Strategic Management: Beverages Industry Essay

Question:

Discuss about the Strategic Management for Beverages Industry.

Answer:

Introduction

In the mid-2000s, the alternative beverages industry was growing rapidly. It experienced high-profit margins and premium prices. However, the industry was hit hard by the economic downturn in 2008 and 2009. Sales declined by almost 12.5% during these years. As a result, the industry decreased by 2.1% in 2008 and by 2009 it fell by 3.1%. Because of this downturn, the beverage industry launched new products to expand itself. Energy and health drinks were criticized for the health risks they brought with themselves. High caffeine content may be one of the forces that affected the beverage industry mainly. The drinks contained alcohol and harmful ingredients kava and melatonin. However, the demand for new types of drinks increased when the producers entered the geographic markets. Energy drinks and sports drinks became an essential segment of the industry in 2010 with the change in the preferences of the consumers. High price points of such beverages made them an attractive option for established companies like coca cola and new entrants as well. In 2008-09, only ready to drink tea and energy drink industry experienced a significant amount of growth.

One of the essential factors that determine the success of a company is its ability to bring about innovation in the products. The alternative beverages have created a benchmark as it is different from the traditional drinks like fruit juice or carbonated drinks. Brand loyalty is a crucial factor and is dependent upon the image of the brand, its taste, ingredients, health effects, and energy boosting properties. The kind of endorsement, packaging, and sponsorships a company engages itself in determines brand recognition. These brands must also have an efficient distribution system to convince buyers and distribute itself. Market share, volume, and distribution are some of the key factors which drive the success of a company. Also, brand building skills are one of the most important things that determine the success of a brand.

One of the most important factors for the growth of the beverage industry is the emergence of energy shots in-store counters. Energy drinks focused on teenagers, but the two-ounce energy shots were meant for adults and office goers. These drinks boasted of boosting energy on a demanding day. Moreover, the caffeine content was not regulated. Hence, such drinks can contain as much caffeine as was considered appropriate by the producers. This would pose an adverse impact on the health of people, especially children. Large doses of these energy drinks may lead to diseases like insomnia and heart arrhythmia. Moreover, an individual may develop gall bladder stone if energy drinks are taken in high doses. These health factors posed a negative impact on the beverage industry. The success of companies like PepsiCo, Coca Cola, Red Bull, Hansen Natural Corporation and others thus depended on the above-stated factors.

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