The strategic group map in the alternate beverage industry
The alternate beverage industry is a fast growing and competitive market with two major producer and several large marketer companies. There is tremendous growth in the industry with both large and small marketers launching a new line of brands. The demand on the consumer side is also growing fast with the preference of alternate beverage drinks to the traditional carbonated ones (Bachmeier, 2009). Many consumers across the world are moving away from the traditional carbonated drinks to healthier alternate drinks, thus making the industry more promising. It is believed that the demand is expected to grow as the consumer purchasing power increases globally (Hill, & Jones, 2012).
The three large companies in the industry are the PepsiCo, Coca Cola and the Red Bull GmbH. Other small marketers include the Rock star Inc and Hansen Natural Corporation. Alternate beverages formed an important part of the beverage companies’ lineup of brands due to its fast growing market, premium prices and high profit margin. Here, firms compete on the basis of product innovation; marketing and new markets venture (Bangs, & Henricks, 2005). In the year 2009, PepsiCo was the world’s market leader with a total market share of 26.5% globally and 47.8 in the US. Coca Cola was the runners up with a total global market share of 11.5%. Coca Cola trailed PepsiCo in the alternate beverage despite being the world’s largest player the carbonated drinks. Red Bull on the others side was the leading seller in the global market in 2009, making it the third largest producer after PepsiCo and Coca Cola (Cant, 2006). There exist hundreds of regional and specialty brands of the alternate beverage in the US and international market. Out of these brands, Rock star was the noteworthy privately held beverage Company in the market. Alternate beverage market grew drastically since the year 2000 due to the shift in consumers’ preference from consumption of carbonated drinks to healthier non carbonated drinks. Its growth coupled with high profit margin the market attracted both well established and new companies (Freeman, 2010). Even though, the three brands; energy, sports and vitamins enhanced drinks were all categorized as alternate beverages, consumer choice differed across the brands. Market analysis shows that energy drinks were highly consumed by teenage boys after practicing or engaging in sports activities in school (Hitt, Ireland, & Hoskisson, 2011). Sports drinks were consumed by who engaged themselves in sporting activities as well as those manual laborers who work on hot days. On the other side, vitamin enhanced drinks were highly consumed by adults interested in increasing vitamin levels, in their bodies despite being a substitute for sports drink.
The alternate beverage market grew rapidly since 2005 but slowed down in the years 2008 and 2009. Analysts believe that the slowing down in the market performance is as a result of the US economic down turn as well as market maturity of these products. There was also the issue of criticism on the health prospects of these products (Hill, & Jones, 2012). Producers were force to contend to this as consumers argued that the products posed health risks. There was a notion that excessive consumption of high-caffeine-content beverage might cause insomnia or arrhythmias. In addition to this, physicians advised the consumers to avoid relation drinks arguing that there some that contains potentially harmful ingredients melatonin and kava. All these were caused major setback to producers of alternate beverages, and some were forced to change their marketing strategies to reclaim consumer confidence (Mcloughlin & Aaker, 2010).
The strategic group that is in the best position is the PepsiCo, Coca Cola and the Red Bull GmbH and those who are in the worst position are the Rock Star and the Hansen Natural Corporation. This is based on the product innovation, market share and consumer satisfaction strategies employed by these market players (Hill, & Jones, 2012).
What key factors determine the success of alternative beverage producers?
New category creation through constant Product innovation: alternative beverage industry is a very competitive one with two major Companies and several small marketers. Here, companies produce and market energy, sports and vitamin enhanced drinks, so there is high competition for the consumers (Mcloughlin & Aaker, 2010). Within each brand, each firm has tried to create a line of brand products to differentiate its products from those of rival companies, as well as break from the traditional carbonated drinks. In fact, brands were positioned within their segments on the basis of differentiations. A good example is when all energy drinks brands attempted to create customer loyalty based on the brand’s energy boosting properties of their ingredients, taste and image (Seenivasa-Pillai, Wemken, & Hiebl, 2007). PepsiCo through product innovation managed to introduce some of the world’s largest brands which enabled the Company secure the largest market size. These brands include Aquafina, Mountain dew, Tropicana, Lay’s, Tostitos, SoBe, Cracker Jack, Pepsi, and Cheetos among other brands. Generally, new category creation is a sober, successful and well proven strategy in the international market and also pursued by the world’s leading companies.
