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Performance Evaluation of Britvic Plc - Example

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is a United Kingdom based soft drinks company. The company provides wide range of beverages such as sparkling sodas, sophisticated fruit juices, ice tea, squash, syrups, mineral waters, mixers and energy drinks (Britvic, 2015a). The firms brand portfolio in the UK…
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Extract of sample "Performance Evaluation of Britvic Plc"

Performance Evaluation of Britvic Table of Contents Introduction 3 1. Cost Concepts Affecting Managerial Decisions in Britvic Plc. 3 2. Relation Between Fixed and Variable Costs 4 1.3. State of Technology in Fruit Juice Sector 4 2. Analysis of Market and Economic Environment of Britvic Plc. 5 2.1. Porters Five Forces in Decision Making 5 2.2 PESTEL Analysis of Britvic 7 3. Recent Performance Analysis of Britvic 8 3.1 Profitability Performance 8 3.2 Market Share and Penetration Performance 10 3.3. Growth Strategy of Britvic 12 4. Conclusion and Recommendation 13 Reference List 14 1. Introduction Britvic Plc. is a United Kingdom based soft drinks company. The company provides wide range of beverages such as sparkling sodas, sophisticated fruit juices, ice tea, squash, syrups, mineral waters, mixers and energy drinks (Britvic, 2015a). The firms brand portfolio in the UK includes Robinsons, tango, J2O and fruit shoot along with the PepsiCo brands like Pepsi and 7UP (Sparks, 2014). Britvic manufactures and sells products in the UK and Ireland under agreements of PepsiCo. The purpose of the company is to make everyday moments of people’s life enjoyable. They offer a broad range of soft drinks to meet the varied desires of the customers. Their brands and innovations are fabricated on the excellence of their insight and knowledge of the soft drinks markets in which they operate. Their activities of the company are committed to build sustainable relationships with their suppliers of raw materials and customers (Sparks, 2014). Britvic’s Internal Organizational structure is aimed at developing a trouble-free focussed operating model, empowering people and aligning resource and capability to the growth prospects. There are various departments in Britvic which permits them to operate business efficiently and sustain its market position (Hu, 2011). Customer management director heads the organizational structure of the company who controls the segmented channel structure under him. The channels includes grocery department, convenience, licensed department, food service section, customer operations and channel marketing department. Due to the company’s continuous growth, an efficient organizational structure has been developed to make the decision making process simpler (Britvic, 2010). 1.1. Cost Concepts Affecting Managerial Decisions in Britvic Plc. Economies of scales refer a proportionate savings in costs achieved by increased levels of production. Britvic Plc. drives economies of scales by improving their factories and distribution footprint. There exist a number of costs that affects the managerial decisions of Britvic such as implicit, explicit, incremental and sunk costs (Hu, 2011). Explicit costs include the costs of the actual expenditures made by the company to purchase inputs for its production and the implicit costs refer to the value of the inputs used by the company in its production. These costs are taken into account by Britvic along with the opportunity costs of all its inputs whether purchased or owned by the company (Britvic, 2014) The short run refers to the period of time during which at least one input of the company is fixed (Anagnostopoulou and Tsekrekos, 2013). The long run average cost curve for Britvic is the aggregation of all the possibilities where all the inputs vary. It allows the company to adjust to market, technological conditions and is vital for realising long term market equilibrium in various market situations. Understanding long term costs are therefore important for making long run management decisions. Britvic announced short term cost saving plan for improving its efficiency (Urlić and Britvić, 2012). Britvic planned to cut down costs by taking a merging decision with A.G. Barr. They made annual cost savings of 30 million pound by reducing their workforce. 1.2. Relation Between Fixed and Variable Costs Fixed cost refers to the costs that are independent of outputs and remain constant. Variable costs refers to the price that varies with the output and it boost at a steady rate relative to labour and capital (Eichel and Bender, 2007). Britvic continuously makes attempts to reduce their fixed and variable costs by employing a variety of tools such as PVO programme where the product costs are reduced with no deprivation to brand quality or equity (Britvic and Bakan, 2013). PVO programme in Britvic saved around £ 1.0 million in the recent year on top of the previous cumulative total across carbonates over 2011-2013 of £ 6 million. 