Soft Drink Industry: Competition and Structure

Soft Drink Industry Competition and StructureThis c either on aims to study the way the hushedening imbibition manufacture, a major sidetrack of the global bever come on persistence. The question depart provide an introduction of the crackers inebriety industry. Using Porters 5 Forces framework, the research check intoks to map the structure of the industry. The research go forth further analyze the macro-environment of the industry using the PESTEL framework to discern changes in the industry. In addition, the research seeks to identify the structural drivers of change indoors the industry. The study under(a) believen intends to focus also on learning roughly the stream stage of industry life cycle and what are the driving traits that rat headway this industry worthwhile.From the above scenarios, the research entrust identify the almost likely scenario for the future of the industryINTRODUCTIONThe Soft Drink Industry consists of establishments gener ally eng aged in manufacturing non- torrent, change beverages, mineral waters and concentrates and syrups for the manufacture of carbonated beverages.Principal activities and proceedssAerated watersCarbonated beveragesMineral and spring watersSoft fuddle concentrates and syrup andSoft befuddle preparation carbonating. (Hrsdc, 2005)The softish- plight area has instanter false toward brand- new-fashioned overseas market places. season once the joined States, Australia, Japan, and Western Europe were the dominant soft-drink markets, the issue has slowed d take dramatically, but they are still important markets for Coca-Cola and Pepsi. However, Eastern Europe, Mexico, China, Saudi Arabia, and India reserve become the new hot spots. Both Coca-Cola and Pepsi are forming joint bottling ventures in these nations and in former(a) areas where they see growth potential. (Fargos, 2005)Soft drinks are the largest beverage market divide in the global market and are forecasted to reach appro ximately $550bn in 2013 (business insights, n.d).The key players in this industry areCoca -Cola CompanyPepsi CoCadburyNestlePorters Five ForcesBargaining Power of BuyersDifferent level of dicker might exist among the group of purchasersVending machine no buyer bargaining powerFast food chain- more bargaining powerBargaining Power of SuppliersBargaining power of suppliers is weak. The ingredients are easily accessible and there are many suppliers, reducing companys switching cost. Many substitutes for colewort can be used like corn syrup ,sweetener. flagellum of SubstitutesThe threat of substitutes can be reduced by expanding the products such(prenominal) as non carbonated drinks like juice ,tea, coffee and plain water. Alcohol is a threat too esp. as these companies dont manufacture alcoholic beverage. But receivable to social, time and health constraints its moderated.Rivalry among Competing Firmsone could characterize the soft drink market as a duopoly between Coke and Pepsi , resulting in decreed economic receiptss. in that respect is intense rivalry between coca-cola and Pepsi. there is no price differentiation and consumer has no brand loyalty.Threat of New EntrantsIt would be nearly impossible for a new bottler to enter the industry because of the fearsome market presence of Coke, Pepsi, and a few separates .Soft drink industry contend substantial capital investment, which would deter entry. Further existing bottlers hadexclusive territories in which to distribute their productsPESTEL ANALYSIS(P)olitical FactorsNon-alcoholic beverages fall within the food category under the FDA. The government plays a role within the operation of manufacturing these products in call of regulations. There are severe penalties set by the government on companies if they try to violate the laws. (Pbawa, n.d.)(E)conomic FactorsThere is a deep impact of recession on Soft drink industry. If cost of raw material rises than return costs will increase. The companies are vulnerable to exchange rate fluctuations, resulting in a drop in profits through foreign funds earned versus merchandise investment.(S)ocial FactorsMany people are bear on roughly their fitter lifestyles. They are switching to bottled water and nutrition colas instead of 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 bulkyevity(T)echnological FactorsThe new applied science of internet and television which use exceptional effects make some products look attractive. This helps in selling of the products. Introduction of cans and tractile bottles have increase sales for Coca-Cola as these are easier to carry .As the new technology in packaging system rise the production uplifteder.(E)nvironmental FactorsSoft drink industry degrade the environment by transport and fuel wastage ,industries production and waste process. They are required to have mor e eco friendly products and practices now. While coca cola and pepsi both are emphasizing on cycle of cans.(L)egal FactorsLegal restrictions are put in place so that companies products do not fool and harm the consumer. Companies are required to aware the consumer about negative health impact of soft drink and also mark the ingredients and warning on product.Structural Drivers of changeSocial/demographicThe consumer has slowly become more health conscious. . Changing consumer demographics resulting in changing consumer tastes and increased require for healthier products. There is a increased in competition from other non-alcoholic beverages, such as energy drinks and sports drinks.Packaging and distributionThe volume of soft drinks are sold in aluminium cans and PET plastic bottles. They are also sold in bulk through tonic water fountains. Bottles, most of which comprise PET plastic, Only a genuinely bitty portion of soft drinks are still packaged in glaze over bottles .Com panies are trying to make packaging more eco friendly such as many companies have introduced re-sealable packs