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STRATEGIC MARKETING PLAN
FOR VIRGIN
THE COLA PRODUCT LINE
January 1, 2011 to December 31, 2013
Prepared by:
Date:
EXECUTIVE SUMMARY
2
CONTENTS
EXECUTIVE SUMMARY
2
CONTENTS
3
INTRODUCTION – JAYNE TO READ OVER
5
SITUATION ANALYSIS
6
BUSINESS DEFINITION AND SCOPE JESS TO READ OVER
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MISSION STATEMENT(S)
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PRODUCT DEFINITION
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AT THE INDUSTRY LEVEL (TOTAL OF ALL PRODUCT CATEGORIES):
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AT EACH PRODUCT CATEGORY LEVEL
7
THE MARKET – CUSTOMERS (END USERS) FOR THE PRODUCT CATEGORIES TARGETED BY OUR
ORGANISATION
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SCOPE
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EXTERNAL ENVIRONMENT: REMOTE ENVIRONMENT
ECONOMIC FORCES
HANNAH: PLEASE COMPLETE (REFER TO PROJECT GUIDELINE).
IMPLICATIONS:
SOCIO-CULTURAL FORCES
SCENARIO:
IMPLICATIONS:
SCENARIO:
IMPLICATIONS:
TECHNOLOGICAL FORCES
SCENARIO:
IMPLICATIONS:
NATURAL ENVIRONMENT FORCES
PLEASE INCLUDE THE IMPACT OF WATER AVAILABILITY ON THE INDUSTRY
SCENARIO:
IMPLICATIONS:
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EXTERNAL ENVIRONMENT: NEAR ENVIRONMENT
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INDUSTRY/MARKET REVIEW
FORCES
TYPE OF FORCE
STRENGTH
DESCRIPTION:
IMPLICATIONS:
COMPETITIVE REVIEW
DESCRIPTION:
IMPLICATIONS:
DISTRIBUTION CHANNELS AND BUYERS (INTERMEDIARY CUSTOMERS)
DESCRIPTION:
IMPLICATIONS:
END-USER CUSTOMERS
DESCRIPTION:
IMPLICATIONS:
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DESCRIPTION:
IMPLICATIONS:
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CRITICAL SUCCESS FACTORS (CSFS)
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SUMMARY OF OPPORTUNITIES AND THREATS
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SITUATION ANALYSIS – INTERNAL CAPABILITIES
45
REVIEW:
IMPLICATIONS:
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48
PROBLEMS AND OPPORTUNITIES STATEMENT
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RECOMMENDATIONS AND RATIONALE
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MARKETING OBJECTIVES: (SEE EXHIBIT 2.4 FOR EXAMPLES)
EXAMPLE OF MARKETING STRATEGIES:
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APPENDIX
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APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
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61
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INTRODUCTION
– Jayne to read over
The Virgin Group was ‘conceived’ by Sir Richard Branson in 1970 and since has created over 300 brands.
The company in 2009 employed over 50,000 people throughout 30 countries and in 2009 the company’s
global revenue exceeded over $18 billion US1. The Virgin Group is taking on another new business
acquisition expanding its product lines into yet another avenue, planning to enter the carbonated soft
drink market. The Virgin Group Empire is built off founder Sir Richard Branson’s attitude towards life and
his constant desire to seek out the thrills in adventure.
The Virgin Group has nineteen brands within its portfolio, many of which exist in non-related markets.
The Virgin Group has brands in financial services, telephones, air travel, lifestyle, health and now the
beverage market. Virgin values money, quality, innovation, fun and competitive challenge, all of such
qualities are communicated throughout their businesses through management styles and company
corporate culture. These cultures perfectly unite with Richard Branson’s personal image. The Virgin
Group likes to think that their multiple business ventures demonstrate their devotion to picking the right
market at the right time2.
The purpose of this strategic marketing plan is to gain extensive knowledge into the Carbonated Soft
Drink market and establish the fundamental actions, which will carve The Virgin Groups beverage into a
successful business venture. New business acquisitions are built off strong and extensive research, the
Virgin Group views the market from both a business perspective but also from an external perspective;
gaining insight into what Virgin can bring to consumers in which their competitors are not. Throughout
this report, untouched areas of the beverage market will be identified, Virgins capabilities to meet and
exceed these unmet consumer demands measured, and he competitiveness of the market place
evaluated3.
Two market leaders; Coca-Cola and Pepsi currently dominate the Australian beverage market. These
companies together share 33.5% of the global beverage market4. The domestic beverage market rivalry
is just as concentrated with the leading three contenders (Coca-Cola Amitil, Pepsi Co and Asahi
Breweries) holding 54.9% of the total market volume5. The initial launch of Virgin Cola was in the 1990’s
and was a partnership acquisition between The Virgin Group and a Canadian soft drink company Cott &
Company. Virgin Cola was released into the UK market in 1994 and gained initial success through the
restaurant and pub channels, through these outlets Virgin Cola managed to 8%market share, before
1The
Virgin Group 2009, ‘About us’ available; http://www.virgin.com/about-us, accessed 02.04.12
The Virgin Group 2009, ‘About us’ available; http://www.virgin.com/about-us, accessed 02.04.12
3 The Virgin Group 2009, ‘About us’ available; http://www.virgin.com/about-us, accessed 02.04.12
4 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011
5 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011
2
5
moving into decline. In 1997 Virgin Cola lost approximately 5 million pounds on revenues of 30 million
pounds. In 1998, The Virgin Group bought out Cotts & Company and launching Virgin Cola with a 25
million backing investment; the goal here to achieve publicity and resulting in sales. Although massive
publicity was earned, The Virgin Group failed to compute this into sales.
SITUATION ANALYSIS
Business Definition And Scope.
Virgin Vision.
“To make a credible contribution towards sustainable lifestyles whilst meeting or exceeding the
expectations of our staff, customers and other stakeholders”.
Virgin is a leading international investment group and one of the world's most recognised and respected
brands. Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow successful
businesses in sectors ranging from mobile telephony, travel, financial services, leisure, music, holidays
and health & wellness. Across its companies, Virgin employs approximately 50,000 people, in 34 countries
and global branded revenues in 2011 were around £13bn ($21bn).Virgin is a brand that heads over 200
privately held business ventures, beginning in 1970s it is involved in many sectors including financial, leisure, music,
mobile telephony, health and wellness, and employs approximately 50,000 people internationally.
The Virgin brand stands for value for money, quality, innovation, fun and a sense of competitive challenge.
Virgin excels in creating and taking private business ventures and building them under its extremely well known and
successful brand.
Virgin is undertaking a new venture in soft drinks industry in Australia, it intends to introduce Virgin cola which will
be a healthy soft drink as an alternative to carbonated drinks such as Coca cola, Pepsi and other energy drinks such
as V ,Mother and Red bull.
Virgin has always succeeded in business by offering consumers another way, a better way and being able to fight
their corner, The world has changed a great deal in the 40 years that Virgin has been in business but we
have moved with the times and we have always listened to what people want.
In recent years consumers have become more healthy conscious demanding healthy food, drinks and healthy
lifestyle in general. The business is intending to enter this niche market by offering variety of healthy drinks that will
appeal to different demographic but specifically 20-39 year olds. The business intends to use fair trade products
that will satisfy virgin vision for sustainable lifestyle while helping the needy.
Scope
In Australia the consumers are more cautious about what they spend and where they spend their money, Virgin cola
will be a competitive and affordable healthy drink that will not break consumer’s budget. The research and
development of this drink will be thorough and aim at ensuring that virgin brings a product that will stand out from
its competitors in the carbonated drinks market. The whole process of manufacturing, distribution and supplying of
Virgin cola will be in a sustainable environment. Raw materials will be sourced from natural environmental
sustainable sources, no artificial or genetically modified plants are to be used, and also the company will ensure there
will be no waste in the production line, all materials left over is to be recycled such as recycled bottles.
Virgin is intending to distribute and supply Virgin cola using environmental friendly supply chain companies those
which use hybrid vehicles and trucks, light packaging boxes and use recycled bottles. The business also will have
partnerships with intermediaries such as small retailers, convenience stores, and corner shops to maximise the
collection of empty containers, also partnership with packaging suppliers to supply sustainable and recycled
containers at reduced price.
Although the cost will be relatively higher compared to the competition, Virgin cola will capitalise on the popularity
of healthy eating lifestyles of young generation and generate awareness of the new cola product by selling to small
retailers and then increase market share by distributing into the big super market shelfs in the health isles.
MISSION STATEMENT(S)
“Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge.”
6
HANNAH: Is there an SBU statement?? As per project guideline 'Conclude with a brief statement of what
this means in terms of establishing parameters of the product and market scope for the strategic marketing
plan.
PRODUCT DEFINITION
AT THE INDUSTRY LEVEL (TOTAL OF ALL PRODUCT CATEGORIES):
Virgin Group Ltd. engages in the fields of leisure, travel, tourism, mobile, broadband, TV, radio, music,
finance, and health in Asia, Europe, North America, Africa, and Australia. It engages in the fields of
airlines, rail services, vacation and cruise packages, and passenger motorbike transportation services.
The company also operates gym facilities, racing teams, online casino and slots, and balloon flights;
publishes non-fiction books; provides cord blood stem cell banking, home IT and technical support,
health and lifestyle management, employee health program, and NHS services; and offers corporate gift
vouchers, and online gaming and video games, as well as wines online. In addition, it offers
phone/mobile telecommunication, broadband Internet, and TV services; and film and television
development, packaging, and production services. Further, the company operates music and
entertainment stores, radio stations, and music festivals. Furthermore, it offers financial products and
services, such as credit cards, pension products, insurance products, savings, superannuation, and home
loans, as well as online fundraising solutions; and equity for growth capital, management buyouts,
recapitalizations, and corporate spin-outs for renewable energy and resource efficiency sectors. Virgin
Group Ltd. has a strategic partnership with Tribe Mobile.
HANNAH: as per project guideline: 'It is of critical importance that emerging and declining product
categories are identified.'
AT EACH PRODUCT CATEGORY LEVEL
The Virgin Drinks line includes:
o
Virgin Cola
o
Virgin Lemonade
o
Virgin Colours (different coloured and flavoured soft drink)
o
Virgin Ice Cool (Iced Tea)
o
Virgin Vines (Wine)
o
Virgin Ooze (RTD pre-mixed alcoholic beverages)
o
Virgin Vodka
o
Vmix (small variation of Virgin soft drinks)
o
Vjuice (small variation of juice, tomato cocktail and orange)
o
Virgin Energy Shot
7
Table 1: Product categories targeted by our organisation and our products competing in those
categories
PRODUCT CATEGORY
OUR PRODUCTS
Lifestyle
Virgin Active Australia
Media and Mobile
Virgin Mobile Australia
Money
Virgin Money Australia
Insurance, credit cards, life insurance
Music
Virgin Radio International
People and planet
Virgin Green fund
Travel
Virgin Atlantic Airways, Virgin Atlantic International
Virginblue Airlines
Table 2: Competitors and their products competing in these product categories:
COMPETITORS
COMPETING PRODUCTS
TRAVEL
Qantas
Qantas Airways, Jetstar
United Airlines
United, American Airlines
Emirates
Emirates airlines
LIFESTYLE
Fitnessfirst
Fitness first health clubs
MONEY
Westpac
Car insurance, Credit cards, life insurance, Home and content insurance
Commonwealth
Home loans
Nab
ANZ
MUSIC
Apple Music
Apple online music store
JB Hi-Fi
JB Hi-Fi Now online music store
MEDIA AND MOBILE
Telstra
Optus
Telstra mobile, Telstra internet.
Yes Optus mobile, Optus home and internet services.
PEOPLE AND TRAVEL
Bp
Origin energy
Solahart
BP Solar
Wind farms, Solar cells
Thermosiphon and split system solar. Heat pump water heaters
THE MARKET – CUSTOMERS (END USERS) FOR THE PRODUCT CATEGORIES TARGETED BY
OUR ORGANISATION
JAYNE TO INSERT SUNDAY: State the demographic, socio-economic and relevant psychographic or
lifestyle characteristics of the primary target markets. Define this broadly to encompass all product
categories that are to be targeted.
8
(market = consumers/people, industry=companies)
State what the opportunity is but instead argue through strategic logic backed with evidence from SWOT
analysis. WHAT AND WHY. Do business conditions change because of regulation?
SCOPE
This plan outlines the marketing strategies for the Virgin Cola product line in Australia for the three-year
period from 1 December 2012 to December 1 2015.
EXTERNAL ENVIRONMENT: REMOTE ENVIRONMENT
ECONOMIC FORCES
The Australian soft drink market is in a steady position which leaves opportunities for new entrants.
Competition is fierce however, niche markets are still available to introduce new products into.
Scenario:
1. The soft drink market is so influenced by the markets top 3 companies’ that any new entrant is
immediately counter attacked.
2. The global financial crisis has had such an effect on the market that consumers’ are more hesitant to
invest in Virgin’s new venture.
3. The global financial crisis has lead consumers to become more spending conscious, reduced spending,
reducing the likelihood of consumers trying a new brand. – reference consumer trends
Implications:
Compared to the dominant competitors, our price point will not be as competitive which could influence
consumer purchasing decisions however compared to other healthy alternatives within the product
9
category. A slip in consumer confidence as a result of the Global Financial Crisis. This threatens entry into
any market and considering the rise in the cost of living which affects the carbonated soft drink market
as it is a luxury.
OPPORTUNITIES
MARKET VALUE:
“The Australian soft drinks market grew by 3.3% in 2010 to reach
a value of $10,953 million.”6
The growing market value of the soft drink industry in Australia is
an opportunity for new entrants.
MARKET VALUE FORECAST:
In 2015, the Australian soft drinks market is forecast to have a
value of $12,721.8 million, an increase of 16.1% since 2010.”8
The increasing market value forecast for the soft drinks market
creates an opportunity for new entrants to enter a market with
an increasing value forecast.
THREATS
The top 3 players in the soft drink market (Coca-Cola,
Pepsi and Asahi breweries) hold the largest market
share in Australia (54.9%)
“Coca-Cola Company, is the leading player in the
Australian soft drinks market, generating a 39.4%
share of the market’s volume.”7
“Consumer confidence has slipped in the last quarter
with more Australians apprehensive about economic
uncertainty, financial security, and rising gas and
electricity prices.”9
“The major economic issue facing PepsiCo is the rising input costs
of their businesses due to structural inflation. Agricultural,
energy, and some metal industries are going through periods of
steady inflation.”10
The soft drinks segment recorded revenues of $4, 463.9 million in
FY2010, an increase of 10.2% over FY2009.11
A 10.2% increase in revenue in 1 year again illustrates that the
soft drinks industry in Australia is a valuable market to enter into.
6
DATAMONITOR. 2011. Soft Drinks in Australia. Available at: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C08BD7-4FD8C32C0B1F. [Accessed 05 March 12]
7 DATAMONITOR. 2011. Soft Drinks in Australia. [ONLINE] Available at: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8178F-43C0-8BD7-4FD8C32C0B1F. [Accessed 05 March 12].
8 DATAMONITOR. 2011. Soft Drinks in Australia. [ONLINE] Available at: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8178F-43C0-8BD7-4FD8C32C0B1F. [Accessed 05 March 12].
9 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,
10 https://docs.google.com/viewer?a=v&q=cache:C67SCDV7P8IJ:www.aaronksparks.com/portfolio/mktg360pepsireport.pdf++The+major+economic+issue+facing+PepsiCo+and+its+subdivisions+is+the+rising+input+costs+of+their+businesses+due+to+structural+inflation
.+Agricultural,+energy,+and+some+metal+industries+are+going+through+periods+of+steady+inflation.&hl=en&gl=au&pid=bl&srcid=ADGEESha
OJyPLjytXxMbioGVhx4wuE4Ag95Fpu9cA2LBhl9OHVV0HDGlt-ajqmPki7zCeQw1NcIBcOHS2IyMGk8zL13k8pkKErSSbK7SmtE0RJSg8ySkIsd5hgpi61R32k5pFIJaiKR&sig=AHIEtbQPGJ83HM7uJSPWnYyRvsQrecWCuA
11 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.11
10
SOCIO-CULTURAL FORCES
Socio-cultural forces heavily impact the carbonated soft drink market. The Australian populations
expenditure on food and non-alcoholic beverages heavily impacts the carbonated soft drink market.
Socio-cultural trends also have an impact on the market. The ‘health’ trend changes the way that
competitors formulate new products and recreate their existing products.
Socioeconomic trends determines the best way to position of our product and product placement
Scenario:
1. The top 3 players each introduce brand new flavours to keep up with the health trend, which
expands the market but makes it harder for new entrants to succeed.
2. The ‘healthy’ trend is moving into the later stages of maturity of the product life cycle and
consumers’ become bored/skeptical of it.
3. A further population increase will expand the market and develop more opportunities for a niche
market to be introduced.
4. An increase in the birth rate will increase the amount of children that are present during the late
growth, early maturity stages of a new product.
Implications:
Marketing a carbonated soft drink as a healthy alternative consumers may be sceptical (consider vitamin
water, was marketed as a healthy alternative but is full of sugar.)
OPPORTUNITIES
Since 1994, household spend on food and nonalcoholic beverages have increased by 14%, with
the population spending over $16 a week more
on these commodities.12
THREATS
Coke is looking to introduce another product into its
line of cola flavoured soft drinks: “Green Tea Coke”.
This will appeal to women who are health-conscious