1.3. State of Technology in Fruit Juice Sector Fruit juice manufacturing industries are undergoing increasing technological advancements in the recent years (Reuters, 2015). The citrus juice production technology are improving in the global fruit juice market and this continuous improvements enabled the industry to outshine on quality with the result that the fruit juices tastes better now and same as the fresh squeezed juice. Various innovative technologies such as frozen concentrated juice production, Citrus by products recovery, automation of citrus industry, sanitation standards and pasteurisation technology led to the revolution of the fruit juice sector (Neves, et al, 2012). Additionally, innovation in management tools and food safety technologies improved the quality of the extracted fruit juices. Britvic Plc. is obliged to implement such technologies and is successfully providing customers with the superior quality fruit juices. Concerns for fruit juice sugar content are extensive which increases the degree of technological uncertainties. Sugar low content is the vital selection criteria for fruit juice consumers (Britvic, Kovacevic and Cingel, 2013). The technologies requires to address concerns about the fruit juices high sugar content which can be done by blending vegetable juices with the fruit juices to cut sugar content. Differences in consumers demand and increase in price also contribute to the technological uncertainties. 2. Analysis of Market and Economic Environment of Britvic Plc. 2.1. Porters Five Forces in Decision Making Porter’s five forces are the degree of competition, number of firms, market concentration, entry barriers, degree of product differentiation, availability of substitutes and nature of complimentary products and markers (Kotler and Keller, 2011) The degree of competition is relatively moderate in the global juice market with the top two companies leading 40% of the market. The companies’ operating in this market is large which generates competition (Marketline, 2014a). Other aspects of the market that increases competition are high fixed costs and the complexity of market as the manufacturing machineries is a lot difficult to divest. Britvic’s managerial decisions should be centred on product diversification amongst market players which can elevate this competition to some extent. The company has the ability to manufacture carbonated and non carbonated beverages that reduces dependencies on the juice market and assist in gaining competitive advantage (West, Hughes, Parker, Moohan and Addy, 2003). Figure 1: Drivers of Degree of Competition in Global Juice Market (Source: Cruden, 2005). There are a number of leading juice manufacturing companies in the global market such as Coca Cola, PepsiCo and Tingyi that are leading the global juice market. Coca Cola produces more than 3,500 beverages and sells their juices over 200 countries (Marketline, 2014). There are more than 500 growing brands that are offering sparkling beverages, sports drinks and fruit juices in the global market (Freedman, Reyner and Tochtermann, 2010). The managerial decisions of Britvic should be focussed on extending its product line and constantly improve their products in order to sustain the global market. Market concentration is moderate in the UK fruit juice market. The inadequate development with definite high concentration juice markets is attributable to increased prices and a diminishing supply of fruits that is suitable for extracting juices (Cruden, 2005). The fruit juice sector has a moderate level of concentration with the existence of the three major players such as Coca Cola, PepsiCo. and Gerber juice. These companies are accounting for 41% revenue. Concentration is mounting moderately in the recent years following the acquisition activity. For example, Innocent fruit Juice Company is brought out by the Coca Cola enterprises (Cruden, 2005). The degree of concentration also increased as innocent tremendously expanded its market share. Britvic’s decisions should stress on the level of concentration in the market and develop strategies to cope up with it. Entry barriers of the new entrant in the global juice market are assessed to be moderate. It is observed difficult for the new entrants to compete with the intensely in-gained brand identities of the existing market leaders (Marketline, 2014). Conversely, the shelf space in the retail outlet is restricted and the beverages often require most costly chilled storeroom which means the