The global beverage industry is a $1.58 trillion a year industry (Gamble, 2012, p. C-76). An emerging subsection of the beverage industry is the alternative beverage market (non-carbonated, non-alcoholic beverages), which accounts for $42.8 billion dollars (Gamble, 2012, p. C-77). As consumer tastes veer away from traditional beverages, the alternative beverage market faces vast growth potential.
Five Forces Analysis
An analysis of the competitive environment was conducted using Porter’s Five Forces Model. Analysis shows moderate competitive forces in play overall. Rivalry among competitors is strong. Buyer demand has waned due to the economy. In addition switching costs for consumers is low, but sales of alternative beverages, concentrated within the three largest producers, Coca-Cola, PepsiCo and Red Bull, continue to grow.
Threats from substitutes is weak. Although switching costs are low, carbonated beverages, the dominant product of the drink market has been seeing a steady and marked decline in recent years as consumers begin to shy away as they become more conscious of their health. According to Esterl (2013), “Sugary bubbles have become a lightning rod in the U.S. for consumer health concerns, such as diabetes and obesity. Meanwhile, baby boomers are aging, and soda’s traditional market-youth-is often turning to water, energy drinks and coffee instead”. (n.p.)
Supplier forces is the weakest of the five. Supplies are readily available from numerous sources. The two largest competitors PepsiCo and Coca-Cola have the resources to vertically integrate the needed supplies into their business by either corporate takeover or internal manufacturing capabilities. According to Gamble (2012), “…suppliers of secondary packaging (e.g., cardboard boxes, shrink-wrap, six-pack rings, printed film or paper labels) aggressively competed for the business of large alternative beverage producers (p. C-80).
Lastly, threats from new entrants is...