and parallels with the increasing market for health
products.13
12
Australian Bureau of Statistics. 1999. Household Expenditure Survey, Australia. Available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6535.0/ Accessed 22 February 12
13 Global Edge. 2009. Viktoriya Ivanova [ONLINE].. http://globaledge.msu.edu/blog/archive/2009/6. Accessed 20 February 12
11
“Meals out and fast foods” (which are both
sufficient opportunities to purchase a
carbonated beverage such as cola) is the highestranking expenditure for households in 1999. 14
POLTICAL AND LEGAL FORCES
The impact that political and legal forces have on the carbonated soft drink market basically relate purely
to the labelling and ingredient content in the products.
Scenario:
1. Labelling laws change forcing companies to recall products and relabel, costing large amounts of
money
2. Drought affects Australia increasing water usage costs even higher than they already are.
Implications:
Virgin Cola does not have the money to spend on relabelling or changing the label of their soft drinks,
therefore labelling must abide by the conditions of the ACCC to prevent any issues.
OPPORTUNITIES
The ACCC requires by law that labelling
give sugar and kilojoule content. 15
RATING*
THREATS
RATING*
Regulations by the government are
costly to abide by. Water usage costs are
high after drought.
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
14
Australian Bureau of Statistics. 1999. Household Expenditure Survey, Australia. Available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6535.0/. Accessed 22 February 12
15
Australian Competition and Consumer Commission. 2009. Food Labelling Guide. [ONLINE] Available at:
http://www.accc.gov.au/content/item.phtml?itemId=877504&nodeId=857ee6d77362422e3f724e2ad61a0271&fn=Food%20Labelling%20Bookl
et.pdf. [Accessed 09 March 12].
12
TECHNOLOGICAL FORCES
Technological forces have a high impact on the carbonated beverage market in Australia, continuing
technological advancements allow the supply chain of competitors to become faster and faster. The
development of things such as recyclable bottles and new and improved vending machines also adds
another dimension to the carbonated soft drink market.
Scenario:
1. Advanced technology allows companies’ to develop 100% recyclable bottles and cans making
them available to all companies’
Implications:
Hannah: please complete (refer to project guideline).
Competitors with economies of scale are able to invest in sustainable cropping techniques (refer to
competitor pespi section)
OPPORTUNITIES
THREATS
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New and improved ingredients can be used in Virgin
Cola, ingredients that are cheaper can be found and
worked with.
Coke have been researching and planning to develop the
new “PlantBottle” which is aiming at being 100%
recyclable. 16
This technological advancement by Coke is a threat to
other soft drink market holders
Technological advancements can result in more
efficient supply chain management
Technology impacts this industry less which means
less capital investment
NATURAL ENVIRONMENT FORCES
Primary inputs for soft drinks manufacturers include concentrates, a range of natural and synthetic
sweeteners such as corn syrup and refined sugar (sucrose), aspartame, and similar ingredients17.
Scenario:
1. Drought
2. Natural disasters decreasing efficiency of raw material supply, supply chain efficiency
Implications:
Companies must take into account the unpredictablility of natural disasters which heavily effect natural
and raw materials.
OPPORTUNITIES
THREATS
16
Global Edge. 2000. Coca-Cola Amatil. Available at: http://globaledge.msu.edu/blog/post/562/ge-blog-series--go-green--part-4.2---plantingnew-ideas .Accessed 08 February 12
17 Datamonitor 2011. Soft Drinks in Australia, Available: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD74FD8C32C0B1F. Accessed: 05 March 12.
14
“In the 12 months to 30 June 2010, Australia's
Due to Australias unpredictable weather, water
population increased by 377,100 people, reaching
availability in the last decade has been scarce, this
22,342,000. The annual growth rate for the year
creates rising costs for water usage which will affect the
ended 30 June 2010 (1.7%) was lower than that
cost of raw materials to create the product.
recorded for the year ended 30 June 2009
(2.2%).” 18
EXTERNAL ENVIRONMENT: NEAR ENVIRONMENT
INDUSTRY/MARKET REVIEW
The soft drink market consists of the retail sale of bottled water, coconut water, carbonates,
concentrates, functional drinks (including sports drinks), juices, RTD tea and coffee, flavored milk and
smoothies.
The Australian soft drinks market generated total revenues of $11 billion in 2010, a year that proved the
most lucrative for the Australian soft drinks market.
The Australian soft drinks market value grew by 3.3% in 2010 to reach a value of $10,953 million.
The compound annual growth rate of the market in the period 2006–10 was 3.3% (refer Appendix E.1).
The Australian soft drinks market grew by 2.9% in 2010 to reach a volume of 4,649.7 million litres.
The compound annual growth rate of the market in the period 2006–10 was 3.1% (refer Appendix E.2).
Carbonates are the largest segment of the soft drinks market in Australia, accounting for 59.9% of the
market's total value. Comparatively, the juices segment accounts for a further 15.9% of the market (refer
18
Australian Bureau of Statistics. 2010. Population by Age and Sex. Available at: http://www.abs.gov.au/ausstats/abs@.nsf/mf/3201.0. Accessed
05 March 12
15
Appendix E.3)
SUNDAY: prepare a product life-cycle chart showing the size of the total market for each of the main
product categories within volume. In analysing the data, review the annual growth rate. Then project the
size of the market and each product category for the next 3–5 years which is the time frame of the strategic
marketing plan (Refer to chapter on forecasting techniques). Product life cycle idea is important: level of
industry sector, product category and even brand level. Identify if you have a balanced portfolio (diff
PLC).
Despite the strong sales growth in the bottled water and functional drinks categories, the Australian soft
drinks market grew at a steady rate during the period 2006-2010 however this is expected to decelerate
in the forthcoming five years due to increasingly health conscious consumers and government
regulations regarding water use and safety of sweeteners. Yet, given the market consumption increase
between 2006 and 2010, market volume is expected to rise over the next five years, deeming it an
attractive market for new business adhering to the new regulations and anticipating changing consumer
trends.
PORTERS FIVE FORCES – INDUSTRY SPECIFIC
1
FORCES
TYPE OF FORCE
STRENGTH
Supermarkets/hypermarket chains
Bargaining power
5
are most significant distribution
of buyers
channels for soft drinks
2
3
Most inputs are readily available
Bargaining power
commodities
of suppliers
New brands must contend with the
Threat of new
reach and strengths of established
entrants
2
2
brands
4
Consumers may chose to drink
Threat of
coffee, tea, or homemade juices, or
substitutes
2
fruit juices
5
Supermarkets and hypermarkets
Bargaining power
account for 48.5% of the total market
of buyer
5
volume, followed closely by on-trade
retailers at 32.5%
16
6
7
8
Consumers in this market are likely to
Bargaining power
be strongly influenced by brand
of buyers
Retailers are forced to stock brands
Bargaining power
popular among consumers
of buyers
Inputs are available from several
Bargaining power
sources although they are subject to
of suppliers
5
2
4
price fluctuations
9
Packaging manufacturers are growing
Bargaining power
because of a demand for more
of suppliers
4
consumer friendly packages
10 Advertising and marketing agencies
Threat of
play a significant role in the brand
substitutes
building process in the soft drinks
Supplier power
4
market
11 Brands try to distinguish their
products by stressing health benefits
12 Setting up a new business would be
fairly capital-intensive
13 Leading firms have diverse product
offerings
14 The Australian soft drinks market is
fairly concentrated and top three
Threat of new
4
entrant
Threat of new
5
entrants
Threat of
3
substitutes
Threat of new
4
entrants
firms have more than 50% volume
5 = strong, 1 = weak
MAREE: I just rated according to the data but would you mind to look over?
FIVE FORCES ANALYSIS
The Australian soft drinks market is fairly concentrated, with the top three players holding 54.9% of the
total market volume. The market has the presence of leading players such as The Coca-Cola Company,
Asahi Breweries and PepsiCo. Switching costs for retailers are not prohibitive, which boosts rivalry.
Overall, there is a moderate degree of rivalry in the soft drinks market (refer appendix E.10).
Although major players are fighting for the dominant position, there is scope for growth in niche
categories (refer to appendix E.5).
Leading players tend to have a diverse product offering, which reduces the threat posed by substitutes.
Overall, there is not a great threat imposed by the soft drinks' substitutes except from traditional coffee
17
and tea or homemade juices, along with the tendency of consumers switching towards the fruit juices
(refer appendix E.9).
Supermarkets and hypermarkets form the most significant distribution channel in the Australian market,
followed closely by on-trade retailers. The presence of big supermarket chains increases buyer power
however this remains moderate, as consumers in this market are likely to be strongly influenced by
brand and retailers are forced to stock popular brands. Many players have managed to develop strong
brands, which will tend to decrease buyer power, as buyers feel obliged to stock certain products to
meet their customer's preferences. Overall, buyer power in the Australian soft drinks market is moderate
(refer to appendix E.6). Advertising and marketing agencies also play a significant role in the brand
building process in the soft drinks market (refer to appendix E.7).
Supplier power is not great, as most inputs are readily available commodities. Most revenue is generated
from the production of concentrates, which are sold to bottling companies and here the buyer power is
relatively weak. Some of the primary inputs for the soft drinks manufacturer, although available from
several sources, they are subject to price fluctuations. The power of packaging manufacturers is growing
since there is a growing demand for more consumer friendly packages.
Entry to the market will generally be fairly capital-intensive, restricting market entry to players however;
new entrants can exploit niche categories. Overall, there is a moderate likelihood of new entrants (refer
appendix E.8).
Description:
Although the industry is predicted to decline (refer A.2, A.4, A.6), opportunity exists for new entrants
appealing to the changing consumer trends, increasingly conscious of their health and packaging
sustainability. A popular company entering the market would be at an advantage as a new entrant if the
corporate brand value resonates with consumers. Market share would increase, in this otherwise
homogenous product category, as consumers would be drawn to a brand they know, like and delivers on
their evolving values. It is the strongly brand influenced consumers that the new entrant must satisfy as
these consumers dictate buyer purchasing choices. The degree of exposure Australian consumer’s have
to advertising strengthens supplier power to an extent, providing they have the capacity or existing
brand image.
It remains an attractive market for entry despite the predicted decline due cola’s dominance of the CSD
category, despite the availability of alternatives however this must be taken into consideration and new
18
entrants should provide a range of alternative products if they want to survive. This presents an
opportunity for new business considering the emerging consumer health concerns when planning
strategy, research and development and product innovation. The recent decrease in market share is the
cause of the shift in consumption patterns due to growing health issues such as obesity suggesting
possible long-term shifts for the market further increasing attractiveness of market as dominate brands
may be viewed as the unhealthy options.19
Maree - Should this be a description of our findings (including the below table?). Should we relate the
threats/opportunities specifically to new entrants into the industry? Should we also make suggestions of
how to overcome implications?
Implications:
A large amount of capital is required to compete in this industry due to the economies of scale enjoyed
by competitors and also the dominance of competitors regarding supply chain and distribution also
presents implications for new entrants. However, this can be overcome by way of acquisitions, strategic
partnerships and utilisation of core competences.
Although the role of advertising can be leveraged to build consumer awareness of a new entrant, the
advertising capabilities of competitors are great enough to attack new entrant efforts to the market.
Although supplier power is not great this could be an advantage rather than an implication for a new
entrant, providing an opportunity to gain market share despite the size and dominance of the key
competitors.
OPPORTUNITIES
Switching costs for retailers are not
RATING*
4/5 - na
prohibitive
Scope for growth in niche
THREATS
RATING*
5/5 – 5/5
Supplier power is not great
5/5 – 5/5
categories
Primary inputs for the soft drinks
5/5 – 4/5
manufacturer are subject to price
fluctuations
Advertising plays significant role
4/5 – 4/5
Increasing packaging power
5/5 – 5/5
Established brands may be
5/5 – 3/5
Strong, established competitor
5/5 – 5/5
regarded as unhealthy options,
Retailers are forced to stock brands
brands
5/5 – 4/5
popular among consumers
19
Yoffie D. & Kim R. 2011, ‘Cola Wars Continue: Coke and Pepsi in 2010 ‘,Harvard Business School, 9-7-11-46, pp. 1 - 22
19
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
COMPETITIVE REVIEW
The Coca-Cola Company holds the largest market share and is the leading player in the Australian soft
drinks market, generating a 39.4% share of the market's volume.
Asahi Breweries, Ltd. accounts for a further 8.1% of the market (refer to Appendix E.4).
COCA-COLA AMATIL (CCA)
The company is headquartered in Sydney and manufactures, distributes and markets carbonated soft
drinks, still and mineral waters, fruit juices, coffee and other alcohol-free beverages. The company also
distributes alcohol-based beverages through its joint venture company Pacific Beverages. It is also
involved in the processing and marketing of fruits, vegetables and other food products.
The beverage business consists of non-alcoholic and alcoholic businesses. The company, through its nonalcoholic beverage business, manufactures, distributes and markets carbonated soft drinks.20
The company ‘strives to refresh the world, inspire moments of optimism and happiness, create value and
make a difference’.21
Major products and services include alcoholic beverages and food as well as logistics business and
restaurants. Non- alcoholic beverages include: coffee, carbonated beverages, tea-based drinks, water,
fruit and vegetable drinks, chilled beverages. 22 Brands offered within the CSD category include CocaCola, Diet Coke, Coca-Cola Zero, Sprite, Sprite Zero, Fanta, Lift, Deep Spring Natural Mineral Water,
Appletiser, Grapetiser, Kirks, and Bisleri. The company enjoys the continued growth of Coke Zero which
now holds over 40% share of the diet cola category in the immediate consumption channel. Mother
energy drink grew volume by 6% as a result of new flavour and pack variants and now has 24% of the
total energy drink market.23
The business recovered cost of goods sold through a pricing and mix strategy and CCA’s beverage market
20
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.5
The Coca-Cola Company, ‘Our Company’, available at: http://www.thecoca-colacompany.com/ourcompany/index.html accessed: 2nd March
2012
22 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.9
23 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.18
21
20
leadership position continues to dominant volume and value share across all channels despite more
aggressive competitor pricing. 24
The synergies enjoyed are the exceptional capacity and capabilities throughout the by the company span
entire supply chain and distribution. CCA’s major capital investment program reduced operating costs
and delivered effective customer service 25 however the company continues to focus on efficiency,
service and revenue gains right across the business. This will be achieved through the effective balancing
of pricing, volume growth and market share. Competitive position will be further strengthened via
capacity expansion, increased operational efficiency and introduction of cold drink coolers, as well as
successful new product and package innovation.26
The competitive intent of the company is to increase capability and capacity expansion, diversifying
business ventures with the rollout of cold drink coolers. CCA will continue to focus on executing its
organic growth strategy in conjunction with the acquisition of Fijian brewery, spirits and soft-drinks
assets, creating synergies from CSD sector, which includes brands such as Fiji Water, Cascade and Hi-C.
Other possible strategies include a distribution deal with Adelaide-based family-owned Coopers
Brewery.27
Resources, similar to growth strategies, include acquisitions such as Neverfail Springwater. Such an
acquisition considerably strengthens the company's core competencies and competitive position. CCA
also owns an established plant at Richlands in Brisbane, Australia and automated materials handling
facility in Mentone, Victoria, Crusta Fruit Juices and its subsidiary, Quenchy Crusta Sales, a cold chain
distribution company, Quirk's Refrigeration28 and the Northern Territory soft drink sales, distribution and
production assets. The company dominance throughout the entire supply chain positions the company in
an extremely sustainably competitive position. This engagement of major supply chain partners is part of
CCA’s strategy to strengthen their competitive position, which they have done so through the
development of collaborative capabilities and engaging supply chain partners.29
24
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.19
26 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17
27 Ferguson, A 2012, ‘Fiji drinks deal only sets first round on the bar for Coke growth strategy’, The Age, Melbourne, available at: Australia/New
Zealand Reference Centre
28 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
29 Dunne, AJ 2008 ‘The impact of an organization's collaborative capacity on its ability to engage its supply chain partners’, British Food Journal,
Volume 110, Issue 4/5, pp. 361 - 375
25
21
However the company's source of competitive advantage extends further to innovative packaging and
advertising, the coke trademark (patent?), the three-year agreement with the National Rugby League
Partnership (NRL) from March 2010 and Project Zero. 30
STRENGTHS