retails may show unwillingness to substitute new and untested brands for existing beverages which gradually reduces the threat of the new entrants (Freedman, Reyner and Tochtermann, 2010). The products of the fruit juice companies being fairly similar, the company can decide to position themselves as a larger player by pouring considerable resources into product differentiation through branding and by emphasising on the health and the nutritional benefits of the company’s products (Freedman, Reyner and Tochtermann, 2010). Extent of product differentiation in the global fruit juice market is moderate. Many companies are offering different products including fresh juices. The growth of demand of fresh and differentiated fruit juices in the UK is positive and has expenditure elasticity significantly distinct. Britvic’s managerial decisions need to consider the relevance of differentiation in their products for grabbing attention of their customers (West, Hughes, Parker, Moohan and Addy, 2003). The products of Britvic require differentiation from its competitors to serve a huge customer and to retain the existing customers’ loyalty. Substitutes to the fruit juices include other non-alcoholic beverages such as carbonated soft drinks and bottled water. In the current years, smoothies are becoming popular among consumers and the market players are offering these drinks without extensively modifying their equipments (Britvic, Kovacevic and Cingel, 2013). Managerial decision making of Britvic needs to consider these product and technological advancements to compete with these substitutes. Keeping a track of the competitor’s products can help the company in developing innovative strategies for product development and reducing the threat from the substitutes in the juice market (Marketline, 2014a). 2.2 PESTEL Analysis of Britvic Political and legal factors are narrowly linked together. It is necessary that the soft drinks company like Britvic keep special care on any new legislation passed by the government in order to benefit from them. Government encouraging individuals to consume healthier products will have a positive impact on the fruit juices (Marketline, 2014a). Economic factors have a great influence on the soft drinks industry. Britvic is influenced by the economy of the country where it operates its business (Hu, 2011). During various stages of the economy the prices of the raw materials can be different. During the recession, the soft drinks industry went down and later with the prosperity of the economy the opportunities for Britvic started to recover and make more profits which are currently happening in UK (Hu, 2011). Social factors are very crucial for the soft drinks industry as these are the customer who pools money for Britvic. Many people are health conscious and avoid products containing sugar. Britvic uses well known people in the society for the promotion of its beverages and produces low sugar fruit drinks to grab attention of ample consumers (Hu, 2011). These strategies generate valuable results for the company. Technological aspects can be very advantageous for Britvic. The latest technology can be used to manufacture more efficient products within a short time frame. Additionally, it will be easier to communicate with a large number of consumers worldwide through internet and their smart phone applications (Marketline, 2014a). New machines and computers also will lead to less operating costs and increased productivity of the company. Environmental factor play a vital role in the soft drinks industry as the customer who purchase fruit products rather than unhealthy frizzy beverages are more likely to consider the environmental aspects. Britvic is observed to be environment friendly. They reduce their carbon emissions by various equipments that produce less carbon and source their products locally instead of importing them from overseas (Anagnostopoulou and Tsekrekos, 2013). 3. Recent Performance Analysis of Britvic 3.1 Profitability Performance The global fruit juice market encountered moderate rate of value growth in the current years and this growth is prospected to pick up the pace. Supermarkets and hypermarkets generated the highest proportion of sales in the international juices market in 2013 (Anagnostopoulou and Tsekrekos, 2013). The market volume has further boosted in the current year. Figure 2: Sales Growth of Global Juice Market (Source: Anagnostopoulou and Tsekrekos, 2013). Britvic Plc. announces interim results in the recent years and is performing its business profitably. The company has encountered a revenue growth of 4.7% with volume growth of 3.9% and is performing profitably in the fruit drinks market. The focus of the company is on building sustainable profit and margin improvement. The