e following case concerns the application of industry and competitive analysis. It demonstrates the use of the Five-Forces Model and analyzing the impact of the five competitive forces on overall...

Read Case 5: Competition in Energy Drinks, Sports Drinks, and Vitamin-Enhanced Beverages
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.
The market size of beverage market is in 2009 was $ 1,581.7 billion and that of the
alternative beverages was $ 40.2 billion. The market growth rate in the period of 2005-2009 was
2.6 percent and during the same time period the growth rate of alternative beverages was 16.6
percent. The major segments of alternative beverages industry are energy drinks, vitamin based
beverages, energy shots and relaxation drinks. Each group has different target customer segments
which have their own perceptions and demands. The three major players in alternative beverages
industry that operate internationally are Coca Cola, Pepsi and Red Bull.
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 competition in alternate beverage industry is as below. Bargaining power of buyers is
moderate. The retailers purchase the products in bulk and so they have negotiating power in
pricing and allocating fees. Brands which are relatively new and have low market share are
susceptible to the bargaining strength for gaining shelf space whereas leading brand like Red
Bull gains assured space on front shelves. Coca cola and Pepsi has wide range of products and
are least vulnerable (Thompson, et.al., 2012).. The restaurants have low bargaining power as
they purchase low volume. The bargaining power of suppliers is the weakest competitive force in
this case. There is large number of suppliers trying to sell to a particular market. The beverages
are readily packaged and are can be referred to as a commodity. But some suppliers like the
energy drink producers have slightly differentiated products which allow them some basic
bargaining power. The competition from substitutes is substantial....