What Are the Strategically Relevant Components of the Global and U.S. Beverage Industry Macro-Environment?

What are the strategically relevant components of the global and U.S. beverage industry macro-environment? How do the economic characteristics of the alternative beverage segment of the industry differ from that of other beverage categories? Explain.

Global beverage companies like Coca Cola had relied on those beverages to sustain volume growth in mature markets where consumers were reducing their consumption of soft drinks. These companies wanted to expand the market for alternative beverages by introducing new drinks into emerging markets. Beverage producers made numerous attempts to increase the size of the market for those types of beverages by growing product lines and increasing sales and market share. They were faced with criticism of alternative beverages as presenting health risks or not yielding the advertised results. Rapid growth in the market and premium prices/high margins made the alternative beverage market an important part of beverage company strategy.

The economic characteristic of the alternative beverage segment if the industry is differ from that of other beverage categories. Alternative beverages competed on the basis of differentiation from traditional drinks such as carbonated soft drinks or fruit juices. The market started out with low competition, however that is rapidly changing as many new product lines enter and profit margins will inevitably suffer from the price reduction. The rest of the beverage industry is faced with low profit margins because of high competition and little ability to differentiate products.

2. What is competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

The bargaining power of buyers was considerable. Distributors and retailers had substantial leverage in negotiating pricing and slotting fees with alt beverage producers because of their large purchase sizes. New, low market share brands were most vulnerable to buyer leverage since shelf space is allocated to established brands and is at a premium. The large producers were least vulnerable because they offered a large variety of drinks in stores already.

Supplier bargaining power was weakest. There were many suppliers in for the alt beverage ingredients and they are in constant competition to sell their products. Many of the ingredients are commodity or commodity behaving products.

Competition from substitutes is substantial. There are many substitutes to alt beverages like juice, tea, soft drink, or water.

Threat of new entrants was substantial when the market emerged but has reduced significantly with the established beverage producers seizing market share.

Extreme rivalry is the strongest competitive force. The market moves towards imitating the soft