net profit margin of Britvic has shown a tremendous increase for the past few years and the percentage of net profit has increased to 6.67% in 2014 (Anagnostopoulou and Tsekrekos, 2013). Britvic’s has emerged as a market leader in the fruit juice industry. The company is observed to have a steady performance in the global markets. Inspite of difficult business environment, the company showed notable success across the business and profited from hot weather. To generate profitable results, the company has set up strategies to enhance revenue growth. With an improvement in the underlying business of the company, they have made excellent progress on their strategic approaches. Figure 3: Net Profit Margin of Britvic (Source: Britvic, 2014). 3.2 Market Share and Penetration Performance In the global business, Britvic’s carbonates portfolio has tremendously outperformed the market. They profitably grew volumes, whilst the category was in decline and enhanced market share. The fruit shoot performed efficiently in achieving value, market penetration and share volume in the market (Britvic, Duric and Buzic, 2014). During the previous year, they stopped selling the high sugar content fruit shoot considering the health concerns of the people and instead offered low calorie ice tea which boosted their market share by 40% during the year. The gross margin percentage of Britvic has depicted an outstanding growth of 54% in 2014 (Britvic, Duric and Buzic, 2014). Figure 4: Gross Margin Percentage of Britvic (Britvic, 2014). Exports have a key importance in the fruit juice manufacturing industry’s growth. An export action plan was currently launched by Britvic which is a joint initiative between the company and government to work together to enhance export potential and eliminate barriers. The company has successfully developed new markets and competing successfully with established exporters in France, Germany and Spain (Hu, 2011). In order to gain competitive advantage, Britvic is focussing on innovation which resulted in increased market share. They are spreading their business in new markets other than UK and introducing new products to expand its growth by reaching large masses and satisfying customers. They introduced low sugar content drinks for health concerned people and implemented new technologies such as energy efficient machines for conserving energy in their factories (Hu, 2011). The highly advanced equipments for extracting fruit juices has led to production of superior quality juices which increased likability among their consumers and therefore boosting market shares. Based on patent applications, Britvic develops more products in the UK than anywhere else in the world and is generating profitable results (Kansal, 2006). 3.3. Growth Strategy of Britvic Vertical integration involves synchronization of two or more stages of production in vertical chain within a company. The aim of the vertical integration is to ensure efficiency, acquisition of monopoly power and gaining security and control of market surroundings. Vertical integration creates barriers to entry and raises rivals costs among the other advantages (Neves, Trombin, Lopes, Kalaki and Milan, 2012). Britvic is implementing their product value optimization programme as a result of the introduction of in-house larger pack PET squash bottles at their Norwich factory along with other vertical integration approaches. Britvic’s vertically integrated their supply chain in order to limit exposure and uncertainties to the volatile markets (Neves, Trombin, Lopes, Kalaki and Milan, 2012). The company segmented the production process in various technologically separable activities and acted as a technological combination to these activities for transforming inputs into outputs. Diversification refers to companies operations in a number of businesses and it is associated with the growth objectives of the company. Britvic diversified its product offerings from everyday value to premium products across a variety of sub categories (Britvic, Duric and Buzic, 2014). They are also operating their business in a number of different markets and therefore it can be stated that they are not reliant on the preferences of one set of customers. Britvic minutely monitors customer trends across their diversified portfolios and markets. They have also diversified their geographical profile to eliminate business risks (Boone and Kurtz, 2012). Ansoff Matrix Existing products New products Existing markets Market penetration Product development New Markets Market development Diversification Britvic has developed many other alternative growth strategies such as short term and long term strategies. Among the probable options form the Ansoff matrix, the company has chosen to enhance