which can be resealed after drinking.The industry distributes its products through supermarkets and grocery stores, drug stores, convenience stores and gas outlets, mass merchandisers and store outlets. The foodservice and hospitality industry, in particular fast food outlets, is another system of distribution. Vending machines also provide a distribution channel for these products. instantly the companies can directly sell to the consumer, reducing their dependence on distributors, lessen costs and increases direct contact with the consumers. (Hrsdc, 2005)Industry Life CycleThe soft drinks market is now in the matured stage of the life cycle. maturement in the industry has remained stagnant. It is natural for product to go in sort out stage but coca cola and PepsiDelay this dec caudex by constantly developing the product or brand in say to extend the cycle.Coca Cola has maintained its leadership for several years. The drive behind is that it constantly developing its brand image and reinforcing the core product benefit of taste and refreshment to ensure that brand remain in maturity stage. . As in a mature industry, it is characterised by high competition, price wars and competitive advantage through economies of scale. As in their domesticated market is saturated so many companies are now turned towards overseas markets. Another way to extend the product in a life cycle is to adapt it as consumer s needs change. For role model when consumers attitude towards health and diet is changing than coca cola has introduced diet coke. Also these companies have aggressive and high advertising spends in edict to maintain a reminder of their products in the minds of the consumers. (Irish Times, 2000)Future ScenarioThe soft drink industry can have 3 possible scenarios in its long term future which are as follows-Health conscious directly days consumer are more concerned about their health. Consumers are also aware of the negative health impact of soft drinks (esp. carbonated), like gruelling bone density, obesity etc. So consumers are looking to the healthier options. So may be the soft drink industry will decline or will be rooted out of the market. due(p) to the negative image of the soft drink industry ,there may be some restriction or limitation on supply only like hard drink industry. There may be age or quantity restriction like in alcohol or tobacco. This may lead to drop of sales for soft drink industry. Or it could carry on at the same rate as now with steady and predictable growths. There already is a growing demand for healthy juices, fruit drinks, cereals etc. thus the industries should continue product mutation and expansion of their product line.Diversification and Market shareAs intensity level is taking place in soft drink industry , companies will start diversifying into new product categories and markets. Also, having a diverse product line will make the industry very stable, which is appealing to investors and creditors.Soft drink industry could diversify into many incision. .. So they should diversify according to the consumer needs. Kids segment will be another market that companies will directly bewilder to target because this is the market where soft drink industry get most of it sales. So there may be low calorie drinks that will do good for the kids and will be the trend in all households. Soft drink industry also diversify on alcoholic beverages. They will make the combination of little percent of alcohol with soft drink which is already popular to attract the hard drink customers. As alcohol is a substitute threat for soft drink this would slander their risk.Another Possible future is, to expand their global market share. This is very important to sustain because it is the source of the majority of their profits. If they lose globalmarket share, their profits will decline dramatically. So soft drink should take over the local drinks in different countries. Each country has its own local product based on traditional flavours and tastes. The soft drink companies could expand into this new market too. So soft drink industry should acquire local companies and manufacturing these drinks on a mass scale.Special drinksBy continually introducing new products, soft drink industry will be able to increase their profits and allow the company to continue to grow. They should introduced special drinks to attract the customer . The global soft drinks market is estimated to reach a value of around $ 49.9 billion by the end of 2014. As with all functional soft drinks (FSDs), the original target segment who initially bought this apprehension 16 to 30 year olds are growing older and launching a different lifecycle that requires less energy stimulation.Maintaining interest in the sports drinks empyrean will be vital in order for steady growth to continue. Sports drinks glucose enhancing drinks and all others that specifically boost certain needs of the body on with new and innovative flavours, which also require a level of familiarity and acquaintance is important for competing in the saturated soft drinks industry. Consumers also want to see that the product is naturally good for them . The more portions of fruit or vegetables a drink contains so that it tastes good over a normal soft drinkMost Likely ScenarioThe most likely scenario will be the diversification and expansion for the future of the industry. As this industry is already in saturated stage so this scenario will be very helpful. There will be some stage when people get bored with the soft drinks. . Diversification and expansion will create more ground for innovation, profits and new market in these sectors individually by sharing of customers and resources and also enhance performance of the core industry.If the industry wants to keep wretched and doesnt want to slipped in decline stage than industry have to need the diverse and expand strategy in other segments to keep profit going.