Soft Drink Industry Overview
Soft drink manufacturing and selling is a multibillion-dollar business in the world today. Over decades, Coca-Cola, a U.S. based manufacturer has dominated the industry and appears to have mastered the game. However, from soft drink industry overview, it is evident that Coke is not the only player in the industry. Its main competitors are Dr Pepper Snapple Group, and PepsiCo, both in America. Others headquartered out of America are Britvic in the UK, Cott in Canada, Red Bull in Austria, and Suntory in Japan.
Throughout history, consumer tastes and demographics are the main drivers of demand for soft drinks in the world. Thus, companies are able to make profits depending on their ability to do excellent marketing campaigns to win consumers. For large companies like Coca-Cola and Pepsi, they enjoy economies of scale in terms of production and distribution, explaining why they remain afloat. For smaller companies, they can only breakthrough the soft drink market by focusing on new products, meeting the needs of local markets, and offering lower prices for their customers. The U.S beverage market is highly concentrated. For example, the top 50 players in the industry account for over 95% of revenue.
Market trends- soft drink industry overview
Soft drink industry overview shows that carbonated soft drinks account for the highest percentage of revenue. In 2015, the drinks represented up to 65% of revenue, a pointer to how top competitors focus on carbonated soft drinks. On the other hand, noncarbonated drinks account for about 35 percent. While the two are the main products in the market, some companies produce bottled water, even though this makes up a small percentage of the annual revenue by the industry.
Notably, soft drink industry is a mature sector of the economy since it has companies that market alcoholic and nonalcoholic items to people. Generally, the industry presents limited growth opportunities as compared to existing businesses. Therefore, most players in the market focus on diversifying their products in order to gain competitive advantage and gain customer share. In addition, they have a chance to explore lucrative distribution arrangements or acquisitions to enlarge their operations, market cover and product portfolios.
The nonalcoholic Segment of the industry
Coca-Cola and Pepsi continue to dominate nonalcoholic manufacturing and selling in the world. They distribute their well-known brands all over the world through sizable bottling companies. Soft drink industry overview shows that bottlers largely depend on their market leaders to develop new products and improve existing tastes in the market. Over the years, market titans have employed a range of means to remain on top. For example, they purchase smaller players or enter promising deals with distribution arrangements.
Consumers in the soft drink world have numerous options, depending on the prevailing economic conditions. In particular, they prefer expensive drinks when the economy is booming and allows them high disposable income. On the other hand, they will turn to inexpensive and lesser-known beverages when their disposable income is low. Unlike for other sectors of the economy, sales in beverage market are seasonal. For example, during warm summer months, companies register higher sales as compared to cold winter days.
Common Characteristics of the Soft drink industry
Since the soft drink market is highly concentrated with a few players dominating the industry, competition among the companies is always fierce and costly. Coke and Pepsi are the best examples, having been neck to neck for decades. However, the companies experience changing operational risk because of the varying tastes and preferences among consumers around the world. Manufacturers of soft drink must keep pace with the changing trends in tastes in order to remain relevant to their loyal customers.
Soft drink industry overview also indicates that price is a major factor in the market. The players use price to attack competitors. This price volatility is sometimes intense for some competitors to withstand. Moreover, every beverage manufacturer is concerned with the cost of production. Players want to minimize cost as they maximize on profits. Thus, they adopt cost-cutting practices like hedging of materials such as aluminum and carbon dioxide. A common trend in the market is that companies with strong and legendary brands have widest operating and net income margins.
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References
http://www.valueline.com/Stocks/Industries/Industry_Analysis__Beverage.aspx#.Vpfm8E-hRkh
http://www.hoovers.com/industry-facts.soft-drink-manufacturing.1049.html
http://www.euromonitor.com/soft
https://www.csbsju.edu/Documents/libraries/zeigler_paper.pdf
http://marketrealist.com/2014/11/growth-sluggish-non-alcoholic-beverage-industry/