product Base
Growing Savory Snack and Bottled
Water market in US
Opportunities
More expensive products than
Coke, such a high price may limit
lower income families from buying
a Pepsi product
Not entirely patentable, constant
replicability 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
Threats
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
for example: Mc.Donald, KFC etc
Development of new types of
food products
The growth of advertising on the
internet because internet usage
has increased
Opportunities
Many consumers are starting to
leave the carbonated drinks
In some countries like India
banned the sale of coca-cola
The U.S. invasion of Iraq that affect
the sale of coca-cola
The high price of raw materials
Difficulty managing all subsidiaries
worldwide
Sluggish growth of carbonated
beverages
Threats
Diversification of retail outlets
Extension of product line this will help
to retain market share
Geographical expansion, Continuation
of its tradition of entering new markets
through the process of on-trade, has
potential on an international level.
Red Bull is still quite a new product in
the growing functional drinks market,
which leaves a lot of room for
development in major markets
Hardcore advertising and promotion
Costumer recognition through
sponsorship of sport and music event
New ventures like partnership
Opportunities
Health concern tougher rules from
government on high caffeine content
Costumer awarenes of health and well being
people my start to drink other alternative as it
associated with healthier life style
Drinks might be not accepted in the new
market
Organic energy drinks might steal Red Bulls
market share
Many copycat energy drinks such as Mad Bull
and Red Devil threaten to take brand share
from Red Bull.
Red Bulls sales are threatened by the
continued into the drinks market by key drink
players such as Coca-Cola with its Powerade
brand
Many small operators also act as a threat
because they have a high cool value amongst
younger consumers with whom energy drinks
are popular
Threats
Disribution with major
beverages companies create
international opportunities
Growing demand in the adult
demographic
Increasing demand for
energy shots
Opportunities
Consumer health
apprhensions
Price given economic down
turn
Other more grown up
offering from other companies
Juice companies and high
end drink may take the away
fringe and older consumer
Enegy drinks distributed
through main competitors
distributor system
Threats
Coca-Cola
Improving its product by innovating &
building up good image to recapture
the market share it lost in energy
drinks category.
Trying to create more rapid growth in
vitamin-enhanced beverages &
energy product.
Building up its strength in term of
alternative beverage sales in Asia &
react quickly to solve the problem of
lacking competitiveness in the
European market for alternative
beverages.
Using a combination of new flavors &
formulations, brands, line extensions,
improved image building &
distribution capabilities to increase
sales of alternative beverages
internationally.
PepsiCo
Launching a major image building
campaign for the most promise
product it have.
Developing its own energy shot
brand try to convince Rockstar to
add an energy shot to its
distribution agreement.
Negotiating for distribution rights
to European & Asia-Pacific market
with Rockstar or launch its energy
drink brands in attractive
international markets.
Red Bull
Improving the
performance of its
recently introduced
energy shots & continue
to expand into rapidly
growing country markets
for energy drinks.
Developing sports drinks
or vitamin-enhanced
beverages that can
further exploit the
appeal of the Red Bull
brand.
Hansens Co
Expanding the distribution of
energy drinks & alternative
beverages internationally.
Building brand image of Monster
energy drink with the right
marketing strategy.


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.
The strategically
relevant components of the global and U.S. beverage industry macro-
environment are;


Market size: The worldwide total market for beverages in 2009 was $ $1,58trillion,
and
was projected to grow to nearly $1.78trillion in 2014.
In order to compete, beverages companies should
to expand the number and types of alternative
beverages in their product lines by improving and
developing the formulas and flavors, establish
brand loyalty with strong marketing strategy, and
have efficient distribution systems to get
distinctive adventages