Soft Drink Industry

Soft Drink Industry Sethaphat P. GSBS 6021 Consumer Behavior

Outline

Part I

Industry Overview

Applying Porter’s Five Forces to the soft drink industry

Industry S.W.O.T Analysis

Limitations and Recommendations (Industry)

Part II

Consumer Behaviour Influenced ( Marketing Mix)

Part III

Consumer Segmentations

Segmentation S.W.O.T Analysis

Limitations and Recommendations (Segmentation)

Part IV

Conclusion

References

PART I

What is Soft Drink ?

Soft drinks are enormously popular beverages consisting primarily of carbonated water, sugar, and flavouring.

– wikipedia.org

A nonalcoholic, flavored, carbonated beverage, usually commercial prepared and sold in bottles or cans.

- American Heritage Dictionary

Soft Drink Industry Source: soft drink market in the U.S.-www.beverage-digest.com

Porter’s Five Forces Source: wikipedia.org

Applying Porter’s Five Forces to the soft drink industry 1. A fierce competition exists among very few players: - Duopoly industry - Intense rivalry between Coke and Pepsi 2. The threat of substitutes is reduced by the expansion of products portfolio: - Many alternative beverages e.g. juice, tea 3. Suppliers have less bargaining power: - Many substitutes for sugar and packaging e.g. sugar - corn syrup, sweeteners packaging - glass, plastic, metal cans

Applying Porter’s Five Forces to the soft drink industry 4. Different levels of bargaining power exist among the groups of buyers: - Vending Machine – no buyer bargaining power - Fast Food chain – more bargaining power 5. Strong barriers to new entrants: - Amount of capital investment require - Exclusive territories in distribution channel - The access to retail channel s

Industry S.W.O.T Analysis

Strengths

Basic Consumer Need

Large and growing market

Different flavors and packages

Low Costs

Non-Alcoholic

Weaknesses

Negative Claim

Traditional Preservation

Narrow range of material

Opportunities

Establish facts and use potential PR

New Packaging materials

Replace alcoholic drinks

Further replace tea and coffee

Threats

Healthy Issues

Soft Drink in School Guideline

Environmentalism

Distribution costs

Limitation – Healthy Issues

Obesity / Weight Gain

Oral Health

Diabetes Type 2

Recommendation :

Drinking through a straw

Should not consume too much

Low-calorie or No-calorie beverage

Source: Ameribev.org

Limitation – Environmental Issues

Recycling of used-packs

Waste water

Recommendation :

Waste water treatment and re-use of process water

“ Recycle It Now” Campaign

Limitation – Distribution Costs

The costs of transportation

Recommendation :

Developed JIT System

Improved efficiency of production in response to changing retailing and distribution patterns

Limitation – Soft drink in school

School Beverage Guidelines (only high school)

Recommendation :

No or low calorie beverage with up to 10 calorie/ 8 ounces

PART II

Consumer Behavior Influenced Product Price Place (Distribution Channel) Promotions Consumer behavior can be influenced by marketing mix

Consumer Behavior Influenced

Product:

not just the liquid inside but also packaging

many sizes

many flavors

many brands e.g.:

eye catching appearance with red color

Price:

create consumer perceptions and values

high price = better quality

Distribution Channel:

easy to identify in retailing stores

make up the greater proportion of options to buy

vending machine in many sports stadiums and malls

Promotions:

Pull Strategy

e.g. coca-cola fridge in the supermarket

create attractiveness from advertising

sponsor to many events

e.g.: sports and recreational activities

competition

e.g.: check the lid for an instant prize

Consumer Behavior Influenced “ PULL STRATEGY” is when the consumer request the product and pull in through the delivery channel . - wikipedia/org

Consumer Behavior Influenced Coke – “The side of Life”

PART III

Consumer Segmentation Use-situation Psychographic Demographic

Demographic Segmentation Demographic Segment - Youth (10-19 years old) - majority of consumers - spending power - brand loyalties develop through adult-hood - Young adult (20-24 years old) - for diet product - Adult ( 25-35 years old) - for diet and caffeine free products

Psychographic Segmentation Psychographic Segment - Lifestyle - personality (individual/group) - Attitudes - “self-expression” image associated with product - “cool”

Use-situation Segmentation Use-situation Segment - Christmas - Chinese New Year - Olympic

Segmentation S.W.O.T Analysis

Strengths

Purchasing Powers

Large number of consumers

Large profitability

High in brand awareness

Weaknesses

Unstable in attitude/lifestyle

Less brand loyalty

Health concern

Ageing population

Opportunities

Economic

Social occasions

New markets in developing countries

Climate – Hot Weather

Threats

Juice, Alcohol Drinks, Bottled Water

Fashion Trends

Consumer perception of health

Law and government

Limitation – Unstable attitude

Youth always change their interests

Easy to be influenced

Recommendation :

Be aware of teens’ trends

Pay attention to different tribes

Limitation – Less brand loyalty

Always changing in brands

Price sensitive

Easy to be motivated by certain type of group

e.g.: celebrities

Recommendation :

Brand extension

Create many marketing campaigns

Limitation – Health concern

Calorie reduction

Avoidance of sugar

Suspicion of additives

Recommendation :

Promote low or no calorie drinks

Labeling ingredients

Limitation – Ageing population

Changing in consumer’s life stage

e.g.: teens become adults

Different group of people

e.g.: young adult, adult, old people

Life status e.g.: single, married, single parents

Recommendation :

Focusing to the new markets e.g.: old people

Developed in R&D

Limitation – Other beverages

Juice

Alcohol drinks

Bottled Water

Recommendation :

Variety of products

Promotion campaigns

PART IV

Conclusion To sum up, the soft drink industry has increased 25% annually. For the U.S. market, Coca-Cola and Pepsi are the biggest companies in this industry. Coca-Cola use marketing mix to influence consumers to purchase more products. Consumer segments are divided into 3 segments; demographic, psychographic and use-situation. After we do the S.W.O.T analysis, we see that there are limitations for these segments such as unstable in attitude and lifestyle, less brand loyalty, health concern and ageing population. However, these limitations can be solved as we have recommended.

References