Supply chain, market and natural resources dominance

Well known, market leading brand

Innovative advertising, branding and packaging
WEAKNESSES

Consumer perception of Coke and the associated health risks

Limited product innovation

Limited growth options
THREATS
 Major competitors: National Beverage Corp. PepsiCo, Inc. Just Water International Limited31
 Changing consumer habits
 Industry decline
Additional notes:
Coca-Cola: Jayne
Company website: CCA’s product portfolio consists of: Coca-Cola, diet Coke, Coke Zero , Fanta , Sprite, Powerade,
Glacéau and Pump, as well as other trademark beverages of The Coca-Cola Company. CCA bottles and distributes
these brands in its territories under license from The Coca-Cola Company.32
Beverage brands owned, manufactured and distributed by CCA including Mount Franklin, Deep Spring and Kirks.33
The premium spirits portfolio of Beam Global Spirits & Wines including Jim Beam, Canadian Club, Makers Mark and
The Famous Grouse.34
Coca-Cola Amatil Australia uses water from metropolitan supplies from natural groundwater sources.35
Their Environmental Management System continues to improve efficiency in water production facilities while
maintaining open dialogue with governments, non-government organizations and local communities regarding
water resource management.36
30
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.7
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.16
32 Coca-Cola Amatil, viewed 10 March 2012,
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
33 Coca-Cola Amatil, viewed 10 March 2012,
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
34
Coca-Cola Amatil, viewed 10 March 2012,
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
35 White, W 2006, Coca-Cola Amatil, Water Policy – Australia,
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D
36 White, W 2006, Coca-Cola Amatil, Water Policy – Australia,
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D
31
22
Coca-Cola Amatil (CCA) is one of the largest bottlers of non-alcoholic ready-to-drink beverages in the Asia-Pacific
region and one of the major Coca-Cola bottlers in the world.37
CCA’s diversified product portfolio includes carbonated soft drinks, water, sports and energy drinks, fruit juice,
coffee, flavored milk and ready-to-eat fruit and vegetable products and snack foods.38 Pacific Beverages, CCA’s
50/50 joint venture with SABMiller, manufactures and markets a range of premium beers in Australia and New
Zealand and sells and distributes premium spirits. CCA has access to over 270 million consumers through over
600,000 active customers.39
40
37
Coca-Cola Amatil 2010, Factbook, accessed:
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D, p.2
38
Coca-Cola Amatil 2010, Factbook, accessed:
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D, p.2
39 Coca-Cola Amatil 2010, Factbook, accessed:
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D, p.2
40 Coca-Cola Amatil 2010, Factbook, accessed:
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D, p.5
23
41
42
To improve its portfolio in the noncarbonated drinks segment, Coca-Cola acquired Mad River Traders (tea, juices,
and sodas) and Odwalla (juices and smoothies) in 2001. Also signed a licensing deal with Danone to promote Evian
brand in the US.43
Coca-Cola introduced new products, such as Coca-Cola C2, in Japan and the US during 2004. In the UK and 19 other
countries, the company began selling its Dasani bottled water.44
In 2005, Coca-Cola introduced a new product called 'Coca-Cola with Lime' in the US.45 Coca-Cola replaced Pepsi as
the primary beverage served on University of Arizona campus, as part of the exclusive 10-year deal products from
Coca-Cola would be offered in every vending machine and fountain outlet across every University-operated dining
location on the University of Arizona's main campus.46 In the same year, Coca-Cola entered into a partnership
agreement with six US restaurant chains owned by affiliates of Sun Capital Partners to promote its products in
more than 1,750 restaurant locations across 28 states.47
41
Coca-Cola Amatil 2010, Factbook, accessed:
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D, p.7
42 Coca-Cola Company Financials 2010, accessed: 9 March 2012,
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
43 The Coca-Cola Company, History, Datamonitor, p.7, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
44
The Coca-Cola Company, History, Datamonitor, p.7, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
45
The Coca-Cola Company, History, Datamonitor, p.7, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
46
The Coca-Cola Company, History, Datamonitor, p.8, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
47 The Coca-Cola Company, History, Datamonitor, p.9, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
24
Coca-Cola Company and H.J. Heinz Company announced a strategic partnership in February 2011 that enables
Heinz to produce its ketchup bottles using Coca-Cola's PlantBottle packaging.48
49
The company’s products are made available to consumers throughout the world through a network of bottling
partners, distributors, wholesalers and retailers - the world’s largest beverage distribution system. The company’s
vast distribution network spans the globe and allows the company to sell products in some of the most remote
markets in the world. This distribution model is costly for competitors to replicate, and has acted as a sturdy barrier
to entry in the industry.50
The company's large scale of operation allows it to cater to demands in upcoming markets with relative ease and
enhances its revenue generation capacity.51 Growing nonalcoholic ready-to-drink (NARTD) beverage industry.52
Globally the nonalcoholic ready-to-drink (NARTD) market is growing at a significant pace. The NARTD beverage
industry is expected to continue growing retail sales approximately 6% per year for the next 12 years (2008-20).53
This projected growth is being fueled by increase in middle-class consumers and fast-growing urban societies
expected to form in the future. These trends indicate that there will be more people with more disposable income
who potentially will tap into refreshment and convenience. This growth opens up a new world of opportunity for
Coca-Cola. The company can capture this growth with innovative products and targeted go-to-market strategies,
which will continue to drive its global beverage leadership.54
Threats - Evolving consumer preferences
Increasing concern among consumers, public health professionals and government agencies of the potential health
problems associated with obesity and inactive lifestyles represents a significant challenge to Coca-Cola’s industry.
In addition, some researchers, health advocates and dietary guidelines are encouraging consumers to reduce
consumption of sugar-sweetened beverages, including those sweetened with high fructose corn syrup (HFCS), a
form of sugar, or other nutritive sweeteners. Furthermore, there has been an increase in the number of regulations
regarding carbonated soft drinks in the US in response to the heightened desire for healthy food consumption.
Many state public school systems banned the sale of soft drinks on their campuses. The Center for Science and
48
The Coca-Cola Company, History, Datamonitor, p.10, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
49 The Coca-Cola Company, History, Datamonitor, p.22, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
50 The Coca-Cola Company, History, Datamonitor, p.22, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
51 The Coca-Cola Company, History, Datamonitor, p.23, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
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52
The Coca-Cola Company, History, Datamonitor, p.25, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
53 The Coca-Cola Company, History, Datamonitor, p.25, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
54 The Coca-Cola Company, History, Datamonitor, p.25, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
25
Public Interest proposed that a warning label be placed on all beverages containing more than 13g of sugar per 12oz serving. This proposal would affect all non-diet, full calorie drinks produced by the company. These factors have
driven a shift in consumption away from carbonated soft drinks to healthier alternatives, such as tea, juices, and
water. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of
carbonated soft drinks, which constitutes 77% of company’s sales. Although Coca-Cola responded to the changing
preferences by developing a range of diet and light beverages, evolving customer preferences will adversely impact
the sales of its carbonated beverages which will in turn impact its overall profitability.55
Water scarcity and poor quality would impact production costs and capacity
Water is the main ingredient in substantially all of Coca-Cola’s products. Rapid population growth and continued
pollution of existing freshwater sources have created water shortages in nearly every country. Global consumption
of water is doubling every 20 years, more than twice the rate of human population growth. According to the UN,
more than one billion people already lack access to fresh drink water. By 2025, the demand for freshwater is
expected to rise by 56% from the amount that is currently available. As a result, Coca-Cola may incur increasing
production costs or face capacity constraints which could adversely affect its profitability in the long run.56
The Australian beverage business delivered a solid result with earnings before interest and tax (EBIt) increasing by
3.0% to $281.0 million. The business has had to deal with the impact on volumes and a short-term increase in costs
caused by the destructive floods in Queensland and Victoria and Cyclone yasi which occurred during the peak
summer trading season.57 As well, the generally softer consumer spending environment experienced in 2010
continued into 2011, limiting category growth.58 Notwithstanding the difficult conditions, mix improvements,
Project Zero efficiency gains and cost out initiatives underpinned the growth in margins from 19.9% to 20.2%. The
business has maintained its strong market share position despite a high level of competitor discounting activity in
the grocery channel during May and June. New product development for the half was focused on the rollout of new
packages and flavor extensions. The frozen beverage portfolio continues to grow strongly with volume growth of
over 20% as a result of the expansion of the customer base combined with the introduction of new flavors.59
The successful execution of our infrastructure programs in expanding manufacturing capacity and improving
operational efficiency has again delivered a reduction in operating costs and further improvements in our customer
servicing capability. Combined with the restructuring of the spc ardmona (spca) business, I believe these initiatives
will continue to widen the operating capability lead on our competitors.60
Looking forward, cca will continue to focus on executing its organic growth strategy.61
There have been an unprecedented number of natural disasters across our major markets over the last six months.
The floods in Queensland, Victoria and NSW, Cyclone Yasi and the Christchurch Earthquakes.62
CCA has deployed teams to provide assistance to those affected and provided customers with extended terms and
special offers for re- stocking CCA product. In addition, CCA has donated beverage and food products to
communities and emergency services in need and we are matching all employee donations to the flood relief
program.63
Dividends up 11.5% in 201064
Improve our profitability and market position.65
Weaker consumer demand66
55
The Coca-Cola Company, History, Datamonitor, p.26, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
56 The Coca-Cola Company, History, Datamonitor, p.26, Accessed: 8 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
57 Coca-Cola Amatil 2011, Shareholder News- Interim Reports,
http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf
58 Coca-Cola Amatil 2011, Shareholder News- Interim Reports,
http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf
59 Coca-Cola Amatil 2011, Shareholder News- Interim Reports,
http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf
60 Coca-Cola Amatil 2011, Shareholder News- Interim Reports,
http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf
61 Coca-Cola Amatil 2011, Shareholder News- Interim Reports,
http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf
62
Coca-cola Amatil limited 2010, annual report , accessed
http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf
63 Coca-cola Amatil limited 2010, annual report , accessed
http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf
64 Coca-cola Amatil limited 2010, annual report , accessed
http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf
65
Coca-cola Amatil limited 2010, annual report , accessed
http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf
26
Cadbury has entered into a conditional agreement to sell its Schweppes beverages business in Australia to Asahi
Breweries for a total cash consideration of approximately GBP550 million.67
m P&N Beverages Australia Pty., Ltd., a manufacturer and distributor of non-alcoholic and non-dairy beverage
products. Both the companies are based in Australia.68
Coca-Cola Amatil Ltd. (CCA), a beverage and food company, has discontinued discussions with Golden Circle Limited
(GCL), a grower-owned fruit and vegetable processing company, in relation to the planned acquisition of GCL after
its AUD195 million ($173 million) offer was rejected in favour of a private equity deal.69
Coca-Cola engages in the manufacture, distribution and marketing of non-alcoholic beverages, concentrates and
syrups. Coca-cola (TCCC) markets 4 of the worklds top 5 non-alcoholic sparkling brands (Diet coke, fanta and sprite)
The companies finished beveraged is sold in more then 200 countries and the TCCC is headquartered in Atlanta, US
and employs around 139,600 people. Most of TCCC products are manufactured and sold by bottling partners. CocaCola is the biggest selling product of TCCC other popular drinks include Beat, Canada Dry, Cherry Coke, Diet Coke,
Fanta, Sprite etc. In 2011 (January) Coca-Cola Amatil (AUS) launched Nestea range of ice tea in pear and honey
variety. Asahi Breweries primarily is focused on beer rewing.
PAB division accounted for 35.3% of total revenues in FY2010. Revenues from PAB division reached $20.4 billion in
FY2010, as compared to 10.1 billion FY2009.
Top 3 players in the AUS market – Coca-Cola, Asahi Brewery and PepsiCo. These 3 hold 54.9% of the total soft drink
market. 70
(23) Coca-Cola is dominant in the carbonated soft drinks market in Australia, the product, Coca-Cola alone
accounted for more than 75% of the sales value in 2001. PepsiCo is the second most successful company in the
Australian carbonated drinks market. PepsiCo experienced a faintly rise of 0.5% for the year 2001 in its share value.
However, it is a long way from PepsiCo, commanding only one-tenth of the carbonated market. Cadbury
Schweppes also makes a notable impact on the market with their Schweppes lemonade. Solo control only small
sections of the market. Leading companies: Coca-Cola, PepsiCo, Cadbury Schweppes, Solo.
Australia - Carbonated Soft Drinks, Market Profile, www.datamonitor.com
66
Coca-cola Amatil limited 2010, annual report , accessed
http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf
67 Cadbury sells Australian Schweppes business to Asahi Breweries 2009, Financial Datamonitor, accessed: 21 March 2012
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
68 Tru Blu Beverages acquires carbonated soft drinks and cordial businesses from P&N Beverages 2011,Financial Deal Datamonitor, Accessed: 21
March 2012, accessed
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
69
Coca-Cola Amatil not to acquire Golden Circle 2007,Datamonitor, accessed: 21 March 2012, Available
<http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3
DCourse%26id%3D_3155_1%26url%3D>
70
INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011,
27
ASAHI GROUP HOLDINGS (SCHWEPPES AUSTRALIA)
Asahi Group are engaged in beer brewing but also produces and markets soft drinks.71
The four segments the company operates through include alcoholic beverages, soft drinks, food and
others. Asahi acquired Australian beverage business owned and operated by Cadbury (Schweeps
Australia) later entering into a binding share purchase agreement to acquire 100% of the issued shares of
P&N Beverages Australia, the third largest soft drink company by volume in Australia. 72The company
enjoys a powerful position in the beverage market through a strong product portfolio and dominates a
significant share of the market in the snack and beverage industry with worldwide brands.
The company's mission is:
“Asahi aims to satisfy its customers with the highest levels of quality and integrity, while contributing to
the promotion of healthy living and the enrichment of society worldwide.”73
Major products and services include alcoholic beverages and food as well as logistics business and
restaurants. Non- alcoholic beverages include: coffee, carbonated beverages, tea-based drinks, water,
fruit and vegetable drinks, chilled beverages. Schweppes Australia (under license) manufactures and
distributes Pepsi, Pepsi Max, Pepsi Light and Pepsi Light Caffeine Free within Australia.74
The company has ownership interest in food manufacturing, processing and bottling plants75 with the
successful launch of product extensions creating additional revenue streams and growth avenues.76
Company resources include the strategic acquisitions two large bottlers and the relationship shared with
large retail and wholesalers through a customer warehouse channel that delivers products directly from
manufacturing plants/warehouses to customer warehouses/retail stores.77
The soft drink segment enjoys the operation and technology synergies of Asahi Soft Drinks Company,
which also manufactures and distributes coffee, carbonated beverages, tea-based drinks, water, fruit
and vegetable drinks, and chilled beverages.78 Due to the manufacturing and selling of leading snack
foods including Lay’s, Doritos, Cheetos the company owns snack manufacturing and processing plants in
71
Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.4
Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.7
73 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012,
<http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto>
74 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012,
<http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto>
75
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.6
76 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
77 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
78 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.5
72
28
Australia.79 The established presence of the company allows the expansion of its markets through the
related synergies of expanded operations, also reducing business risk.80 The complimentary combination
of snack and beverage business imparts unique competitive advantages enabling leverage and efficiency
within an existing distribution system, providing a barrier to entry for new entrants. Such a model is
considered a core competency of the company as such a encompasses diverse Strategic Business Units
(SBUs) and would be costly, timely and difficult for competitors to replicate81 Furthermore, the
diversified product base, multi-channel distribution system and investment in emerging markets act as a
sustainable competitive advantage, protect the company from a downturn specific to a market or
business line or distribution network, and reduce business volatility.82
Current strategies incorporate environmental sustainability with recent consideration in sustainable crop
farming technology. Current strategies also include the evolving health conscious consumer trends with
investment in coconut water and the decision to ensure the portfolio become more ‘natural ingredient
based’. 83 The formation of joint ventures with complimentary businesses such as Lipton and Sakata
further strengthen the company's competitive position.84
The strengthen such competencies the company heavily invests in corporate social responsibility,
resource and development, brand building, and sustainable growth85 with a particular focus also on
good-for-you portfolio of products.86
Maree: Should i expand further on
GENERIC LEVEL BUSINESS/COMPETITIVE STRATEGY
CURRENT GROWTH STRATEGIES
CURRENT COMPETITIVE POSITION
STRENGTHS

