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

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A strategic group map is a strategic management tool, which indicates the competitive positions of competing firms in a given industry. In the beverage industry, the strategic group map is relatively crowded. There are approximately eight strategic groups categorized as, sports drinks, ready-to-drink tea, ready-to-drink coffee, carbonated soft drinks, energy drinks, bottled water, enhanced/flavored water, and fruit beverages. The biggest strategic group in this industry is the carbonated soft drink group, with a market share of 48.2 percent. It is then followed by bottled water (29.2 percent) and fruit beverages groups (12.4 percent). The smallest strategic group in the beverage industry is the ready-to-drink coffee group with a market share of 0.2 percent (Gamble 42). Over the last decade, new beverage producers entered the beverage market, causing saturation level in the industry’s strategic group map to increase. However, many firms in the various strategic groups in the industry have recorded steady growth; due to increased global demand for beverages, and increased purchasing power of the consumers in developed countries continue to increase (Gamble 41).

Among all the aforementioned strategic groups, sports drinks, energy drinks, and vitamin-enhanced strategic groups, are better positioned than the rest. This is because, since the year 2000, consumers’ preference has shifted from other types of beverages to energy, sports, and vitamin-enhanced drinks. This is because more and more consumers are becoming cautious about their health. Modern consumers prefer to consume beverages, which have less or no negative effects to their bodies, specifically in terms of weight gain. Therefore, as consumers’ preferences continue to shift towards consumption of sports, energy, and vitamin-enhanced drinks, the respective segments of these strategic groups in the beverage market continue to become important, thus making energy, sports, and vitamin-enhanced drinks’ strategic groups better positioned than other groups. According to Gamble, these beverages  tend to carry high price points, which make them attractive to both the new entrants and the existing firms in the industry (44). This reason also makes the energy, sports, and vitamin-enhanced strategic groups better positioned than the rest.

According to Gamble, consumption of carbonated soft drinks has declined in the United States. A 2.3 percent decline in the year 2009 marked the fifth consecutive year than the US consumers had purchased fewer carbonated soft drinks. Consumers prefer healthier drinks such as bottled water and ready-to-drink tea or coffee. For these reasons, carbonated soft drinks strategic group is the worst positioned group in this industry’s strategic group map.

Gamble states that one of the key factors that determine the success of alternative beverage producers is product innovation. Since the introduction of alternative beverages in 1967, “alternative beverage producers have been competing with the traditional beverages on the basis of differentiation” (Gamble 45). Some of the differentiation strategies used by alternative beverage producers include development of brand loyalty based on taste, branding and packaging, clever adverts, sponsorship of extreme sports and music concerts, and endorsement of athletes and celebrities. This has enabled producers of alternative beverages to gain global recognitions, thus gaining market success.

Availability of efficient distribution channels to supermarkets and convenient stores also determines the success of alternative beverage producers. Efficiency in distribution of alternative beverages is achieved, when an alternative beverages producer produces other beverages such as carbonated soft drinks and bottle water. Presence of other beverages enables a producer of alternative beverages to achieve scales of economies in the distribution process. It is expensive to distribute alternative beverages alone because of fixed costs such as warehouse, labor, and trucks. However, economies of scale in distribution of alternative beverages are achievable, when a producer distributes the alternative beverages along with other beverages (Gamble 45).

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