their market share by pursuing Market development and diversification strategy . They developed a reward structure that emphasised on short term operating performance of the company and sustained long term performance. Britvic’s long term strategy is centralised around growth. The major building blocks to this strategy are building business scale via acquisitions, frequently enhancing all its actions and capitalising on its portfolio and depth (Boone and Kurtz, 2012) 4. Conclusion and Recommendation Britvic beverage Company has positioned itself as a successful brand by its increased market shares in the fruit juice market, but it needs to recognize proper product portfolio for each of its fruit juice products to sustain its lead position or enhance it in the UK soft drinks market. The report identifies Coca Cola and PepsiCo to be the major competitors they can differentiate and develop their products to gain attention of a large number of customers in the market. Porter’s five forces described the market and the economic environment in which Britvic is operating its business. This evaluation facilitated the decision making strategies of the company in sustaining competition. By evaluating the business performance of Britvic, it can be recommended that they require reinforcing their loyalty to maintain their strong customer base. The company needs to update their products to hold on to the market share and attract new customers. The business strategy of Britvic should be new product development and expansion of market share. The strategy of Britvic should be new product development and expansion of market share. It has also been observed that the gross margin has undergone abnormal changes for the past few years. Britvic’s gross margin and the net profit have shown drastic growth in the recent years. For maintaining such growth, the company needs to pay more attention to its overall operations and implement innovative growth strategies for sustaining the globally competitive market. Reference List Anagnostopoulou, S. C. and Tsekrekos, A. E., 2013. Do firms that wish to be acquired manage their earnings? Evidence from major European countries.International Review of Financial Analysis, 30(6), pp. 57-68. Baker, M., 2007. Marketing strategy and management. 6th ed. Basingstoke: Palgrave Macmillan. Boone, L. E. and Kurtz, D. L., 2012. Contemporary Marketing, Page 84, 7th ed. New York: Kaplan Publishing. Britvic, 2010. A year in soft drinks. [online] Available at: [Accessed 23 May 2015] Britvic, 2014. Annual Report. [online] Available at: < http://www.britvic.co.uk/~/media/Files/Media%20Centre/Reports/Britvic%202013%20Annual%20Report.ashx> Accessed 23 May 2015] Britvic, 2015a. Company Overview. [Online] Available at: [Accessed 23 May 2015] Cruden, T., 2005. A Change in Packaging Purchasing in a Wines and Spirits Company. International Journal of Wine Marketing, 1(1), pp. 42-48. Eichel, E. and Bender, H., 2007. Performance appraisal: a study of current techniques. 5th ed. London: Prentice Hall. Freedman, P. M., Reyner, M. and Tochtermann, T., 2010. European category management: look before you leap. McKinsey Quarterly, 4(1), pp. 156-164. Hu, C., 2011. Soft drinks report: South African Beverage Review, South African Food Review, 38(8), pp. 32-36. Kansal, B, B., 2006. Performance Management. 6th ed. London: Prentice Hall. Kotler, P. and Keller, K.L., 2011. Marketing Management. New Jersey: Prentice Hall Marketline, 2014. Britvic plc. [pdf] London: Market Line. Available at: [Accessed 23 May 2015] Marketline, 2014a. Global Soft Drinks. [pdf] London: Market Line. Available at: [Accessed 23 May 2015] Mikolajczyk, K., and Schmid, C., 2005. A performance evaluation of local descriptors. Pattern Analysis and Machine Intelligence, IEEE Transactions on,27(10), pp. 1615-1630. Neves, M. F., Trombin, V. G., Lopes, F. F., Kalaki, R. and Milan, P., 2012. Concentration of juice bottlers. The orange juice business Wageningen Academic Publishers, 8(3), pp. 149-152. Reuters, 2015. Britvic PLC. [online] Available at: [Accessed 23 May 2015] Sparks, L., 2014. Tesco’s supply chain management. Logistics and Retail Management: Emerging Issues and New Challenges in the Retail Supply Chain, 8(5), p. 149. Urlić, I. and Britvić, D., 2012. Group-Based Strategies Employed in the Wartime and Post-War Treatment of Psychological Trauma: Experience from the War in Croatia. Clinical Social Work Journal, 40(4), pp. 421-428. West, N. X., Hughes, J. A., Parker, D. M., Moohan, M. and Addy, M., 2003. Development of low erosive carbonated fruit drinks 2. Evaluation of an experimental carbonated blackcurrant drink compared to a conventional carbonated drink. Journal of dentistry, 31(5), pp. 361-365. Read More
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