Supply chain management efficiency87

Distribution influence

Large scale operation units

Established brand name

Economies of scale
79
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.6
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
81 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
82 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
83 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.10
84
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7
85 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.32
86 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.36
87 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.14
80
29
WEAKNESSES

Late entry into markets where Coke already had established distributor and consumer space.

PepsiCo also lagged behind in the potential growth market of low or no sugar-based beverages.88
OPPORTUNITIES

An opportunity for the Asahi Group Holding Ltd is the strategic acquisitions to expand business 89

Power to negotiate exclusive supply contracts90
THREATS

Main competitor, Coca-Cola has strong brand recognition across the globe with key brands and
widespread popularity.
THREAT TO VIRGIN
The company launched eco-friendly, recyclable and compostable cups in the US.91
Threat to industry or Virgin??
PepsiCo Inc:
PepsiCo, Inc, is a global snack and beverage company. 92It manufacturers, markets and sells a variety of salty,
sweet and grain-based snacks as well as carbonated and non-carbonated beverages.93
The company has 19 brands in in its portfolio, which generate over $1,000 million each in annual retail sales. Some
of these include Pepsi-Cola, mountain dew, diet pepsi, Gatorade, Lay’s and Tropicana.
The company recorded revenue of $57, 838 million during the financial year ending Dec 201094
PepsiCo operates in over 200 countries and has large-scale operations in North America (Canada and the US),
Mexico and the UK.95A segment of the PepsiCo business unit; FLNA, uses its own as well as third party
manufacturing facilities to produce its snack products (including Lay’s potato chips, Dorito’s etc) which are then
sold to independent distributors and retailers.96 Schweppes Australia was formed on 3 April 2009, when we
became a wholly-owned subsidiary of Asahi Group Holdings, Ltd.97 Under license, Schweppes Australia
manufactures and distributes Pepsi, Pepsi Max, Pepsi Light and Pepsi Light Caffeine Free within Australia.98
The company has ownership interest in food manufacturing, processing and bottling plants. 99 The AMEA segment
manufacturers and sells a number of leading snack foods including Lay’s, Doritos, Cheetos with snack
manufacturing and processing plants in Australia.100
PepsiCo introduced the first caffeine-free colas in 1982 and was later restructured to focus on soft drinks, snack
foods and restaurants.101 The company went global through joint ventures and later merged with Quaker Oats to
88
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.29
Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.14
90 Cadbury Schweppes: sour grapes or genuine fear? 2001, Datamonitor 360, accessed 14 March 2012, p. 2
91 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.11
92 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.5
93 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.4
94 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.4
95
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.5
96 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.5
97 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012,
<http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto>
98 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012,
<http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto>
99 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.6
100 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.6
101 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7
89
30
create a $25 billion food and beverage company.102 The move not only expanded PepsiCo's position in the market
but enhanced its distribution influence, giving it greater power to negotiate exclusive supply contracts.103 Cadbury
Schweppes, the UK's chocolate and soft drinks group, has kept a low profile, but it voiced its concern when
required to comment by the FTC.104
The company also formed a joint venture with Lipton to expand the marketing and distribution of Lipton’s range in
select markets.105 Key acquisitions include Sakata, the Australian rice snacks manufacturer.106
2006: PepsiCo and the National Hockey League (NHL) signed a multiyear deal, under which PepsiCo was given
exclusive North American rights, as well as select marketing and promotional rights in the beverage, sports
beverage, bottled water and snack categories. PepsiCo replaced Coca-Cola, which had a similar deal with the NHL
for 17 years. As part of the deal, Gatorade became the official sports drink of the NHL, replacing Coke’s Powerade,
and Aquafina became the bottled water.107
The joint venture between PepsiCo and starbucks allowed Starbucks access to PepsiCo’s established distribution
channels.108
2006 PepsiCo Australia acquired Bluebird Foods, New Zealand’s snack maker for NZ$245 million.109
Brand of PepsiCo; Aquafina launched a low calorie, vitimin enhanced water beverage in different flavour
combinations. 110 PepsiCo made official plan to invest $1 billion in China as part of the company’s strategy to
expand in emerging markets and broaden its portfolio of locally-relevant products. 111 2010: PepsiCo completed
the strategic acquisitions of its two largest bottlers and invested heavily in CSR and R&D. 112 The company begins
to consider the environment with sustainable crop farming technology, and the health conscious consumer with
investment in coconut water and decision to ensure their portfolio become more ‘natural ingredient based’. 113
2011: PepsiCo and Burger King signed multi-year agreement ensuring PepsiCo is the exclusive soft drink
supplier.114 The company also launched eco-friendly, recyclable and compostable cups in the US.115 Beverages
include: bottled water, carbonated soft drinks, chilled juices and juice drinks, powder drinks, ready-to-use tea,
sports drinks.116
Brands include: Alegro, Amp Energy, Aquatina, Aunt Jemima, Cheetos, Cracker Jack, Pepsi, Doritos, Duyvis, FritoLay, Fritos, Fruktovy Sad, Frustyle, Gamesa, Gatorade, Izze, Lay’s, Life, Mirinda, Mountain Dew, Mug, Near East,
Pasta Roni, Propel, Quaker, Rice-A-Roni, Rold Gold, Ruffles, Sabritas, Sakata, Sierra Mist, Simba, Smith’s, Snack a
Jacks, SoBe, Sonric’s, Stacy’s, SunChips, Tonus, Tostitos, Tropicana, V Water, Walkers, Ya. 117
The company recorded revenues of $57, 838 million during financial year ended Dec 2010, an increase of 33.8%
over 2009.118All other countries (including Australia) accounted for 27.4% of total revenues in FY2010. Revenues
from these countries totalled $15, 830 million, an increase of 24.2% over 2009.119 PepsiCo holds significant
market share in the snack and beverage industry with worldwide brands. The complimentary combination of snack
and beverage business imparts unique competitive advantages to PepsiCo. However, the carbonated drinks market
in the US has witnessed a slow but steady switching trend to low sugar and sodium products, thereby signalling a
negative growth trend of carbonated soft drinks product.120
SWOT121
102
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7
Cadbury Schweppes: sour grapes or genuine fear? 2001, Datamonitor 360, accessed 14 March 2012, p. 2
104 Cadbury Schweppes: sour grapes or genuine fear? 2001, Datamonitor 360, accessed 14 March 2012, p. 2
105 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7
106 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7
107 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.8
108 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.9
109 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.8
110 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.8
111 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.9
112 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.10
113
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.10
114 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.11
115 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.11
116 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.21
117 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.22
118
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.23
119 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.24
120 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.25
121 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.25
103
31
Strengths:
1.
2. Combination imparts unique competitive advantage allowing PepsiCo to leverage existing distribution system
with the size of its infrastructure providing a barrier to entry for new entrants and competitors since such a model
is costly to replicate122
3. Successful launch of product extensions creating additional revenue streams and growth avenues123
4. Reaches bigger retail and wholesalers through customer warehouse channel by delivering its products directly
from manufacturing plants and warehouses to customer warehouses/retail stores.124 The diversified product base
and multi-channel distribution system protect it from a downturn specific to a market or business line or
distribution network, thus reducing business volatility.125
5. PepsiCo has established presence in both developed and emerging markets, internationally and domestic. Large
international presence allows the company to expand its markets to high growth economies, derive the related
synergies of expanded operations and also reduce the business risk.126
Opportunities
Acquisitions broaden the company portfolio and also strengthen its geographical reach with international
expansion likely to provide long term growth opportunities.127
Datamonitor estimates, the soft drinks market in Asia-Pacific grew by 4.1% in 2010 reaching a value of $111, 023.6
million. In 2015 the Asia Pacific soft drinks market is forecast to have a value of $143, 597.2 million, an increase of
29.3% since 2010.128
Threats
Coca-Cola has strong brand recognition across the globe with key brands such as Diet Coke, Sprite and Fanta. Coke
has a wide geographical reach and widespread popularity. One of the contributing factors for PepsiCo’s decline in
beverage industry post 90’s has been its late entry in international markets where Coke already had established
distributor and consumer space. PepsiCo also lagged behind in the potential growth market of low or no sugar
based beverages.129 Company focus on brand building, increasing global presence, R&D, emerging markets
infrastructure, sustainable growth.130 Focus also on good-for-you portfolio of products.131
Company operates through 4 business divisions: alcoholic beverags, soft drinks, food and pharmacetucals and
others.
Soft drinks division manufactures and sells various drinks such as PepsiCo – one of world leading global beverage,
snack and food companies. Pepsi operates through business units (same as mentioned in doc1). PAB sells beverage
concentrates, pepsi, Gatorade, Tropicana pure premium, lipton, sierra mist, Tropicana juice, naked juice, etc. PAB
122
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
124 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
125 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
126 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26
127 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.28
128
PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.28
129 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.29
130 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.32
131 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.36
123
32
also manufacturers or contracts manufacturers to sell ready-to-drink tea, coffee and water products through
Unilever (under the lipton brand name) and Starbucks.
Data Data from datamonitor360:(Already included in research document [diagrams and tables etc]).ß
PepsiCo, Inc.
Company Profile
Publication Date: 11 Jul 2011
www.datamonitor.com
COMPANY:
Has 19 brands in its portfolio, which generate over a million each in annual retail sales.
The company’s headquaters employs 294,000 people.
The company recorded revenues of $57,838 million during the financial year ended December 2010
(FY2010), an increase of 33.8% over 2009. The operating profit of the company was $8,332 million
in FY2010, an increase of 3.6% over 2009. The net profit was $6,320 million in FY2010, an increase
of 6.3% over 2009.
Chairman and Chief Executive Officer: Indra K. Nooyi (executive board)
Data from google scholar: most of the data on scholar needed to be bought however the International Marketing
Exemplar Firm Report was one I thought would be good.
Pepsi has 41 brand names
Is constantly struggling with there leading competitior Coke-cola
Epsi holds a 37.5% share in the carbonated drinks market (Coke 42.9%)
Founded as a bottling company in the 1800’s.
PepsiCo’s long-term success has been attributed to their domination of the market and superior reputation for
being a stable, quality brand name.
Advertising efforts first marketed Pepsi-Cola as a bargain brand
After changing hands four times and declaring bankruptcy twice in the first part of the 20th century, Pepsi shifted
its focus from bargain brand promotions to advertising geared toward young people—this is where the “Pepsi
Generation” marketing plan originated from.
PEST ANALYSIS
POLITICAL:
New regulatory pressures regarding health concerns and other global concerns have forced companies in the
food/beverage industry to take on new challenges and reevaluate their products to meet new consumer demands,
PepsiCo has developed a Blue Ribbon Advisory Board, made up of leading health and wellness experts and thirdparty advisors from across the globe in order to help the corporation face these newly strengthened consumer
demands. Furthermore, PepsiCo has recently worked alongside the Clinton Foundation, American Heart
Association, and the North American beverage industry in order to set policies regarding placement of the correct
products in the correct areas.
ECONOMIC:
The major economic issue facing PepsiCo and its subdivisions is the rising input costs of their businesses due to
structural inflation. Agricultural, energy, and some metal industries are going through periods of steady inflation.
Because PepsiCo relies on these industries, inflation costs must be factored into their cost equations. The
corporation acknowledges its fortunate ability to navigate through tough economic times in the past.
SOCIAL:
Social environment of food service markets are changing significantly. A new demand for healthy food and
beverages coupled with a push towards green operations and environmentally-friendly company management has
changed the social playing field within most markets.
PepsiCo and PBNA have successfully adopted new goals and produced new products in order to follow these
growing trends. Not only has PBNA recently began to offer new products such as Diet Pepsi Max, a cola with zero
calories, sugars, carbohydrates, or Total Fat, but it has also added new lines of product in order to meet this more
health-conscious market.
TECHNOLOGY:
PepsiCo and its subdivisions utilize technology in order to sustain company growth, keep up with the demands of its
sustained growth, and perform efficiently.
PepsiCo’s delivery systems provide a strong competitive advantage. In particular, their most powerful distribution
system, Directstore-delivery (DSD) allows them to supply all of their retailers and customerdistributors with up-todate stock. “Directstore-delivery allows us to create maximum appeal and visibility for our brands and support instore promotions. DSD works well for popular 7 products we restock often, because it allows us to distribute new
33
products quickly. Our DSD system reaches hundreds of thousands of retail outlets this way, from neighborhood
convenience stores to large-format supermarkets” (Annual Report, 11).
Data from Data monitor: think the same as Data Monitor360
Data from PepsiCo.com/Annual Report 2012
http://www.pepsico.com/Company/Our-Mission-and-Vision.html
At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to
do for our business.
Our Mission
Our mission is to be the world's premier consumer products company focused on convenient foods and beverages.
We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our
employees, our business partners and the communities in which we operate. And in everything we do, we strive for
honesty, fairness and integrity.
Our Vision
"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment,
social, economic - creating a better tomorrow than today."
Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit
society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company. Data from
PepsiCo.com/Annual Report 2012
http://www.pepsico.com/Company/Our-Mission-and-Vision.html
Performance with Purpose
At PepsiCo, we're committed to achieving business and financial success while leaving a positive imprint on society
- delivering what we call Performance with Purpose.
Our approach to superior financial performance is straightforward - drive shareholder value. By addressing social
and environmental issues, we also deliver on our purpose agenda, which consists of human, environmental, and
talent sustainability.
Learn more about Perfor
Data from annual reports:
http://www.pepsico.com/Download/PepsiCo_Annual_Report_2010_Full_Annual_Report.pdf
“Good for all… is good for business”
At PepsiCo, Performance with Purpose means delivering sustainable growth by investing in a healthier future for
people and our planet. As a global food and beverage company with brands that stand for quality and are
respected household names — Pepsi-Cola, Lay’s, Quaker Oats, Tropicana and Gatorade, to name but a few — we
will continue to build a portfolio of enjoyable and healthier foods and beverages, find innovative ways to reduce
the use of energy, water and packaging, and provide a great workplace for our associates. Additionally, we respect,
support and invest in the local communities where we operate, by hiring local people, creating products designed
for local tastes and partnering with local farmers, governments and community groups. Because a healthier future
for all people and our planet means a more successful future for PepsiCo. This is our promise.
=
34
Values of PepsiCo include:
Human Sustainability
Some performance targets include:
increase the amount of whole grains, fruits, vegetables, nuts, seeds and low-fat dairy in our global product
portfolio,display calorie count and key nutrients on our food and beverage packaging by 2012.
Some performance targets include:sustain and improve brand equity scores for PepsiCo’s 19 billin-dollar brands in
the top 10 markets, rank in the top two suppliers in customer (retail partner)surveys where third party measures
exist, continue to expand division operating margins, increase cash flow in proportion to net income growth over
three-year windows. Environmental sustainability
Some key performance targets include: to improve our their water use efficiency, increase CSR
Work to eliminate all solid waste to landfills from our production facilities.
Encourage our associates to lead healthier lives by offering workplace wellness programs globally.
Our Customers
Our primary customers include wholesale distributors, grocery stores, convenience stores, mass merchandisers,
member- ship stores, authorized independent bottlers and foodservice distributors, including hotels and
restaurants.
We normally grant our independent bottlers exclusive contracts to sell and manufacture certain beverage products
bearing our trademarks within a specific geographic area.
These arrangements provide us with the right to charge our independent bottlers for con- centrate, finished goods
and Aquafina royalties and specify the manufacturing process required for product quality.
35
Our Distribution Network
Our products are brought to market through DSD, customer warehouse and foodservice and vending distribution
networks. The distribution system used depends on customer needs, prod- uct characteristics and local trade
practices.
Our Competition
Our businesses operate in highly competitive markets. We compete against global, regional, local and private label
manu- facturers on the basis of price, quality, product variety and distribution. In U.S. measured channels, our chief
beverage competitor, The Coca-Cola Company, has a larger share of CSD consumption, while we have a larger share
of liquid refreshment beverages consumption. In addition, The Coca-Cola Company has a significant CSD share
advantage in many markets outside the United States. Further, our snack brands hold significant leadership
positions in the snack industry worldwide. Our snack brands face local, regional and private label competitors, as
well as national and global snack competitors, and compete on the basis of price, quality, product variety and
distribution. Success in this competitive environment is dependent on effective pro- motion of existing products,
the introduction of new products and the effectiveness of our advertising campaigns, marketing programs and
product packaging. We believe that the strength of our brands, innovation and marketing, coupled with the quality
of our products and flexibility of our distribution network, allow us to compete effectively.
Other Relationships
Certain members of our Board of Directors also serve on the boards of certain vendors and customers. Those Board
members do not participate in our vendor selection and negotiations nor in our customer negotiations. Our
transactions with these vendors and customers are in the normal course of business and are con- sistent with terms
negotiated with other vendors and customers. In addition, certain of our employees serve on the boards of PBV
and other affiliated companies and do not receive incremental compensation for their Board services.
Changes in the legal and regulatory environment could limit our business activities, increase our operating costs,
reduce demand for our products or result in litigation.
The conduct of our businesses, and the production, distribu- tion, sale, advertising, labeling, safety, transportation
and use of many of our products, are subject to various laws and regulations administered by federal, state and
local governmental agencies in the United States, as well as to foreign laws and regulations administered by
government entities and agencies in markets
in which we operate. These laws and regulations and interpre- tations thereof may change, sometimes
dramatically, as a result of political, economic or social events. Such regulatory envi- ronment changes may include
changes in: food and drug laws; laws related to advertising and deceptive marketing practices; accounting
standards; taxation requirements, including taxes specifically targeting the consumption of our products; competition laws; privacy laws; and environmental laws, including laws relating to the regulation of water rights and
treatment. Changes in laws, regulations or governmental policy and the related interpretations may alter the
environment in which we do busi- ness and, therefore, may impact our results or increase our costs or liabilities.
Governmental entities or agencies in jurisdictions where we operate may also impose new labeling, product or
production requirements, or other restrictions. For example, studies are underway by various regulatory authorities
and others to assess the effect on humans due to acrylamide in the diet. Acrylamide is a chemical compound
naturally formed in a wide variety of foods when they are cooked (whether commercially or at home), including
french fries, potato chips, cereal, bread and coffee.
It is believed that acrylamide may cause cancer in laboratory animals when consumed in significant amounts.
Studies are also underway by third parties to assess the health implications of carbonated soft drink consumption.
If consumer concerns about acrylamide or carbonated soft drinks increase as a result of these studies, other new
scientific evidence, or for any other reason, whether or not valid, demand for our products could
decline and we could be subject to lawsuits or new regulations that could affect sales of our products, any of which
could have an adverse effect on our business, financial condition or results of operations.
We are also subject to Proposition 65 in California, a law which requires that a specific warning appear on any
product sold in California that contains a substance listed by that State as having been found to cause cancer or
birth defects. If we were required to add warning labels to any of our products or place warnings in certain
locations where our products are sold, sales of those products could suffer not only in those locations but
elsewhere.
In many jurisdictions, compliance with competition laws is of special importance to us due to our competitive
position in those jurisdictions. Regulatory authorities under whose laws we operate may also have enforcement
powers that can subject us to actions such as product recall, seizure of products or other sanc- tions, which could
have an adverse effect on our sales or damage our reputation.
In addition, we and our subsidiaries are party to a variety of legal and environmental remediation obligations
arising in the normal course of business, as well as environmental remedia- tion, product liability, toxic tort and
related indemnification proceedings in connection with certain historical activities and contractual obligations of
businesses acquired by our subsidiar- ies. Due to regulatory complexities, uncertainties inherent in litigation and
the risk of unidentified contaminants on current and former properties of ours and our subsidiaries, the potential
36
exists for remediation, liability and indemnification costs to differ materially from the costs we have estimated. We
cannot assure you that our costs in relation to these matters will not exceed our established liabilities or otherwise
have an adverse effect on our results of operations.
Maree: should I include competitive strategies (e.g. Low cost defender’s for both) in this section
accompanied with brief description (p.68)?
MINOR COMPETITORS
 Bickford's (includes juices, sodas, teas, sparkling water with fruit flavor, energy drinks, bottled
water)

Bundaberg (includes diet varieties, flavored CSD includes lemon lime bitters and ginger beer)

Cascade (includes fruit juices, ginger beer, flavored CSD including sparkling apple juice and
sparkling blackcurrant)

Golden Circle Company (includes fruit juices, cordials and CSD)

Kirks (line of sodas marketed by Coca-Cola Amatil) marketing core competency

LA Ice Cola (includes cola available in four varieties including sugar free and diet variety)

Leed (includes carbonated lemonade) – distributed by coke

Lido (includes lemonade)

