Achiyat Ulumuddin Chasan

1464002
Strategic Management : Case Assignment 2

Competition in Energy Drinks, Sport Drinks, and Vitamin-Enhanced

Beverages
Summary
In the mid-2000s, there are rapid growth sales for alternative beverages in global
market. Alternative beverages consist of some segment such as energy drinks, sport drinks,
and vitamin-enhanced beverages. According to rapid growth sales of alternative beverages,
global beverage companies such as Coca Cola and PepsiCo relied on such beverage.
Moreover the consumers reduced their consumption on carbonated soft drinks. Besides Coca
Cola and PepsiCo, there are some alternative beverage producers such as Red Bull GmbH,
Rockstar Inc, Hansen Natural Corporation, Living Essentials, and Energy Brand. PepsiCo has
the largest market share in alternative beverages globally with around 26,5% market share.
And then followed by Coca Cola with 11,5% market share and Red Bull with 7% market
share. And the other 55% market share is for the rest companies. PepsiCo became alternative
beverages producer with the largest market share due to their attempts at increasing the size
of the market by extending existing product lines and developing altogether new products.
In addition to make various products, other strategies to enlarge the market share are
innovation, brand image and distribution channel. Convenient stores were a particularly
important distribution channel for alternative beverages since energy drinks, sport drinks, and
vitamin-enhanced beverages were purchased for immediate consumption. Convenience stores
contribute around 75% of energy drink sales in 2010. Therefore, Coca Cola and PepsiCo
became the largest producers because they have more distribution channel more than
convenience stores such as vending machine and provide in special events. It was related to
Coke and Pepsi which they also produced. Anywhere Coke and Pepsi could be purchased,
there will be also available alternatives beverages they produced.
Analysis
In this section, the competition on alternative beverages industry will be analyzed
from the external environment view.

1. Macro Environment Factors

- Political factors : FDA as the regulator for food and drug industry has regulation
to make alternative beverages safe to consume. Companies should obey the
regulation from FDA to ensure their business operate well. So, the political factors
have low impact on alternative beverages industry as long as the companies obey
-

the FDA regulation.

Economic conditions : the increasing of consumer purchasing power and high
profit margin in alternative beverage make this industry look so sexy to
companies. It will attract companies to try their luck in this industry, So, the

economic conditions have high impact on alternative beverages industry.

Sociocultural forces : brand image of alternative energy drink influence
consumers to buy the products. For example, in the industrial area which is most
of the population work as labor, the product image should be energy drink that
will make them more energetic and stronger. So, sociocultural forces have high

impact on this industry.

Technological factors : there is no need of high end technology in this industry.

So, the technological factors have low impact on this industry.

Environmental forces : there is no environmental issues arise from alternative

beverages. So, environmental forces have low impact on this industry.

2. Five Competitive Forces
- Rivalry among competing seller
The competition in the alternative beverages industry is very tight. It can be
concluded from many producers in this industry and no producers dominate the
market share more than 50%. Moreover, the demand is still growing especially in
-

developing country but slowly. So, the rivalry in this industry is very strong.
Potential new entrants
Entry barrier for this industry is very low. Everyone can compete in this industry.

Therefore, there are many companies compete in this industry.

Substitute products
Substitute products for alternative beverages are carbonated soft drinks and fruit
juice. Carbonated soft drinks industry growth is declined according to health issue
whereas fruit juice has its own target market. So the substitute product in this

industry is weak.
Supplier bargaining power
There are many supplier in alternative beverages industry such as ingredient

supplier and packaging supplier. So, the bargaining power in this industry is weak.
Customer bargaining power
In this industry, buyer cost of switching to competing product are low. Buyer can
choose the product whenever they like without any charge. Moreover the buyer

are price sensitive. The quality also matter. If the product effect on the healthy
condition, they will choose another product. So, the customer bargaining power in
this industry is very strong.
3. Industry Driving Forces
Based on the analysis above, I conclude that this industry has very tight competition
and has low entry barrier. Those will attract many companies play in this industry
moreover with high profit margin in alternative beverages. To win the competition,
company should give attention to the industry driving forces such as
- Innovation
- Brand Image
- Channel Distribution
Recommendation
Alternative beverages industry is still as very interesting industry due to high profit
margin and growing market. But it has low entry barrier so it make many companies can
easily entry in this industry. It makes the competition in this industry very tight. The
companies who want to survive and grow in this industry should give big attention in three
factor related to industry driving forces. Innovation, brand image, and channel distribution.
1. They should innovate with new brand and safety product.
2. They should develop brand image that match with their segment market.
3. They should develop wide distribution channel for their segment market as possible.