Companies should ensure product delivery with the benefit that consumers can feel: one of the best strategies that a producer in this industry can adopt and win customer confidence is to deliver a product that has a positive health effect that can be felt easily (Hill, & Jones, 2012). For example, some producers made good profits when they introduced Living Essential 5 hour energy that was designed to have a calming effect and even help those with insomnia. This was simply because the consumer could easily feel and detect the effect. This is a key way of creating a brand loyalty in the market through incorporating consumer feeling. It has been used in food and beverage industry and proved to be successful (Jeffs, 2008). Look at the success of the Coke brand of Coca Cola in the global market simply because of its refreshing and relaxing feeling. The Coca Cola matched what they advertise or tell the consumers about the Coke brand with the exact impact the brand has upon consumption.
Brand focus is another strategy that can enable a producer in alternate beverage industry successful. Brand focus is a battle of brand perception and not battle of products as many termed it. A producer needs to create a brand through innovation and focus on the success of that brand in the market (Pitt & Koufopoulos, 2012). The focus here means that the brand needs to be strategically launched, marketed, make follow up in terms of consumer reaction and have a constant brand development and promotion to ensure success in the market. Brand focus ensures that new brands are not just created but followed to the later to ensure its success in local and global market. It involves extensive research on the product performance in the market, constant development based on research results and extensive marketing strategies (Penzkofer, 2007). Marketing strategies involves endorsement from prominent personalities and celebrities in various fields.
Recommendations to each of the three Companies on how to improve their competiveness in the global alternate beverage market
Coca Cola Company needs to capitalize on its strong brand portfolio. The Company has been a global market leader with strong brands like Coke in the carbonated beverage industry. It has other, several brands that have already gained market acceptance, as well as goodwill (Witcher, & Chau, 2010). Alternate beverages are health products and consumers need to be convinced to accept their consumption. Coca Cola Company needs to capitalize on the goodwill its existing products have to develop and market new brands in alternate beverage industry. This Company also faces stiff competition in the acquisition and retaining of product market. To beat its rival company, PepsiCo, it needs to have flexible sales and distribution models (Penzkofer, 2007). They need to have several distribution models that are designed to suit different customer profile, geographical region and market structure.
For PepsiCo, it needs to focus on new emerging markets such as China, India and Russia and avoiding concentrating much on the existing ones. This is because of its current position in the market and to survive the stiff competition, it needs to conquer new markets ahead of others. By doing so, it will give the Company an added advantage and it will be in a position to compete well on already mature markets (Jeffs, 2008). The current critics in the alternate beverage industry go to affect PepsiCo greatly if the consumers stop consuming these products. The Company has a wide range of brands most of which have been criticized as harmful products. PepsiCo need to take the challenge and surface health and environmental issues. It needs to respond first to these critics and appeal to consumers before any other company does. This will help maintain the existing customers and even convince new ones to join (Penzkofer, 2007).
Red Bull GmbH has been famous for successfully creating and building a brand without relying on mass-media. It has created a network of events, uses top athletes in the world to endorse its products and even branded its refrigerated sales successfully (Thompson, & Martin, 2010). In order to maintain this, Red Bull GmbH needs to boost its mass marketing strategies to allow marketing campaigns embed its image of Red Bull- an energy drink in consumers’ minds. The Company also needs to embrace the strategy of product diversification to be able to compete with giant companies like Pepsi. Diversification show Company’s innovation, which refreshes consumers minds and keeps anticipating for more and more.