Leed (includes carbonated lemonade) Kirks (line of sodas marketed by Coca-Cola Amatil)
Description:
The key competitors in the Australian CSD industry are extremely efficient and dominant throughout the
supply chain. While consumers determine retailer purchases, it is the key competitors that have formed
strategic partnerships, own plants and warehouses, determine the degree of new entrant access to raw
materials and solely contract bottlers.
Implications:
These players have the resources, capabilities and budgets to defend their market position and employ
attack strategies if required.
OPPORTUNITIES
Changing consumer trends
RATING*
4/5 – 5/5
THREATS
RATING*
5/5 – 5/5
Competitor dominance
Limited product innovation
5/5 – 1/5
Competitor synergies in supply &
4/5 – 4/5
37
distribution channels
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
DISTRIBUTION CHANNELS AND BUYERS (INTERMEDIARY CUSTOMERS)
Supermarkets / hypermarkets form the leading distribution channel in the Australian soft drinks market,
accounting for a 48.5% share of the total market's volume. On-trade accounts for a further 32.5% of the
market.
Analysis of distribution structure (number and type of distributors serving the total market including a
break down of sales by the various intermediary types)
Historical trends and future development for distribution channels
The power base of the buyers
Trends concerning physical distribution
MOST importantly info concerning the wants/needs of the intermediaries in particular the margins
applied by the various intermediaries, promotional requirements, policies concerning new line fees,
stock delivery and inventory management requirements
THE KEY PLAYERS IN THE DISTRIBUTION CHAIN:

Coca-Cola

Pepsi Co

Asahi Breweries
DISTRIBUTION STRUCTURE
In Australia Major Chain retailers have large national store networks covering all inner city, suburban and
regional centres. Smaller chains or independent banner groups have less comprehensive coverage of the
market.
The distribution of Soft drinks in Australia embedded in the food distribution channels. The key feature
of the channel structure is the means by which retailers manage direct supply logistics on national or
regional bases through national (NDC) and regional distribution centres (RDC).
38
STRUCTURE OF INDEPENDENT AND CONVENIENCE RETAIL CHANNELS
Independent grocery and convenience store channels have a minority share of retail sales in most food
and beverages categories and offer a limited range of products based on servicing the convenience
needs of passing consumers. This channel includes specialist discount food stores, which offer a limited
range of food and drinks at often deeply discounted prices to attract shoppers.
SPECIALTY RETAIL CHANNELS
This channel encompasses a range of specialist retailers that focus on single or limited fresh food or
otherwise niche food category. These outlets are typically independently owned and, accordingly, unable
to avail themselves of group buying or distribution arrangements.
QUICK SERVICE RESTAURANT CHANNELS
This channel encompasses large integrated chains of quick service restaurants (QSR) or takeaway food
outlets. It represents a significant share in the takeaway retail food market, across burgers, chicken, pizza
and salad meals. These outlets are typically franchised, and their meal and product ingredients are
centrally purchased and supplied, according to tight specifications, through sophisticated logistics
management practices.
INDEPENDENT TAKE AWAY CHANNELS
This channel encompasses many independent takeaway food outlets covering different food groups or
offerings, or both. These outlets are typically independently owned and accordingly unable to avail
themselves of group buying or distribution arrangements.
DINING OUT CHANNELS
This channel encompasses many independent dining and function venues. The outlets are typically
independently owned and accordingly serviced by specialist fresh product and food service wholesalers
and distributors offering services to meet the frequency, cold-chain and specification requirements of
these retailers.
EVENTS AND LEISURE CHANNELS
This channel encompasses many sporting and major event venues, and involves a large range
Of meal formats and price/value. Travel catering includes the food and drinks supply to airline
Companies and to a large percentage of food outlets located in airport terminals.
INSTITUTIONAL HEALTHCARE CHANNELS
39
This channel encompasses the supply of meals to many government and independent healthcare
institutions, which provide beds.
OTHER INSTITUTIONAL FOOD CHANNELS
This channel generally encompasses contract catering services to kitchen and dining venues.
Commercial caterers are the largest provider of meal and kitchen management solutions to this
segment, with the service package varying according to industrial practices, cost constraints and the size
and location of the institution
Description:
Jerome: please complete (refer to project guideline).
Implications:
Jerome: please complete (refer to project guideline).
*
OPPORTUNITIES
RATING*
THREATS
RATING*
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
END-USER CUSTOMERS
Jerome: please complete summary for this section (refer project guideline)
Health conscious
Retailers (buyers) users (customers)  customers influence retailers
Supply and buyer relatively low compared to that of consumers
Initiators’ are well known Australian sports people who can comment and influence
Gyms, health foods stores, health supplement stores (GNC, ASN)
There are unmet needs in the product category total natural, low carb and low sugar ingredients free of
artificial sweeteners.
Description:
Jerome: please complete (refer to project guideline).
40
Implications:
Jerome: please complete (refer to project guideline).
*
OPPORTUNITIES
RATING*
THREATS
RATING*
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
SUPPLY
Some bottlers are independent, while others are owned by the big-name manufacturers described
usually as 'partners' and 'customers'. The bottlers are licensed to convert purchased raw materials into
packaged soft drinks with the manufacturers' branding, and distribute the ready for sale commodities to
buyers within a particular sales territory. Although the majority of bottlers are free to make their own
business decisions, the close ties between manufacturers and bottlers’ means that food & beverage
retailers are arguably the more significant buyers from the point of view of market players132.
Industry level supply is important to strategic marketing planning. Shortage or excess can have industry
wide effect in supplies of raw materials, for example crop failures, diseases labour disputes. In order for
manufactures and distributes to maintain competitive advantage they need to ensure supply of their raw
materials and also maintain excess.
Soft drink Industry has a very intense competitive rivalry, a slight increase of in capacity of supplies can
trigger price wars, hence reduction in profitability.
Porters competitive forces identifies areas that could potential affect supply at the industry level and
marketing planners need to be aware of the following:
Description:
Jerome: please complete (refer to project guideline).
Implications:
Jerome: please complete (refer to project guideline).
*
OPPORTUNITIES
Utilisation of existing supply
channels for different product
RATING*
THREATS
Competitor dominance in the supply
RATING*
chain
132
Datamonitor 2011. Soft Drinks in Australia, Available: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C08BD7-4FD8C32C0B1F. Accessed: 05 March 12.
41
categories
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
CRITICAL SUCCESS FACTORS (CSFS)
Would you mind checking these Maree? Thank you
For successful operation in the Australian CSD industry, the following factors are critical for success:

PRODUCT ATTRIBUTES INCLUDING A POPULAR BRAND, WITH CONSISTENT QUALITY AND
PACKAGING
Consumers have greater influencing power than that of suppliers or buyers, ultimately dictating
market share. Therefore, a brand wishing to compete in this industry must resonate among
consumers, by delivering on their desires and at competitive prices. Furthermore, consumers are
strongly and often influenced by brand so a favourable brand is critical in this competitive market.
As the product category is relatively homogenous it is product packaging that differentiates brands.
(Hannah/Jess: please comment of the strength and value of the virgin brand and cross reference
with your section)

RESOURCES INCLUDING DISTRIBUTION CAPABILITIES AND ACCESS TO INPUTS
Due to the high capital required for entry to such a market it is imperative that companies wishing to
compete in such an industry have prior knowledge or affiliations organisations with not only
experience with the distribution channels for beverages in Australia, but relationships with retailers,
distributors and bottlers. Furthermore, it is critical that new entrants have access to the raw
materials required for production as these are limited in Australia (Hannah: do you reference water
restrictions in your section? Please add here once you do)

COMPETENCIES INCLUDE PRODUCT & PACKAGING INNOVATION, SUPPLY CHAIN EFFICIENCY AND
DISTRIBUTION MANAGEMENT
As industry decline is predicted, those wishing to compete must be innovative with product offerings
and packaging as to appeal to the evolving consumer trends, which are causing market decline.
Additionally, successful companies in this industry are extremely efficient in the extremely complex
and costly supply chains. To secure a strong and sustainable competitive position in the market, new
entrants must have a wide distribution reach, be able to be secure favourable space on retailer
42
shelves and be in available in convenient locations thus deeming distribution management a critical
factor of success.
SUMMARY OF OPPORTUNITIES AND THREATS
Jess to amend according to Maree notes
Virgin Cola exits in a highly competitive market, not only against direct competitors such as Pepsi Co.,
Coca-Cola Amatil and Asahi but also against their competitors brand extensions and their substitutes
such as bottled water, sports drinks and juices.
The carbonated soft drink market is hostile with the three big players occupying XX% of the overall
market share.
Social trends prompted by obesity concerns also add the ‘health factor’ aspect opening another
competitive platform for carbonated soft drink product offerings to meet consumer expectations and
attain their market share.
Virgin Cola faces many opportunities and threats as both a brand and a product offering in the day-today competitive consumer environment.
OPPORTUNITY
HIGH
HIGH
OPPORTUNITY:

To take advantage of the health
conscious social trend and
expand product line into low
calorie or healthier substitute
SFD goods (Retail world, AC
Nielsen Special report, 19th July
2010, p.20).
LOW
* To produce mimic brand extensions like Virgin
Cherry Cola and Virgin Vanilla Cola for a
competitive price.

LOW
Strengthen geographical reach
with international expansion (if
they aren’t launching
internationally) – growth could
provide long-term growth
opportunities.
OPPORTUNITY:
Take advantage of GFC and rocky
economic conditions with the use of
coupons and discount vouchers.
*Branching into the ‘organic’ sector in response
to heath trends.
43
* Horizontal axis = significance of opportunity, Vertical axis = probability of occurrence
THREAT
HIGH
HIGH
LOW
COMPETITORS:
ASAHI GROUP HOLDINGS (Schweppes
Aus), PepsiCo, Coca-Cola – High
competitive environment against
already established companies, who
already offer line extensions appealing
to social trends. Coke has a strong
international brand presence.
THREAT:
Majority of consumers curbing their household
expenditure (saving on gas, electricity, TA meals
and new clothes), need to make CSD as a market
offering be perceived as a necessity rather then
a luxury or specialty good.
44
LOW
THREAT:
Sluggish growth performance in the
grocery channel overall in AUS.
MINOR COMPETITORS:
 Bickford's (includes juices, sodas,
teas, sparkling water with fruit
flavor, energy drinks, bottled
water)
 Bundaberg (includes diet varieties,
flavored CSD includes lemon lime
bitters and ginger beer)
 Cascade (includes fruit juices,
ginger beer, flavored CSD
including sparkling apple juice and
sparkling blackcurrant)
 Golden Circle Company (includes
fruit juices, cordials and CSD)
 Kirks (line of sodas marketed by
Coca-Cola Amatil)
 LA Ice Cola (includes cola available
in four varieties including sugar
free and diet variety)
 Leed (includes carbonated
lemonade)
 Lido (includes lemonade)
*Alcoholic substitutes in the beverage industry,
this threat is scaled reasonably low as alcoholic
beverages are un-attainable for consumers
under the age of 18 and for those of the legal
drinking age contributing factors such as RBT
and social standards
* Problematic distribution channels as
retailers ma not want to take the risk of
carrying a new product
*Horizontal axis = significance of threat, Vertical axis = probability of threat
SITUATION ANALYSIS – INTERNAL CAPABILITIES
Jayne to read over
Virgin Cola has decided to brand its carbonated soft drink as an Organic Soft Drink to be distributed
through specialty stores such as Thomas Dux, Harris Farm, Fratelli Fresh and other niche delicatessen
styled stores. This branding strategy will help distinguish Virgin Cola as a brand, giving it a point-ofdifference and setting it aside from the major players Pepsi and Coca-Cola.
The Virgin Group’s on a company level is one of great power as its products range across several industry
sectors. The Virgin Group’s brand name is one of its biggest assets, this is partly due to the strong
45
association the brand has with Director, Sir Richard Branson. Sir Richard Branson acts as an unofficial
endorsee for the company’s brand, values and business approach. The Virgin Group has products in
Lifestyle, Media and Mobile, Money, Music, People and Planet as well as travel; this diverse portfolio
strengthens the overall brand recognition of the company as the company is exposed to a plethora of
consumers across these different segments.
The re-launch of Virgin Cola in Australia will align with the Virgin Groups pre-existing values and cultures
established through the brands other product lines. The carbonated soft drink beverage is going to align
especially with the People/Planet values of the company. Virgin Pepsi is going to be an organic cola
produced with fair trade ingredients and the product will be bottled in recycled materials. These aspects
of the product not only reinforce the Virgin Groups mission and culture but it also acts as a point-ofdifference and aligns with current trends stimulating an influx in health concern and societal search for
healthier substitutes for the household goods in which consumers love.
In order for Virgin Group to name Virgin Cola as a ‘Fair Trade’ product, it needs to meet certain
requirements set out by the Fair Trade Body. These requirements include:

Pay a price to producers that aim to cover the costs of sustainable production: the Fair Trade
Minimum Price133.

Pay an additional sum that producers can invest in development: the Fair Trade Premium134.

Partially pay in advance, when producers ask for it135.

