Success Factors Determining Success of Alternative Beverages - Research Paper Example

Energy drink case Introduction The global beverage industry has seen significant dominance of carbonated drinks in the past. However, the alternative beverage segment of the industry is growing incessantly, as beverages like sport drinks, vitamin infused drinks, and energy drinks in general, progressively gain popularity. Rapid growth in the alternative beverage segment has been apparent from about 2004 to 2005, that is, the mid-2000s (Gamble, 2014). Companies that manufacture and distribute alternative beverages compete primarily on the basis of differentiation of products from conventional drinks and fruit juices. It is, therefore, feasible to posit that market positioning of alternative beverages is largely dependent on product differentiation. Just like in production of carbonated drinks, principal sellers in alternative soft drinks industry are globally renowned beverage manufacturers like PepsiCo and Coca-Cola (Barr & Hajela, 2013). This is ascribable to the fact that the two companies already had strong brands in the beverage industry before venturing into the provision of alternative beverages. Nonetheless, other beverage manufacturers like Hansen Natural Corporation, which produces Monster Energy and Red Bull GmbH, have succeeded in building recognized brands, while gaining a considerable share of the potent alternative beverage industry. Even though the latter industry was projected to sustain the steady growth observed previously, it suffered a setback following the 2008 financial recession. Unfavorable economic conditions impeded consumers’ buying capacity thus resulting in a significant decline in sales, particularly those of highly-priced alternative beverages. All the same, industry analysts foresee improvement in sales of alternative soft drinks with time, as carbonated drinks consumers progressively shift their preference towards the relatively new beverage category. Competing companies in this industry can only increase their chances of success depending on their readiness to match volatility of consumer trends, capacity to build brand loyalty, willingness to adopt innovation, and ability to increase distribution and marketing channels, among other distinctive strategies. Discussion Global beverage organizations like PepsiCo and Coca-Cola are focusing on reversing the major decline of carbonated by venturing into production of alternative beverages. These organizations have expanded their market presence by introducing vitamin drinks, sports drinks, and energy drinks in the international market (Esterl, 2013). Additionally, organizations like Red Bull have had success in development of their markets for their new alternative beverage products. The most purchased beverages are the sports drinks and the target market is usually teenagers. However, since many people are focused towards health living, vitamin enhanced beverages are also frequently purchased. This is clearly explained by the five competitive forces where the strongest in this industry is rivalry among competing sellers focused on attracting a wide range of consumers. It is evident that there is a lot of competition among rival organizations. This is especially so because they are focused on getting the market share. On the other end, the weakest force is the competitive pressure stemmed from consumers bargaining power. Brand loyalty keeps consumers from switching to other low priced commodities. Therefore enhancement of taste improves consumer preference. This is a huge competition strategy being utilized by these organizations in order to market their products to their consumers (Beverage industry, 2012). Strategic Group Positioning Competition among the major industry players is usually based on brand portfolio and graphic distribution. In this case the alternative beverage principal industry players that compete globally are positioned as most favorable in the industry. Nevertheless, it is clear that Red Bull has successfully dominated the European market (Norris et al, 2000). Coca-Cola on the other hand has played a major role in conquering the U.S markets well as parts of Europe. PepsiCo on the other hand has had the same kind of success in sales due to the success in distribution by Rockstar Inc. Therefore, it is clear that organizations that have single brand, as well as, regional distribution only are positioned as the poorest in the alternative beverage industry. It is also clear that with the current level of competition, small and regional organizations will remain in the industry for a long time. However, if they are acquired by some of the large international organizations, they will be able to remain in the industry as competitive. Success Factors Determining Success of Alternative Beverages There are different elements that are essential for competitive success in the alternative beverage industry. For instance, accessibility to distribution is one of the principal factors. Distribution is usually regarded as one of the most imperative parameters for success of any industry. This is because of the fact that numerous brands that deal with alternative beverage drinks might fail to achieve good sales volumes as well as market shares except if made available in stores. PepsiCo is one of the companies that are assured of consistent distribution. The other major factor is product skills innovation. This is a factor that has ensured success in numerous organizations. In this case, it is evident that alternative beverages are dissimilar from traditional beverages (Turne,r 2000). Innovation has ensured that PepsiCo continues producing and developing additional volumes of new categories of beverages. The other factor which will affect the success of alternative beverages is image. This is a major element because it ensures that product names are emphasized in endorsements, adverts, as well as promotions thus creating demand for a particular brand. Therefore, by using new tactics in brand image, new labels and packaging has enhanced consumer appeal. Sufficient sales volume is another principal factor that has assisted in the development, as well as, success of the organizations in the industry. To be successful, alternative beverage producers are required to have adequate sales volumes in order to keep expenses at a viable level (Wheelen & Hunger, 2000). Consideration of consumer trends has been a major success determinant for alternative beverage industry. It is imperative to note that dissimilar beverages are affected in different ways with certain trends. For instance, most consumers are focused more on health consciousness. Therefore with this particular trend, people are focused on consuming zero