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  • Assignment of Marketing Management: Topic: Porters 5 Forces Analysis For Soft Drink Industry

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    The document provides an analysis of Porter's 5 forces for the soft drink industry. It finds that the threat of competition is high due to dominant players like Coca-Cola and PepsiCo. The threat of new entrants is low due to high costs and brand loyalty. Substitute products like bottled water, coffee and tea pose a strong threat. The bargaining power of suppliers is low due to many alternatives. However, the bargaining power of large buyers like retailers is strong.

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    The document provides an analysis of Porter's 5 forces for the soft drink industry. It finds that the threat of competition is high due to dominant players like Coca-Cola and PepsiCo. The threat of new entrants is low due to high costs and brand loyalty. Substitute products like bottled water, coffee and tea pose a strong threat. The bargaining power of suppliers is low due to many alternatives. However, the bargaining power of large buyers like retailers is strong.

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    300 views6 pages

    Assignment of Marketing Management: Topic: Porters 5 Forces Analysis For Soft Drink Industry

    Uploaded by

    anshu169
    The document provides an analysis of Porter's 5 forces for the soft drink industry. It finds that the threat of competition is high due to dominant players like Coca-Cola and PepsiCo. The threat of new entrants is low due to high costs and brand loyalty. Substitute products like bottled water, coffee and tea pose a strong threat. The bargaining power of suppliers is low due to many alternatives. However, the bargaining power of large buyers like retailers is strong.

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    Flag for inappropriate content
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    Assignment of Marketing Management

    Topic: Porters 5 forces analysis for soft drink industry

    Submitted to: Ms Kanika Jhamb


    Submitted by: Anshul Sharma
    B.Tech (Hons.) MBA CSE
    Soft Drink Industry:

    Soft drink Industry consists of establishments primarily engaged in manufacturing non-alcoholic,


    carbonated beverages, mineral waters and concentrates and syrups for the manufacture of
    carbonated beverages.
    For Soft Drink Industry, Porters 5 forces analysis is as follows:

    1. Threat of Competitors: Soft drink consumption has a market share of 46.8% within the
    non-alcoholic drink industry. The soft drink industry is very competitive for all
    corporations involved, with the greatest competition being that from rival sellers within
    the industry. The two examples for soft drink industry (Non cola products) are Coca
    Cola and Pepsi co.
     Coca-Cola, Pepsi Co., are the largest competitors in this industry, which are globally
    established.
     Coke is dominant company of the soft drink industry and boasts a global market share
    of around 44%. The Coca-Cola Company dominates the market by owning four of the
    global top five soft-drink brands: Coca-Cola, Diet Coke, Fanta and Sprite. Its main
    activity consists on producing syrup concentrate which is then sold to various
    bottlers throughout the world who hold a Coca-Cola franchise. Coca-Cola faces
    competitive pressure from rival sellers in the soft drink industry.

     PepsiCo boasts global market share of about 31%. Pepsi Co., is the biggest snack
    maker and the second biggest soft-drinks maker in the world. The company
    manufactures markets and sells beverages and snacks in approximately 200 countries.

     Brand name loyalty is another competitive pressure. Diet Pepsi ranked 17th and Diet
    Coke ranked 36th as having the most loyal customers to their brands.

     The new competition between rival sellers is to create new varieties of soft drinks,
    such as vanilla and cherry, in order to keep increasing sales and enticing new
    customers.

     Exit barriers are high for bottlers with expensive equipment, moderate for
    concentrate producers. Advertising budgets are high and customers are influenced by
    brand perceptions.
    2. Threat of new entrants: The threat of entry depends on the presence of entry barriers and
    the reaction that can be expected from existing competitors Saturation
    and small growth of Soft drink industry makes it very difficult for new entrants to
    start competing against the existing firms.

     Another entry barrier is the high fixed costs for warehouses, trucks, and labor, and
    economies of scale. New Entrants cannot compete in price without economies of scale.
     Coca-Cola and Pepsi Co dominate the industry with their strong brand name and great
    distribution channels and market saturation makes them difficult to enter the soft drink
    industry and become strong competitive force.

     Bottling Network: Both Coke and PepsiCo have franchisee agreements with their
    existing bottler’s that have rights in a certain geographic area in perpetuity. These
    agreements prohibit bottler’s from taking on new competing brands for similar products.

    3. Threat of Substitute:
    Substitute products are those products that appear to be different but can satisfy the same
    need as another product. Substitute products are those competitors that are not in the soft
    drink industry. In case of Substitutes for products of soft drink industries like Coca Cola
    and Pepsi, are bottled water, sports drinks, coffee, and tea, non cola drinks like
    orange, mango etc.

     Bottled water and sports drinks are increasingly popular among those consumers who are
    health conscious. These water and sports drinks are healthier than soft drinks.
     Coffee and tea are competitive substitutes because they provide caffeine. The consumers
    who purchase a lot of soft drinks may substitute coffee if they want to keep the caffeine
    and lose the sugar and carbonation.

     It is also very cheap for consumers to switch to these substitutes making the threat of
    substitute products very strong.

    4. Bargaining power of Suppliers: It is low, because there are many suppliers in this
    industry and there are substitute firms in the industry. Suppliers for the soft drink industry
    do not hold much competitive pressure.

     Suppliers to Coca-Cola are bottling equipment manufacturers and secondary


    Packaging suppliers. As, Coca-Cola does not do any bottling, the company owns
    about 36% of Coca-Cola Enterprises which is the largest Coke bottler in the world.
    Since Coca-Cola owns the majority of the bottler, that particular supplier does not
    hold much bargaining power.

     Coca-Cola and Pepsi are among the metal can industry’s largest customers and maintain
    relationships with more than one supplier, giving these suppliers less bargaining power
    due to the availability of alternative suppliers.

    5. Bargaining power of Buyer:


    The soft drink companies distribute the beverages to stores, for resale to the consumer. The
    bargaining power of the buyers is very evident and strong. The buyers of the Coca-Cola
    and Pepsi Co. are mainly large grocers, discount stores, and restaurants and also by providing
    some promotional schemes.
     Large grocers and discount stores buy large volumes of the soft drinks, allowing them to
    buy at lower prices.

     Restaurants have less bargaining power because they do not order a large volume.

     However, with the number of people are drinking less soft drinks, the bargaining power of
    buyers could start increasing due to decreasing buyer demand.

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