Sign contracts that allow for long-term planning and sustainable production practices136.
The meeting of these requirements and the attainment of the Fair Trade title/logo not only will be a
distinguishing factor which can be used in advertising but it will also enforce the ethics of the company
behind it (The Virgin Group). This will give Virgin Cola a competitive advantage over the market leaders
Pepsi and Coca-Cola as they do not attain such certification and because movements like Fair Trade are
becoming increasingly popular in today’s societal environment. This movement into Fair Trade will earn
Virgin Cola first mover advantage and will lead to Virgin Cola being a market leader in the
environmentally sustainable products for carbonated soft drinks.
On a competitive scale, the marketing of the Virgin Cola as being a product with superior environmental
sustainability status will stimulate attention from major competition Coca-Cola. Virgins positioning
strategy to publicizing the brand Virgin will trigger this focus and it’s product as being a market leader for
environmental sustainability innovation. This is because Coca-Cola is currently in the stages of
133
http://www.fairtrade.net/generic_trade_standards00.html
http://www.fairtrade.net/generic_trade_standards00.html
135 http://www.fairtrade.net/generic_trade_standards00.html
136 http://www.fairtrade.net/generic_trade_standards00.html
134
46
developing a ‘PlantBottle’ of it’s own with a similar branding strategy. Coca-Cola is a global brand that
also draws from its strong brand recognition as a main driver in the competitive dominance in the
marketplace. Coca-Cola as a brand as an extremely high level of consumer recognition with branding
strategies aimed at evoking fun ‘summer-time’ memories and experience with friends. This branding
strategy is successful because it appeals to consumer’s emotive stimuli, evoking memories of fun and
then associating Coca-Cola as a brand to such memories.
Coca-Cola’s ‘PlantBottle’ will be made of a material known as PET plastic, the bottle will contain 30%
materials from Brazilian sugar cane and molasses. The goal is to make the PlantBottle 100% recyclable137.
Virgin Cola’s market entry will beat Coca-Cola into the market and therefore enjoy the first mover
advantage and access to economies of sale. However this move does bear some risk, Coca-Cola is now
given the opportunity to watch Virgin Cola and analyze the overall consumer response to the product,
and build features into their ‘PlantBottle’ which will better satisfy unmet consumer expectations and to
build/learn off Virgins mistakes.
A the main capability in which this branding strategy gives The Virgin Group to other competitors is it
separates them from immediately competing against the markets larger players Coca-Cola and Pepsi,
placing it in a sub-category niche within the carbonated soft drink category. This niche provides a less
volatile market place, which will be easier to dominate off the brand name alone. Once the niche market
is dominated by Virgin Cola the company can then decide to start defusing the beverage out into the
mass-market.
Another capability in which The Virgin Group will enjoy includes tax concessions, these concessions can
be granted to make up for loss of potential income incurred through adopting sustainable production
methods and avoiding mass production. Partnerships or alliances set up with recycling companies will
also grant the Virgin Group additional capabilities as distribution of raw materials and finished goods will
be maintained at little or no cost.
Apart from the production capabilities in which The Virgin Group will enjoy on the production side of
operations, the sales/retail side will also inherit capabilities vital to growing market share. The ‘natural’
and organic attribute of the product will enable the beverage to move across product lines and allow it
to be kept in the consideration group for healthier substitutes such as performance drinks, juices and
bottled water. Another capability on Virgins sales side of the business is that the Virgin Cola beverage will
137
Global Edge. 2000. Coca-Cola Amatil. [ONLINE] Available at: http://globaledge.msu.edu/blog/post/562/ge-blog-series--go-green--part-4.2--planting-new-ideas [Accessed 08 February 12].
47
be competition in a much less volatile market. Avoiding in the first instance direct competition with both
Coca-Cola and Pepsi.
Jess: I did not have time to thoroughly read through this section so please have someone do it before
Sunday for errors etc.
Review:
Jess: please complete (refer to project guideline).
Implications:
Jess: please complete (refer to project guideline).
*
OPPORTUNITIES
RATING*
THREATS
RATING*
The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.
The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very
significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low
probability.
PROBLEMS AND OPPORTUNITIES STATEMENT
Jess: If you are unable to do this tomorrow I can do it either with you or myself on Sunday. The delay
with the final document and CSFs was due to formatting, email communication, inserting others work
and cross referencing with the project guideline. I also needed to complete the summary for the
presentation so Hannah was able to get started on slides.
1. THE BUSINESS UNIT’S CAPABILITIES COMPARED TO CRITICAL SUCCESS FACTORS
CSF
Our capabilities/competencies








