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I hereby declare that the project entitled INDUSTRY ANALYSIS ON soft-drink industrywas done by me under the guidance of PROF. YASH SRIDHAR, in partial fulfillment of the requirement for the award of the degree of Post Graduate Program in Master OF Business Administration. I assure that the work is original and has not been submitted earlier to this Institute or to any other institution.
Vaishali ojha
ACKNOWLEDGEMENT
There is always a sense of gratitude one expresses to others for the helpful and needy service they render during all phases of life.I have completed this project with the help of different Sites and Personalities .I wish to express my gratitude towards all of them. Lastly I would like to thank my parents and friends for their constant support
Contents
1. Introduction3-4 2. History..5-6 3Raw-material.7-9 4. Poter 5-model10-11 5. Market analysis11-12 6. SWOT Analysis12-13 7.Industry change.13-14 8. Market share14-15 9 Key factors.. 16 10.Recommendation.. 11.Bibliography
1810 First U.S. patent issued for the manufacture of imitation mineral waters.
1850 A manual hand & foot operated filling & corking device, first used for bottling soda water.
1899 The first patent issued for a glass blowing machine, used to produce glass bottles. 1913 Gas motored trucks replaced horse drawn carriages as delivery vehicles. 1919 The American Bottlers of Carbonated Beverages formed.
1920 The U.S. Census reported that more than 5,000 bottlers now exist. Early 1920's The first automatic vending machines dispensed sodas into cups.
1929 The Howdy Company debuted its new drink "Bib-Label Lithiated LemonLime Sodas" later called "7 up". Invented by Charles Leiper Grigg.
1934 Applied color labels first used on soft drink bottles, the coloring was baked on the face of the bottle.
1952 The first diet soft drink sold called the "No-Cal Beverage" a gingerale sold by Kirsch.
1962 The pull-ring tab first marketed by the Pittsburgh Brewing Company of Pittsburgh, PA. The pull-ring tab was invented by Alcoa.
1963 The Schlitz Brewing company introduced the "Pop Top" beer can to the nation in March, invented by Ermal Fraze of Kettering, Ohi
1966 The American Bottlers of Carbonated Beverages renamed The National Soft Drink Association.
1974 The stay-on tab invented. Introduced by the Falls City Brewing Company of Louisville, KY.
1979 Mello Yello soft drink is introduced by the Coca Cola Company as competition against Mountain Dew.
4. Acids: Acids like citric acid & phosphoric acid are added to give Refreshing
tartness or bite & help in preserving the quality of a drink.
5. Natural Flavours:
vegetables, nuts, barks, leaves etc. in soft drink containing natural flavours & fruit juice.
6. Caffeine: Caffeine has special kind of taste makes the taste of soft drink a
royal one. Caffeine was added to soft drink from its introduction to a commercial market but now caffeine free soft drinks are also available. Its quality is than compared with same amount of coffee.
7. Carbon Dioxide: Carbon Dioxide is a colourless & smell less gas, which is
added to cold drink to get bubble & it also help in keeping drink strong & fresh.
8. Colour: Along with taste of soft drink is also of very important, the company
tries to maintain both taste & colour of the soft drink every where in the world.
9. Sugar: Sugar syrup is added to the drink at around 75 degree C0 to the pure
drinking water, this is to make soft drink taste sweet. Even artificial sweetness is also used.
80% of soft drinks are consumed on the spot, where it is sold at place like cinemas, railway stations etc. Other 20% of the market of soft drink is consumed at home or other places.
Coke is dominant company of the soft drink industry and boasts a global
market share of around 44%.The coca-cola company dominates the market by owing four of the global top five soft drink brands:coca-cola,diet coke,Fanta and sprite.Its main activity consists on producing syrup concentrate which is then sold to various bottlers throughout the world who hold a coca-cola franchise.coca-cola faces competitive pressure from rivals seller in the soft drink industry.
Pepsico boasts global market share of about 31%.pepsi co.,is the biggest
snack maker and the second biggest soft-drink maker in the world.The company manufactures market and sells beverages and snacks in approximately 200 countries. Brand name loyality is another competitive pressure.Diet pepsi ranked 17th and Diet coke ranked 36th as having the mostloyal customers to their brands. The new competition between rival sellers is to create new varities of soft drinks,such as vanilla and cherry,in order to keep increasing sales and enticing new customers. Exit barriers are high for bottlers with expensive equipment,moderate for concentrate producers.Advertising budgets are high and customers are influenced by brand perceptions.
2.
Another entry barrier is the high fixed costs for warehouses,trucks,labour and economies of scale.New entrants compete in price without economies of scale. Coca-cola and pepsi company dominate the industry with their strong brand name and great distribution channels and market saturation makes them difficult to enter soft drink industry and become strong competitive force.