sugar products. It is extremely imperative to note that in order to be successful, organizations are supposed to focus more on producing healthy products that will be accepted in the market (Grant, 2005). Despite the fact that the alternative industry is new, there is fierce competitiveness. This is because many organizations are focused on attracting more consumers. Companies are also trying to take hold of large market shares in the new industry. For instance, Coca-Cola, PepsiCo as well as Red Bull have joined the new industry (Wheelen & Hunger, 2006). However, these organizations are still faced with different problems which can only be solved by formulating market strategies. Therefore, recommendations to assist in solving these problems are discussed herein. Recommendations The alternative beverage world if focused on improving its products in order to retain its competitive edge. In this case Coca-Cola has a slower growth compared to its rivals in the industry. Therefore, in order to be competitive Coca-Cola should focus more on boosting it product image and innovations. This will assist the organization to regain the market edge, as well as capture the rapid development in energy shots as well as vitamin enhanced beverages. The other major issue facing Coca-Cola is the problem of distribution especially in the U.S market. Therefore, the organization should make sure that they partner with distribution organizations in order to make their products more available to their customers. Additionally, Coca-Cola is supposed t focus more on building on selling its products in Asia. This will not only expand the consumer base, but it will improve their sales volume. This is a factor that they should also try in their European market. There is lack of competitiveness in this region and they should make sure that their market for alternative beverage is resolved. This will be resolved by combining new flavors and well as improving its image and distribution aspects. By doing so Coca-Cola will manage to reach a vast consumer base increasing their sales for alternative beverage globally. PepsiCo on the other hand is gaining worldwide rankings for their alternative beverage products. However, the company has failed to build brand image in some other regions. Therefore, PepsiCo should focus on building its own brand or encourage Rockstar to incorporate energy shot in the distribution of its products. The popularity of PepsiCo in Europe and Asia in terms of alternative beverage market is mainly because of Gatorede and SoBe performance. However, their products do not seem to have popularity outside the United States and Rockstars Inc. agreement with the organization in terms of distribution is in Canada and the U.S. Therefore, it should be recommended that the organization is supposed to negotiate distribution rights in Saia and Europe. This will provide the company with alternative market and attract international recognition and market. This will also assist in attracting other markets like Middle East and Australia to consume their products. By doing so, PepsiCo will be able to attract international sales for their products and increase their volume sales. Red Bull’s performance has been impressive being ranked as one of the best organizations for alternative drinks. Its performance in the U.S and Europe has been remarkable. It is also evident that the organization has utilized the right strategy in broadening its image campaign which includes wide range sponsorships of sport teams, promotions, and advertisements (Whittington et al., 2005). However, there is major competition in the industry and for Red Bull to retain competitive advantage they should focus on improving their performance in their freshly introduced products. Additionally, the organization should continue with their expansion strategies into rapidly developing markets for energy drinks. It is also imperative for the company to note that there is extensive innovation taking place in the industry. Therefore, the organization is supposed to develop vitamin enhanced beverages or sport drinks that will further their appeal as a brand. Conclusion It is evident that there is tremendous growth in the alternative beverage industry. With the current improvement of the economy worldwide, the customer preference is changing form carbonated drinks to alternative beverages. Therefore, there is an expected major growth in the industry. Competition is also evident in the industry and this is forcing the business players to be more innovative in their production. It is clear that alternative beverages have made a mark in the world. Alternative Beverage SWOT Analysis Strengths Strong brand Image for the different organizations Competition is based on volume compared to other carbonated beverages International recognition Health and environmental consciousness Strong market presence Opportunities Increased market presence Emerging markets in Europe, Asia and the U.S Increased Advertisement Weaknesses Lack of consistency in adverts Some products are low quality Seen as a mass produced products thus low pricing Loss of brand loyalty due to mass production Threats Increased competition Low priced products Price wars from the market players References Barr , M., & Hajela, D. (2013). Judge strikes down NYC ban on supersized carbonated soft drinks. Wall Street Journal. Retrieved from http://online.wsj.com/article/AP2994ae4cfc42475d93e82c5e0b45319a.html Beverage industry. (2012, July 18). 2012 State of the Industry: Energy Drinks. Retrieved from http://www.bevindustry.com/articles/85656-2012-state-of-the-industry--sports-drinks Esterl, M. (2013, January 18). Is This the End of the Soft-Drink Era? Wall Street Journal Retrieved from http://online.wsj.com/article/SB10001424127887323783704578245973076636056.html Gamble, J., Thompson, A., & Peteraf, M. (2013). Essentials of strategic management.(3rd ed., p. 265). New York, NY: McGraw-Hill/Irwin. Grant, M. (2005). Contemporary Strategy Analysis. Fifth Edition. Oxford and Victoria: Blackwell Publisher. Norris G, et al. (2000). E-Business and ERP – Transforming the Enterprise. Canada and United States PepsiCola: John Wiley & Sons. Turne,r C. (2000). The information e-conomy – business strategies for competing in the global age. First published. London and Milford: Kogan Page Limited. Wheelen, L., & Hunger, D. (2000). Strategic Management and Business Policy – Entering 21st Century Global Society. Seventh Edition. New Jersey: Prentice-Hall. Wheelen, L., & Hunger, D. (2006). Strategic Management and Business Policy. Tenth Edition. New Jersey: Prentice-Hall. Whittington R, et al. (2005). Exploring Corporate Strategy – Text and Cases, Seventh Edition. London: Financial Times and Prentice-Hall. Read More