Competition in Energy Drinks Case Essay

Within the beverage industry companies like Pepsi and Coca Cola were using alternative beverages as a way to counter the effects of the decline of consumption of carbonated beverages. This in turn will help them sustain volume. These two large companies were working hard to expand their alternative market line by introducing sports drinks, energy drinks, and vitamin drinks. One of the largest issues at hand is the pressure to stop producing these harmful drinks, people felt that they had a negative impact on your body and believed their strategies promoted reckless behavior. Even though this was happening they had to keep pushing through to be very successful. Sales began to increase as well as market share which introduced several new brands to the alternative beverage industry. In the alternative beverage industry competition is fierce. Some of the major factors that play a role are product innovation, differentiation; create brand loyalty based on taste, the drinks image, advertising, and sponsorships. Many of these companies like Hansen and Red bull sponsored events to promote their brand. The strongest of the 5 competitive forces within the industry is that of substitution. Pepsi and Coca Cola made their products available to customers with ease pushing other companies out of business. The weakest of the 5 forces is buyer bargaining power. Buyers do not have much control over the prices at which these beverages are being sold. If they were looking for an energy drink they would have to pay the high prices. Buyers are starting to become more brand loyal so they will buy at high prices more often. Companies like Coca Cola and Pepsi seem to make the industry less attractive for new entrants. Reason is because they both are well established with good brand recognition. Consumers will most likely always choose the brand they are familiar than new unfamiliar brands. The market for energy drinks is declining, sales are down, and the market has matured. Over the next 5 years drivers of change will not slow down companies like Coca Cola, Pepsi, or Red Bull. Instead of looking to compete on price, volume, or market share gains it looks like they will look into product innovations to increase sales. At this point time drivers of change will most likely keep the alternative beverage unattractive for smaller companies. Pepsi and Coca Cola are able to counter the downturn the economy because of the broad range of products they have. Red Bull on the other hand has only a few products and sales are suffering. A few recommendations for the larger companies are as follows. Coca Cola does very well in the carbonated beverage industry but is way behind in the alternative beverage industry. They can do some research on countries where they want to sell their product and see what consumer actually want. By doing this they could create a product that will appeal to local consumer tastes. Pepsi Co. has done really well in the alternative beverage industry but has introduced a new line of energy drinks (Charge, Rebuild, Defend, and Bloodshot) that I have never heard of. It would be in their best interest to do an ad campaign to consumers. Red Bull on the other hand just needs to expand their product line. They are focusing mainly on their original flavor still and that may be a reason why sales are decreasing.