Competition in energy drinks, sports drinks and vitamin enhanced beverages
Spring Hill College
Alternative beverages such as sports drinks, energy drinks, and vitamin-enhanced beverages developed into an important competitor for the beverage industry and saw rapid growth in the mid-2000s. Alternative beverages compete on the basis of differentiation from each other in the market and traditional drinks, such as carbonated soft drinks and fruit juices. The largest sellers of alternative beverages are the global food and beverage giants, such as Coca-Cola and PepsiCo., that have already built respected brands in snack foods, carbonated soft drinks, and fruit ...view middle of the document...
Global beverage companies, such as Coca-Cola and PepsiCo, have struggled to reverse the decline in carbonated soft drinks consumption in the U.S and have relied on the alternative beverages in order to maintain volume growth in mature markets where consumers were reducing their intake of carbonated soft drinks due to consumer health concerns, such as diabetes and obesity (Esterl, 2013). Coca-Cola, PepsiCo, and other companies expanded the alternative beverage market through introducing energy drinks, sports drinks, and vitamin drinks into international markets. In addition, companies, such as Hansen Natural Corporation and Red Bull GmbH, have seen high profits as well through their development and sales of alternative beverages. Sports drinks are most frequently purchased by those who engage in sports, fitness, or other strenuous activities, where vitamin enhanced beverage are mostly purchased by the adult consumers interested in increasing their intakes of vitamins. While the profile of the energy drink consumer is presented as teenagers, in earlier years, teenagers were the face of carbonated soft drinks’ traditional target market (Gamble, 2011, p. 266) Today’s youth are “often turning to water, energy drinks and coffee instead” of carbonated soft drinks (Esterl, 2013).
Of the five competitive forces, the strongest in the alternative beverage industry is the competitive force associated with rivalry among competing sellers to attract customers. With many competitors fighting for market share, competition between rivals has become fierce. This rivalry, mixed with many different substitutions – which include bottled water, carbonated soft drinks, etc. – drive the alternative beverage industry.
The weakest of the five competitive forces is competitive pressures stemming from buyer bargaining power. While there are numerous substitutes, strong brand loyalty keeps customers from switching to lower-cost substitutes. The quality can be judged via taste preferences, the effectiveness of the drink (i.e. the amount of energy the consumer gains from the energy drink), or what certain companies endorse (i.e. Monster and Red Bull endorse extreme sports and Coca-Cola endorses healthy lifestyles). These preferences help support an extremely loyal consumer base making the market hard to enter and gain market share from other established companies. This combined with the already higher costs of alternative beverages – energy drinks costing nearly 400 percent higher by volume than equivalent carbonated soft-drinks – leads to weak competitive pressures from buyer bargaining power.
ANALYSIS AND EVALUATION
One of the most important factors for success in the alternative beverage industry is innovation. As Gamble mentions in the case, “Product innovation had been among the most important competitive features of the alternative beverage industry since the introduction of Gatorade in 1967.” (Gamble, 2011, p. 269) This is certainly still the case, as...