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?

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.

Market size, market growth, segmentation, and scope of rivalry are the strategically relevant components of the global and US beverage industry macro-environment. Discussing the market size, the beverage market in 2009 was between $1.5 and $1.6 trillion. The total sale of beverages during 2009 for soft drinks was 48.2% and 29.2% of bottle water industry sales. Also in 2009, the market of alternative beverages included sports drinks, flavored or enhanced water, and energy drinks. Sport drinks made up 4%, flavored drinks made up 1.6%, and 1.2% was made up of energy drinks. The market for alternative beverages in 2009 was $40.2 billion. The value of the U.S market for alternative beverages was $17 billion. Discussing market growth, the dollar value of the global market for alternative beverages grew at a 9.8% annually between 2005 and 2009, but was expected to slow down to 5.7% annually between 2010 and 2014. Discussing segmentation, the market for alternative beverages consisted of sports drinks, energy drinks, vitamin-enhanced beverages, energy shots, and relaxation drinks. Disucssing scope of rivalry, the competition between rivals consisted of Coca Cola, Pepsi, Redbull, Hansen, and Liquid Energy.

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?

Competition in the alternative beverage is strong due to brand loyalty and the fact that so many of these products are alike. Buyers in this case, have a strong competitive force because of their considerable leverage in price. Suppliers on the other hand, have a weak competitive force because these companies can get supplies from anywhere. Substitutes are a strong competitive force because there are so many brands out there that produce the same product. New entrants competitive force depends on the buyer’s brand loyalty. If some buyers are already committed to a certain brand then a new entrant would have a hard time coming in to this industry. Rivalry among the companies have a strong competitive force due to the slow growing market and the fact that there are not too many competitors in this industry.

3. How is the market for energy drinks, sports drinks and vitamin-enhanced beverages changing? What are the underlying drivers of change and how might those forces individually or collectively make the industry more or less attractive?

The market for energy drinks, sport drinks and vitamin-enhanced beverages has changed significantly after negative sales in 2007. There is a higher demand for

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