2. OPPORTUNITIES FOR THE BUSINESS UNIT TO EXPLOIT WITH EXISTING CAPABILITIES
3. OPPORTUNITIES FOR THE BUSINESS UNIT TO EXPLOIT WITH IMPROVED CAPABILITIES
4. THREATS THAT MUST BE ADDRESSED
RECOMMENDATIONS AND RATIONALE
48
MARKETING OBJECTIVES: (See Exhibit 2.4 for examples)
PRODUCT-MARKET GROWTH STRATEGIES
YEAR 1
OBJECTIVES
YEAR 2
OBJECTIVES
YEAR 3
OBJECTIVES
Existing products in existing markets (Market
penetration)
Existing products in new markets (Market
development)
New products in existing markets
(NPD)
EXAMPLE OF MARKETING STRATEGIES:
MARKET SEGMENT 1
MARKET SEGMENT 2
MARKET SEGMENT 3
Segment description
Segment description
Segment description
Products/brands serving this
segment
Product/Brand positioning
Products/brands serving this
segment
Brand positioning
Products/brands serving this
segment
Brand positioning
Product strategy
Product strategy
Product strategy
Pricing strategy
Pricing strategy
Pricing strategy
Distribution strategy
Distribution strategy
Distribution strategy
IMC strategy*
IMC strategy*
IMC strategy*
Team needs to discus and include the below:
49
What are the critical success factors in this industry ?
Do the firm’s internal capabilities fit with or stretch the firm in a realistic way ?
50
EXAMPLES OF STRATEGIES FOR EACH FORCE. Is there a blue ocean strategy in any element of any force ?
1: Reducing the Bargaining Power of Suppliers
Partnering
Supply chain management
Supply chain training
Increase dependency
Build knowledge of supplier costs and methods
Take over a supplier
2: Reducing the Bargaining Power of Customers
Partnering
Supply chain management
Increase loyalty
Increase incentives and value added
Move purchase decision away from price
Cut put powerful intermediaries (go directly to customer)
3: Reducing the Treat of New Entrants
Increase minimum efficient scales of operations
Create a marketing / brand image (loyalty as a barrier)
Patents, protection of intellectual property
Alliances with linked products / services
Tie up with suppliers
Tie up with distributors
Retaliation tactics
4: Reducing the Threat of Substitutes
Legal actions
Increase switching costs
Alliances
Customer surveys to learn about their preferences
Enter substitute market and influence from within
Accentuate differences (real or perceived)
5: Reducing the Competitive Rivalry between Existing Players
Avoid price competition
Differentiate your product
Buy out competition
Reduce industry over-capacity
Focus on different segments
Communicate with competitors
APPENDIX
APPENDIX A
Yoffie D. & Kim R. 2011, Cola Wars Continue: Coke and Pepsi in 2010
Harvard Business School, 9-7-11-46, pp. 1 - 22
A.1
For more then a centaury Coca-Cola and Pepsi vied for ‘throat share’ of the worlds beverage market.
A.2
Most competitive time spanned from 1975 – mid 1990’s, and was fought over the $74 billion carbonated soft drink
(CSD) industry. Both coke and Pepsi achieved average annual revenue growth of around 10%, as both US and
worldwide consumption rose steadily year after year.
A.3
51
The competition between Pepsi and Coke fed each companies success, the more successful coke was the sharper
Pepsi had to be and visa versa.
A.4
Competitive relationship started to fray in 2000s, however as the US consumption started to decline  by 2009 the
average American drank 46gallos of CSD a year (lowest CSD consumption since 1989)
A.5
Heading into 21st centaury coke and Pepsi faced new challenges:
Could they boost CSD sales
Could they compete against non-CSD beverages that demanded different bottling, pricing and brand strategies?
A.6
ECONOMICS OF THE US CSD INSUSTRY
Americans consumed 23 gallons of CSDs annually in 1970, and consumption grew by an average of 3% a year over
the net three decades. Fuelling this growth inc. increased availability of CSD and the introduction of flavoured and
diet varieties
Alternatives to CSDs including beer, milk, bottled water, juice, tea, powdered drinks, wine, sports drinks, distilled
spirits and tap water.
Within the CSD category the cola segment maintained its dominance, although its market share dropped from 71%
in 1990 to 55% in 2009.
A.7
CONCENTRATE PRODUCERS
Concentrate producers blend the raw ingredients, package the mixture in plastic canisters and ship canisters to be
to the bottler.
Most significant costs of the concentrate producers Inc: advertising, promotion, market research and bottler
support.
A.8
BOTTLERS
Purchase the concentrate, add carbonated water and high fructose corn syrup bottle or can the CSD product and
delivers it to consumer accounts.
Franchise agreements  both coke and Pepsi allow bottler to handle non-cola brands of other concentrate
producers. Bottlers could choose whether to market new beverages introduced by a concentrate producer.
Bottlers couldn’t carry directly competing brands
A.9
RETAIL CHANNELS
In 2009 the distribution of CSD in the United States took place through supermarkets (29%), fountain outlets
(23.1%), vending machines (12.5%), mass merchandise (16.7%), convince stores and gas stations (10%) and other
outlets (7.8%).
Costs and profitability in each channel varied by delivery method and frequency, drop size advertising and
marketing.
CSDs accounted for $12 billion or 4% total store sales in the US and were also a big traffic draw for supermarkets.
Historically Pepsi dominated sales through retail outlets, while coke commanded the lead in retail sales.
In the 1990s competition for fountain accounts = intense, in 1999 burger king franchises believed to pay $6.20 per
gallon of coke syrup (received substantial rebate on each gallon).
After Pepsi entered the fast food restaurant business acquiring Pizza Hut (1978), Taco Bell (1986) and KFC (1986),
coke perused competing chains such as Wendy’s and Burger King to switch to coke
In the vending channel bottlers took charge of buying, installing and servicing machines (also negotiating contracts
with the property owners typically received a sales commission in exchange for accommodating their machine)
A.10
THE EVOLUTION OF US SDI (SOFT DRINK INDUSTRY)
Coke was formulated in 1886, Pepsi invented in 1893.
The cola war begins
1950 Alfred Steele, former Coke marketing executive became the CEO of Pepsi and made “beat coke” his motto.
Pepsi growth began to follow the post-war growth in a number of supermarkets and convenience stores in the
united states: there was about 10,000 supermarkets in 1945, 15,000 in 1955 and 32,000 in 1962 at the peak of its
growth curve.
The Pepsi Challenge
1974 Pepsi launched “the Pepsi challenge” in Dallas, Texas. Coke was the dominant branding that city and Pepsi ran
a distant third behind Dr Pepper. Blind taste tests which where conducted by Pepsi’s small bottler, the company
tried to demonstrate how consumers liked the taste of Pepsi better then that of Coke; after this it rolled out Nation
wide.
52
Coke countered with rebates, retail price cuts and a series of advertisements questioning the tests
reliability/validity.
Pepsi challenge successfully eroded the cokes market share, in 1994 Pepsi past coke in food store sales for the first
time, opening up a 1.4 share lead.
Cola war heats up
1985 coke announced it was changing its 99-year old formula, the radical break with tradition cited a sharp
depreciation in the value of coca-cola as a brand/trademark. On that day Pepsi declared a holiday for its
employees.
Three months later the company brought back the original formula under the name of coca-cola classic.
New CSD products proliferated in the 1980s; coke introduced 11 new products including caffeine free and cherry
coke. Pepsi introduced 13 producers inc. lemon line slice and canine free Pepsi cola.
1980s the growth of Pepsi and coke put the squeeze on smaller concentrate prodycers as their shelf space declined,
smaller products where shuffled from one owner to another.
ADAPTING WITH THE TIMES
Starting late 1990s the soft drink industry (STI) encountered new challenges  suggested possible long-term shift
in the market place.
Americans still drank CSDs (more then any other beverage) at US consumption started to fizzle that stood contrast
to annual growth rates of 3% to 7% during the 1980s and early 1990s.
The shift in consumption patterns evolved the linkage to growing health issues such as obesity.
A.11
THE QUEST FOR ALTERNATIVES:
Expanding the product mix offered other avenues for growth diet sodas rose to capture 30% of the CSD market in
2009 compared to 24% a decade ago. Coke zero became a successful new product.
Both coke and Pepsi intensified their efforts to use alternative sweeteners. Despite some success of diet drinks,
coke and Pepsi realised that growth lied in ‘non crabs’, this category included juices, sport drinks, energy drinks and
tea based drinks also bottled water.
Initially Pepsi was more aggressive in shifting into non-CSD products that outsold cokes rival products in several key
categories including Lipton iced tea and Gatorade sports drink.
In 2007 77% of Pepsi’s new products released in the US where non carb, compared to Coke 56%
A.12
EVOLVING STRUCTURES AND STRATEGIES
Increasing popularity of CSD alternatives was brewing complications for CSD maker’s tradition production and
distribution practices.
Concentrate companies become more directly involved with the manufacturing of non-CSD beverages such as
Gatorade and Lipton iced tea. These finished goods required a smaller but specialized production process that was
challenging for the bottlers to accommodate with the existing infrastructure.
Bottlers were becoming frustrated that they where not fully participating in the new growth businesses. Pepsi and
Coke sold the finished goods to their bottlers, who distributed them alongside their own bottled products at a
parentage mark-up.
In addition, coke and Pepsi distributed some non-CSD directly to retailer warehouses bypassing bottlers.
All CSD companies faced the challenge of achieving pricing power in the take-home channels. In particular the rapid
growth of the mass-merchandisers, led by wall mart and other club stores which posed a threat to the profitability
of Coke and Pepsi.
In addition bottlers had to manage an ever-rising number of stock-keeping units (SKU). Many non-CSD sold at a
relatively low volume leading to an increase use of split pallets.
Bottlers incurred higher distribution and sales costs; some of Cokes biggest bottlers saw their costs of goods sold
(inc operating expenses) reach 90% of their sales.
Not surprisingly bottlers complained over Coke’s charging a flat rate for its concentrate in the US market, cokes
profits were tied to volume growth whilst the bottlers profits were drive by package types and where the drinks
were sold.
A.13
FUTURE OF COLA WARS
Declining CSD sales, declining cola sales, rapid emergence of non-carbonated drinks appeared to be changing the
game.
53
APPENDIX B
S. Vignali, Virgin Cola,
Manchester, UK, pp: 133-143.
Available: http://www.emerald-library.com/ft
Global position of Virgin Cola within soft drinks industry
Virgin brand successful for virgin cold regarding competitors
Service divisions operate autonomously
Brand is emotional association, with Branson as the brand’s most effective PR weapon
Virgin cola adopted strategy to culturally suit different markets
Soft drinks industry = promotion, brand image, packaging (even more so than actual product particularly in USA and
UK)  promo type depends on target market, package for differentiation
Leading brands hold onto market via promo strategies and product diversification, innovation and brand image
Disadvantage = 2 market leaders (Pepsi and coke)  decrease market share and increase market growth = new
product (requires increased funding through promo to increase market)
Launch of existing product in existing market requires increased recognition of brand and improved productivity
Constantly innovate to remain competitive (?)
Virgin cola must be competitively priced. Media and selling through distribution channels = virgin cola promo.
Difficult to secure retail outlets
Advertising: coke focuses on product, Pepsi focuses on user, virgin focus on….???
Consumers are interested in brand name and image portrayed by drinking a brand. Pepsi and coke have merged to
other snack food industries enabling them to achieve economies of scale in advertising, marketing and distribution
Important to continuously establish/implement strategic changes as means of creating competitive advantage in
such a competitive industry
Product is less important compared to the importance of advertising/brand recognition. Create promo technique
that appeals to the global consumer
Merge with complimentary business (diversify into new products in existing markets ) = cost saving/synergy
Coke and Pepsi have strong distribution (overcome by merging with a well established branded product) = ENABLE
PRICE DISCOUNTING
Strengths = Virgin is branding and quality Brand, promo, innovative image and packaging. Product, package and
tastes the same across competitors, it is brand recognition that is significant = virgin advantage with established
brand
Weakness = global brand recognition and appeal to older generations (Richard as a brand), placing too much
emphasis on brand name as promo weapon however he is a unique world wide image. WANT= image that a brand
brings to consumer, quality and competitive price
Brand name dependence, incongruence between strategic/tactical levels, too reliant on to few distribution
channels
Opportunities = diversification of range, increase soft drink consumption, ability to gain more market
Threats = intense competition, saturated market failure = domino effect
APPENDIX C
Datamonitor 2011. Soft Drinks in Australia
Available: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F.
Accessed: 05 March 12.
MARKET VALUE
The Australian Soft drink market grew by 3.3% in 2010 to reach a valye of $10,953 million
Market value forecast
54
In 2015, the Australian soft drinks market is forecast to have a value of $12,721.8 million, an increase of 16.1%
since 2010
MARKET SHARE
Coke is the leading player in the Australian soft drinks market, generating a 39.4% share of the markets volume
FIVE FORCES ANALYSIS
The soft drinks market will be analyzed taking manufacturers of soft drinks as player. The key buys will be taken as
distributors and retailers of soft drinks, and producers of packaging, soft drinks ingredients and other raw materials
as the key suppliers.
The top 3 players (Pepsi Co., Coca-Cola company and Asahi breweries) hold 54.9% of the total market volume. The
buyer power of retailers in this market is moderate. Supplier power is not great, as most inputs are readily available
commodities. New entrants must contend with the reach and strong brands of incumbents, although niche