Bottling network: Both coke and pepsi have franchise agreements with theirs existing bottlers that have rights in a certain geographic area in perpetuity.These agreements prohibit bottlers from taking on new competiting brands for similar products.
Bottled water and sports drink are increasingly popular among those consumers who are health conscious.these water and sports drinks are healthier than soft drinks. Coffee and tea are competitive substitutes because they provide cafferine.The consumers who purchase a lot of soft drinks may substitute coffee if they want to keep the cafferine and lose the sugar and carbonation.
It is also very cheap for consumer to switch to these substitutes making the threat of substitute products very strong.
Suppliers to coca-cola are bottling equipment manufacturers and secondary packaging suppliers. As,coca-cola does not do any bottling,the company owns about 36% of coca-cola enterprises which is the largest coke bottler in the world. Coca-cola and pepsi are among the metal can industrys largest customers and maintain relationships with more than one supplier,giving these suppliers less bargaining power due to the availability of alternative suppliers.
Marketing plan : pest analysis and planning for Coca Cola Companies
Giant soft drink company Coca Cola has come under intense scrutiny by investors due to its inability to effectively carry out its marketing program. Consequently it is seeking the help of Polianitis Marketing Company Pty Ltd to develop a professional marketing plan which will help the business achieve it objectives more effectively and efficiently, and inevitably regain there iron fist reign on the soft drink industry. When establishing a re-birthed marketing plan every aspect of the marketing plan must be critically examined and thoroughly researched. This consists of examining market research, auditing business and current situation (situation analysis) and carefully scrutinising the soft drink industry and possibilities for Coca Cola in the market. Once Coca Cola have carefully analysed the internal and external business environment and critically examined the industry in general the most suitable marketing strategies will be selected and these strategies will be administered by effectively and continually monitoring external threats and opportunities and revising internal efficiency procedures.
The market analysis investigates both the internal and external business environment. It is vital that Coca cola carefully monitor both the internal and external aspects regarding it business as both the internal and external environment and their respective influences will be decisive traits in relation to Coke success and survival in the soft drink industry. Internal Business Environment The internal business environment and its influence is that which is to some extent within the business control. The main attributes in the internal
environment include efficiency in the production process, through management skills and effective communication channels. To effectively control and monitor the internal business environment, Coke must conduct continual appraisals of the business operations and readily act upon any factors, which cause inefficiencies in any phase of the production and consumer process. External Business Environment
The External business environment and its influences are usually powerful forces that can affect a whole industry and, in fact, a whole economy. Changes in the external environment will create opportunities or threats in the market place Coca cola must be aware off. Fluctuations in the economy changing customer attitudes and values, and demographic patterns heavily influence the success of Coka Cola products on the market and the reception they receive from the consumers.
Strengths: Coca-Cola has been a complex part of world culture for a very long
time. The product's image is loaded with over-romanticizing, and this is an image many people have taken deeply to heart. The Coca-Cola image is displayed on Tshirts, hats, and collectible memorabilia. This extremely recognizable branding is one of Coca-Cola's greatest strengths. "Enjoyed more than 685 million times a day around the world Coca-Cola stands as a simple, yet powerful symbol of quality and enjoyment" (Allen, 1995). Additionally, Coca-Cola's bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and operated by independent business people who are authorized to sell products of the Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers.
Threats: Currently, the threat of new viable competitors in the carbonated soft
drink industry is not very substantial. The threat of substitutes, however, is a very real threat. The soft drink industry is very strong, but consumers are not necessarily married to it. Possible substitutes that continuously put pressure on both Pepsi and Coke include tea, coffee, juices, milk, and hot chocolate. Even though Coca-Cola and Pepsi control nearly 40% of the entire beverage market, the changing health-consciousness of the market could have a serious affect. Of course, both Coke and Pepsi have already diversified into these markets, allowing
them to have further significant market shares and offset any losses incurred due to fluctuations in the market. Consumer buying power also represents a key threat in the industry. The rivalry between Pepsi and Coke has produce a very slow moving industry in which management must continuously respond to the changing attitudes and demands of their consumers or face losing market share to the competition. Furthermore, consumers can easily switch to other beverages with little cost or cons
Industry Changes
The soft drink industry is affected by macroenvironmental factors of the industry that will lead to change. First, the entry/exit of major firms is a trend in the industry that will likely lead to change. More specifically, merger and consolidation has been prevalent in the soft drinks market, causing some firms to exit the industry and then re-enter themselves. Several leading companies have been looking to drive revenue growth and improve market share through the increased economies of scale found through mergers and acquisitions. One specific example is how PepsiCo acquired Quaker Oats, who bought Gatorade which will help expand PepsiCos energy drink sector (Datamonitor, 2005). This trend has increased competition as firms diversification of products is increasing. A second trend in the macroenvironment is globalization. With the growing use of the internet and other electronic technologies, global communication is rapidly increasing. This is 10allowing firms to collaborate within the country market and expand into world markets. It has driven competition greatly as companies strive to be first-movers. Specifically, the global soft drink markets compound annual growth rate (CAGR) is expected to expand to 3.6% from 2004 to 2009 (Datamonitor, 2005).
