Level Of Energy Drinks Consumption - Research Paper Example

Level Of Energy Drinks Consumption Introduction Food and beverage industry can be considered as the fastest growing industry across the world catering to the needs and demands of millions of people across the globe. PepsiCo has always been the centre of attraction when it comes to the food and beverage industry especially to carbonated drinks. PepsiCo is one of the largest food and beverage companies having strong presence in more than 200 countries. The company enjoyed immense market share in the carbonated drink category along with facing severe competition from its rival; Coca Cola. The discussion is aimed to analyze the global and US alternative beverages industry. The analysis of the industry has been presented by discussing five forces model, macro environmental characteristics, key success factors, drivers of change and industry dynamics, and strategic group map. Alternative beverages can be defined as beverages other than carbonated drinks mainly available in the form of sports and energy drinks. The market for such drinks has grown rapidly in last few years especially in the US and European countries. Within the beverage industry, PepsiCo has been using alternative beverages to counter and respond to the decline in the consumption of carbonated drinks. PepsiCo has expanded its market by foraying into the alternative drink segments along with introducing wide arrays of energy and sports drinks that have been successful in gaining immense popularity among large customers across the globe. The acceptance of energy and sports drinks offered great benefits to the company especially in the form of competitive advantages and rise in the market share and organsiational growth. There is no doubt that competition is fierce in the alternative beverages especially when there are loyal customers not willing to shift their focus to other alternative beverages (Bryce and Dyer, 2007). The paper will discuss all these factors in a critical manner that will further help in understanding the industry dynamics and the position of PepsiCo in the alternative beverage industry marked with immense competition. Five Forces Model Analysis This part of the discussion will present an analysis of the five forces in the form of bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes, and competitive rivalry. Detailed analysis has been presented as follow: Bargaining Power of Buyers- (Low) - Bargaining power of buyers in the form of customer is pretty low as they cannot influence the prices of energy and sports drinks. Moreover, they are loyal to a particular brand and thus do not bargain much in terms of price as long as they get desired quality. Bargaining Power of Suppliers- (Moderate) - Bargaining power of suppliers is quite moderate considering the fact that PepsiCo has their own set of suppliers supplying raw materials from a long period of time and thus based on an effective supply chain; the overall bargaining power is equally distributed between the buyer and sellers (The Energy fiend, 2012) Threat of New Entrants- (Low) – The threat of new entrants is quite low considering the fact that alternative beverage industry is defined by the acceptance of products and sell is determined by the loyalty level. It can be believed that new entrants may not have a large customer base and thus having little benefits in terms of driving the dynamics of the industry. Threat of Substitutes (High) – The threat of substitute products is quite high considering the fact that sports and energy drinks can easily get affected by the availability of carbonated drinks, herbal drinks, natural drinks, juices, water, and other beverages. Loyalty and addiction of customers may mitigate the threat of substitutes but not at the macro level. Competitive Rivalry- (High) – Competitive rivalry is quite high in the alternative beverage industry as companies like Coca Cola, Red Bull, and Hanes have been offering similar products along with many other companies and thus marking immense competition where only loyalty of customers can determine the market share of companies in the short as well as in the long run (The Energy fiend, 2012) Macro Environmental Analysis PESTEL analysis explains the framework of macro environmental factors used in environmental scanning of the strategic analysis. These factors include political, economic, social, technological, environmental, and legal and a detailed analysis has been presented as follow in a critical manner. Political- the political factor plays an important and crucial role in determining the growth and prospects of any industry and organization. In the context of PepsiCo, it offers non-alcoholic beverages and is regulated by FDA. The government regulates stringent standards that need to be followed and often creates pressure situation (Thombs, et al, 2009) Economic- the recent economic downturn has affected the buying and selling prospects of many