Case Analysis - Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages

Introduction3

Strategy4

Porter Five Forces4

Buyer Power4

Supplier Power4

Threat of New Entrant5

Threat of Substitutes5

Rivalry6

Analysis of Strategic Implementation & Performance6

Recommendations for the Future8

Case Analysis - Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages

Introduction

Energy drinks incorporate calorie, caffeine in addition to other ingredients that presumably enhance the energy capacities of humans by adding extracts from herbs, nutrients like vitamin B and taurine. Energy drinks first emerged on the scene during the 1960s as a response to an increase in the demand of the consumers for an energy rich supplementary drink mostly in the European and Asian markets. The very first energy drink was launched in Japan named Lipovitan D, which received huge reception from the general public. The energy drink market in the United States was truly brought into life with the advent of Red Bull after successfully doing business in Austria for 10 years. Alternative beverages especially energy drinks have established themselves firmly in the United States market and have become the favorite beverage for ages 18 to 34 years. However, the alternative beverages market is a very competitive business which is facing many health and safety regulations as it is pressed to invent innovating and exciting new products in the United States (MGNPD, 2009). The major players in the alternative beverages markets are PepsiCo, Coca-Cola Company and Red bull GmbH.

This paper analyses the case John E. Gamble which is based on the alternative beverages market in the United States.

Strategy

Porter Five Forces

Buyer Power

The companies operating in the alternative beverages market utilize the services of two types of retailers i.e. proximity retailers and the large supermarket chains to showcase their products. Proximity retailers have little power due to their small business size and the fact that there is a lot of competition amongst them. Whereas, supermarkets gain more control as they have a large customer base and can sell in bulk. These supermarkets also present the advantage of customer loyalty like Walmart has a constant fan following. But convenient stores as selected by customers based on their location and the relation with the owner or the representatives at the store. There are a large number of alternative beverages manufacturers and they usually have to compete in order to get the desired self space. But the large companies like Coca-Cola and PepsiCo enjoy monopoly to a large extent due to their sheer size. Although, there are brands like Red Bull and other specialty energy drinks that give these large companies a run for their money which makes the buyers strong for critical accounts.

Supplier Power

The raw material for the alternative beverages includes water, glucose and sugar etc. that are available from a large number of suppliers. However, only the large companies maintain relationships with manufacturers of unfinished products (cans etc). Both the suppliers and buyers have a lot of choices as to attaining and buying their products from. The large number of both players makes the switching cost very low therefore, allowing both ...