Third, changing societal concerns, attitudes, and lifestyles are important trends. In the United States and Europe, people are becoming more concerned with a healthy lifestyle. Consumer awareness of health problems arising from obesity and inactive lifestyles represent a serious risk to the carbonated drinks sector (Datamonitor, 2005, p. 15). The trend is causing the industrys business environment to change, as firms are differentiating their products in order to increase sales in a stagnant market. Thus, the long-term industry growth rate, the fourth trend, shows low growth in recent years. Since 2000, the CAGR is 1.5 per cent (Datamonitor, 2005). The low growth rates are of concern for soft drink companies, and several are creating new strategies to combat the low rates. This leads to the fifth trend of growing buyer preferences for differentiated products. Because soft drinks have been around since as early as 1798 (American Beverage Association, 2006), buyers want innovation with the products they buy. In todays globalizing society, being plain is not good enough. According to Barbara Murray (2006c), The key for all of these beverage companies is differentiation. The giants have new formulations and appearances. Whatever the strategy, be it a new color, flavor, or formula, companies will strive to create the greatest brand awareness in the minds of the consumer in the hopes of crowding out its competitors. Thus, the last trend, product innovation, is necessary to combat buyers need for a variety of tastes. Firms are already differentiating by taste, with the Coca-Cola company as an example. The firms product line includes regular Coca-Cola, Diet Coke, Diet cherry Coke, 11cherry Coke, Vanilla Coke, Coca-Cola with Lime, Coca-Cola with lemon and many more (Murray, 2006a).
Brands
Thums up coke limca fanta kinley sprite
Rs. (Crore)
1740 1350 1030 600 540 400
Year
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
1968 2070 2195 2490 2800 3000 3240 4000 4450 4920 5670 6480 7000
Market share(in %)
Market Share (org Brand Name figure) Market Share (IMRB
41 57 2
49 48 3
Key factors for competitive success within the soft drink industry branch from the trends of the macroenvironment. Primarily, constant product innovation is imperative. A company must be able to recognize consumer wants and needs, while maintaining the ability to adjust with the changing market. They must keep up with the changing trends (Murray, 2006c). Another key factor is the size of the organization, especially in terms of market share. Large distributors have the ability to negotiate with stadiums, universities and school systems, making them the exclusive supplier for a specified period of time. Additionally, they have the ability to commit to mass purchases that significantly lower their costs. They must implement effective distribution channels to remain competitive. Taste of the product is also a key factor for success. Furthermore, established brand loyalty is a large aspect of the soft drink industry. Many consumers of carbonated beverages are extremely dedicated to a particular product, and rarely purchase other varieties. This stresses the importance of developing and maintaining a superior brand image. Price, however, is also a key factor because consumers without a strong brand preference will select the product with the most competitive price. Finally, global expansion is a vital factor in the success of a company within the soft drink industry. The United States has reached relative market saturation, requiring movement into the global industry to maintain growth (Datamonitor, 2005).
Recommendations
Looking towards the future, the most important recommendation to CocaCola is continuing product innovation and expansion of their product line. The soft-drinks industry is fully saturated with competitors. Also, the industry is no longer expanding, and market share is actually decreasing as more consumers are looking to healthier options. By continually introducing new products, Coca-Cola will be able to increase their profits and allow the company to continue to grow. Also, having a diverse product line will make the corporation very stable, which is appealing to investors and creditors. A second recommendation would be to sustain or increase the global market share. Coca-Cola is very well-established globally, and is the global soft-drinks leader. This is very important to sustain because it is the source of the majority of their profits. If they lose global market share, their profits will decline dramatically. A final recommendation for Coca-Cola is to maintain and try to increase their brand loyalty. Diet Coke has the second highest brand loyalty of all the soft-drink competitors brands, and solid advertising campaigns will help maintain the brand loyalty. They can also strive to obtain higher brand loyalty in all other brands, not solely Diet Coke. The brand loyalty is important because it will allow Coca-Cola to sustain profits and maintain their market share.
Bibliography