organizations. The prices of sports and energy drinks are quite high compared to other carbonated drinks and this often affects the acceptance of products but customer loyalty and addiction often drives the sales figures. Social- though, there are not much social pressures but at times, food and beverage organizations have opposed issues from social activists and organizations on the ground of serving carbonated drinks that is not good for health. Moreover, social factors do not affect the sales figures much but affects the image of the product for a brief period of time. Technological- technological advances have helped PepsiCo to distribute its alternative drinks in a significant manner. Moreover, this has also helped in getting connected with a number of customers all across the world. Environmental- Environmental factors do not affect the dynamics of alternative beverages as it is not agro based production. Legal- there can be a number of legal implications as many countries oppose the consumption of energy drinks considering the fact that they have caffeine that is harmful for children and PepsiCo has faced legal issues in many Asian countries (Thombs, et al, 2009) Key Success Factors PepsiCo has been a dominating player in the soft drink industry but failed to become a dominating and exemplary figure in the energy and sports drink segment. Pepsi first launched Amp as an energy drink in the US market that was moderately successful back in the year 2001. Amp became the five top most energy drinks in the US and other global markets but always lagged behind Red Bull and Monster Beverage (Reissig, et al, 2009).Taking a cue from the success of Mountain Dew, PepsiCo introduced Mountain Dew Kick Start that gained attention of a number of youngsters in the US. The key success factors of PepsiCo in the energy and sports drink market is based on keeping things simple and easy along with serving what the customers will accept rather than trying something unusual. Moreover, PepsiCo has established itself as a global brand suggesting it connects with end numbers of customers and thus writing success stories; firstly in the food and beverage industry and later in the energy and sports drink industry in a well planned and positive manner (Reissig, et al, 2009). Drivers of Change and Industry Dynamics Main drivers of change have been in the form of product innovation, globalization, and lifestyle. PepsiCo introduced Mountain Dew Kick Start as an energy drinks having high level of stimulants offering energy and the packaging and ingredients have also been driven by innovation. With the globalization, there has been an increase in the demand for such products all across the world offering great growth prospects to companies. Large numbers of people have been getting influenced by sports and energy drinks and thus raising the sales charts of the company in a significant manner (The Energy fiend, 2012). The dynamics of the industry have changed a lot in last few years. The acceptance of energy and sports drinks seemed like a recent phenomenon that has gained immense popularity in different parts of the world. Overall, it can be said that the drivers of change and industry dynamics have been positive enough to drive the success story in the energy and sports drink segment (The Energy fiend, 2012) Strategic Group Map High Low Data from: Energy Fiend (2012) Low Medium High Based on the analysis of the strategic group map, it is very much evident that Red Bull and Monster are clearly the dominating player in the energy and sports drink segment in the US and across the world and PepsiCo needs to come up with aggressive marketing strategies in order to offer touch competition to these strong brands in the long run. Summary Based on the analysis and discussion, it can be said that PepsiCo is a strongly placed and admired brand across the world but in the energy and sports drink segments, it still lags behind. Its brands like Amp, Gatorade, and Propel have been successful in attracting large number of customers offering reasonable market share but there is still a long way to cover in terms of competing with the likes of Red Bull and Monster. It is highly recommended to use aggressive marketing strategies and words of mouth so spread awareness along with creating a distinctive taste and appeal for the energy and sports drink in order to remain competitive in the long run. References Bryce DJ, Dyer JH (2007). Strategies to crack well-guarded markets. Harvard Bus Rev. 85(5):84-92. Reissig CJ, Strain EC, Griffiths RR (2009). Caffeinated energy drinks—a growing problem. Drug Alcohol Depend. 2009; 99 (1-3):1-10. The Energy fiend (2012) Energy Drink Reviews, The top 15 energy drink Retrieved from http://www.energyfiend.com/the-15-top-energy-drink-brands Thombs DL, O'Mara RJ, Tsukamoto M, et al (2009). Event-level analyses of energy drinks consumption and alcohol intoxication in bar patrons. 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