catergories such as smoothes present opportunities to new entrants. Not a great threat imposed by the soft drink
substitues except from traditional coffee and tea or homemade juices, along with the tendancy of consumers
switching towards the fruit juices. Although major players are fighting for the dominant position, the rivalty level is
moderate and there is scope for growth in niche catergories.
Buyer power: in Aus, the main distribution channels for the soft drinks market are supermarkets, which account for
48.5% of the total market volume, followed closely by on-trade retailers (32.5%) the leading players generate most
of their revenue from the production of concentrates, which are sold to bottling companies.
New entrants: players in the Australian soft drinks market try to distinguish their products to some extent by
stressing their health benefits and taste. Although it would be difficult for a new entrant to compete with the brand
strength and reach of existing players it may be possible to achieve small-scale success stressing a unique
production method or nutritional benefits. However, niche catergories can be exploited by new entrants.
COCA-COLA
The Coca-Cola Company (TCCC) engages in the manufacture, distribution and marketing of non- alcoholic beverage
concentrates and syrups. The company owns the world’s most valuable brand: Coca- Cola. Furthermore, TCCC
markets four of the world's top five non-alcoholic sparkling brands, including Diet Coke, Fanta and Sprite. The
company's finished beverage products are sold in more than 200 countries worldwide. TCCC is headquartered in
Atlanta, US and employs around 139,600 people.
Most of TCCC's products are manufactured and sold by bottling partners, who convert them into finished packaged
products for sale to distributors and other customers. The company sells the concentrates and syrups for bottled
and canned beverages to authorized bottling and canning operations. Authorized bottlers and canners either
combine syrups with sparkling water or combine concentrates with sweeteners (depending on the product), still
water and sparkling water to produce finished sparkling beverages. These sparkling beverages are packaged in
cans, glass and plastic bottles, and sold to wholesalers and retailers.
Coca-Cola is the biggest-selling soft drink of TCCC. Other popular soft drinks brands marketed by the company
includes Beat, Canada Dry, Canning’s, Cheers, Cherry Coke, Citra, Diet Barq’s, Diet Coke, Fanta, Limca, Sprite and
Vault. In addition, TCCC produces, distributes and markets a broad portfolio of energy drinks and sports drinks
across the globe. Its energy drinks are marketed under brands such as Burn, Buzz, Full Throttle, Full Throttle Blue
Demon, Full Throttle Fury, Full Throttle Sugar Free, glaceau vitaminenergy, Powerplay, Rehab, Samurai and TaB
energy. TCCC’s sports drinks portfolio include brands such as Aquana, Aquarius, Aquarius Active Diet, Aquarius
Freestyle, Powerade, Powerade aqua+, Powerade balance, Powerade Option and Powerade Zero.
KEY METRICS
The Coca-Cola Company generated revenues of $35.1 billion in the financial year (FY) ended December 2010, an
increase of 13.3% over 2009. The company's net income totaled $11.8 billion in FY2010, an increase of 73.1% over
FY2009.
PEPSICO.
PepsiCo is one of the leading global beverage, snack and food companies. It manufactures, markets, and sells a
variety of salty, sweet and grain-based snacks; and carbonated and non-carbonated beverages in approximately
200 countries across the world. The company has its largest operation in North America (the US and Canada),
Mexico and the UK.
PepsiCo operates through four business units: PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB);
PepsiCo Europe, which includes all beverage, food and snack businesses in Europe; and PepsiCo Asia, Middle East
and Africa (AMEA), which includes all beverage, food and snack businesses in AMEA. The company's four business
units are further divided into six reportable segments: Frito-Lay North America (FLNA), Quaker Foods North
America (QFNA), Latin America Foods (LAF), PepsiCo Americas Beverages (PAB), Europe, and Asia, Middle East and
Africa (AMEA).
PepsiCo AMEA manufactures and markets salty and sweet snack brands including Lay's, Kurkure, Chipsy, Red Rock
Deli, Cheetos, Doritos, Ruffles and Smith’s. The division also manufactures, markets, and sells beverage
concentrates, fountain syrups and finished goods under the brands Pepsi, 7UP, Mirinda and Mountain Dew. These
brands are sold to authorized bottlers, independent distributors and retailers. PepsiCo AMEA owns or leases
55
approximately 80 plants and 1,175 warehouses, distribution centers and offices. It also utilizes approximately 40
properties owned by contract manufacturers or co- packers.
KEY METRICS
PepsiCo generated revenues of $57.8 billion in the financial year (FY) ended December 2010, an increase of 33.8%
as compared to 2009. The company's net income totaled $6.3 billion in FY2010, an increase of 6.3% over 2009.
MARKET DISTRIBUTION
Supermarkets / hypermarkets form the leading distribution channel in the Australian soft drinks market, accounting
for a 48.5% share of the total market's volume.
On-trade accounts for a further 32.5% of the market.
MARKET FORECASTS
MARKET VALUE FORECAST
In 2015, the Australian soft drinks market is forecast to have a value of $12,721.8 million, an increase of 16.1%
since 2010.
The compound annual growth rate of the market in the period 2010–15 is predicted to be 3%.
MARKET VOLUME FORECAST
In 2015, the Australian soft drinks market is forecast to have a volume of 5,308.1 million liters, an increase of 14.2%
since 2010. The compound annual growth rate of the market in the period 2010–15 is predicted to be 2.7%.
APPENDIX D
APPENDIX E
Datamonitor 2011. Soft Drinks in Australia
Available: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F.
Accessed: 05 March 12.
E.1
56
E.2
E.3
57
E.4
58
E.5
E.6
59
E.7
E.8
60
E.9
E.10
APPENDIX F
CONSUMERS
Typical buyers within this industry are large retailers who hold a great amount of financial muscle which allows
them to make large purchases and enter into long term contracts with market players. The loss of one retailer
could significantly impact upon a manufacturer’s revenue and switching costs are usually low. This boosts buyer
power somewhat. Industry consumption volumes; increased with a CAGR of 2.2% between 2006 and 2010, to reach
a total of 245.2 billion Kg in 2010. The industry's volume is expected to rise to 262.3 billion Kg by the end of 2015,
representing a CAGR of 1.4% for the 2010-2015 period138.
138
INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,
61
The age demographic of Ready To Drinks (RTDs) such as Breezers, UDLs and Cruisers has matured139.
(Might mean that this segment reduces the amount of Cola products purchased as a ‘mixer’ as they consume premixed drinks).
The presence of big supermarket chains increase buyer power140
Consumer confidence has slipped in the last quarter with more Australians apprehensive about economic
uncertainty, financial security, and rising gas and electricity prices. The latest results for the Nielsen Global Online
Consumer Survey undertaken in June, shows that Australian consumer confidence has slipped three points to 108
in the second quarter of 2010 compared to the previous three months; with 36 per cent of consumers having a
pessimistic view of the state of their personal finances over the next 12 months (up six points from Quarter 1); and
only half (50 per cent) saying the next 12 months is a good/excellent time to buy what they want and need – the
lowest this score has been over the past four quarters.
Increasing utility bills was by far the biggest concern among Australian consumers, with 30 per cent citing it as a
major concern over the next six months – up 10 per cent compared to a year ago. In addition, two-in-three
consumers (65 per cent) said they had already taken action to try and save on gas and electricity over the past year,
and even when economic conditions improve, saving on gas and electricity was the number one action cited to
reduce household spending141.
Shoppers are increasingly using coupons and visiting more stores during their shopping trips as they search for the
best value.
This behaviour has been observed in Australia with shoppers increasing their store repertoire. Furthermore, 30 per
cent of Australian shoppers claim ‘they will still look for cheaper grocery brands even though the GFC is over’
(Nielsen Global Consumer Confidence Survey, June 2010)142.
Rising confidence in Australia in 2010 defied the trend of other developed markets and reflected the strongest
outlook Australia has had in more than two years for job prospects, personal finances, and the ability to buy things
over the next 12 months. Australia was the third most confident market globally, boasting a Consumer Confidence
Index score of 115 which was 25 points above the global average of 90. An over- whelming 74% of Australians said
their perception of local job prospects over the next 12 months was excellent or good; 70% believed that the state
of their personal finances was positive; and 59% (the highest score globally) claimed the next 12 months was an
excellent or good time to buy the things they wanted and needed. Despite the positive outlook among Australians,
we are still seeing evidence of cautionary behaviour, with almost half of all consumers channelling their spare cash
into savings (47%), and 40% using surplus cash to pay off debts, credit cards and loans. Plus, the majority of
consumers are curbing their house-hold expenditure by trying to save on gas and electricity; cut- ting back on takeaway meals, new clothes purchases and out-of-home entertainment, and making the switch to cheaper grocery
brands143.
A strong labour market and perceived financial position may be driving up our confidence, but in reality, while we
are also seeing a return in business confidence among grocery manufacturers – it has been tempered somewhat by
the sluggish growth performance of the grocery channel overall (value sales growth for total grocery excluding
tobacco dropped from a healthy 7.8% for the Moving Annual Total (MAT) 16 August 2009, to just 3.6% for the same
period this year).
This was driven by a combination of continued deep discounting by the retailers, a 5% fall in value for grocery
baskets compared to a year ago, and the rise of the savvier shopper who is continuously on the hunt for “value for
money”. Private label perception in the eyes of the shopper has come a long way over the past five years, with
many seeing the benefits it can offer in terms of “value for money”, and as a good quality alternative to name
brands144.
Online Shopping: As Australians demand better deals on everything they purchase, online trading is also playing a
larger role in the shopping channel mix, with the key drivers being the availability of a broader range of products
and services and the ability to get products and services at a cheaper price than they are available through
139
Research in Focus - Ready To Drink Finally Comes of Age
http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3D
Course%26id%3D_3155_1%26url%3D&
140 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011
141 NIELSEN SPECIAL REPORT– JULY 2010, Insights into the shopper of today and the future; Economic concern and rising utility costs keeping
aussies up at night. By Chris Per cy
142
NIELSEN SPECIAL REPORT– JULY 2010, Insights into the shopper of today and the future; Economic concern and rising utility costs keeping
aussies up at night; When Promotions ain’t promotions. By Richard Reeves.
143 AdNews 14 January 2011, 2010 review
144 AdNews 14 January 2011, 2010 review
62
traditional retail channels. Among Australia’s internet population, the vast majority (96%) have made an online
purchase145.
Australian Soft drinks market.
Australian soft drinks market value between 1996 – 2001 has grown by $128.9 Mn
CONSUMER TRENDS.
The latest results for the Nielsen Global Online Consumer Survey undertaken in June, shows that Australian
consumer confidence has slipped three points to 108 in the second quarter of 2010 compared to the previous three
months; with 36 per cent of consumers having a pessimistic view of the state of their personal finances over the
next 12 months (up six points from Quarter 1); and only half 50 per cent) saying the next 12 months is a
good/excellent time to buy what they want and need – the lowest this score has been over the past four quarters.
Increasing utility bills was by far the biggest concern among Australian consumers, with 30 per cent citing it as a
major concern over the next six months – up 10 per cent compared to a year ago. In addition, two-in-three
consumers (65 per cent) said they had already taken action to try and save on gas and electricity over the past year,
and even when economic conditions improve.146 Saving on gas and electricity was the number one action cited to
reduce household spending. The economy was ranked the second biggest major concern with 21 per cent of
respondents – up four points in just three months – a reflection of the widespread voter dissatisfaction we have
seen over the past few months. Not surprisingly, restraint and vigilance continues to be a key theme among Aussie
consumers with around two-in five channelling their spare cash into savings (41 per cent), and 38 per cent of
consumers channelling any surplus cash into paying off debts, credit cards and loans.147
Furthermore, more than half of Australian consumers cited they were actively cutting down on take-away meals,
out-of-home entertainment, and new clothes.148
The key to success of retail sector lies in responding to needs of the shopper of today and the future.149
Population.
Australian population will embark in significant changes including cultural diversity,ageing population and general
population growth, understanding the impact of these changes will have on shoppers and their purchasing
behaviour is critical in capitalising opportunities these trends will offer to retail sector.150
The Shopper.
Global financial crisis(GFC) caused the shoppers to reassess how they spend and shop. There has been a
fundamental shift in shopper sentiment from the spend thrift ,debt driven early noughties to a greater sense of
caution and restraint post GFC.151
The shopper has become savvy
The shopper buys private labels in one category and premium price brand in another
Private label products have been launched successfully into more and more categories .
Shoppers stick with brands as long as they perceived to be good enough. 152
The confident yet Cautious consumer
Rising confidence in Australia in 2010 defied the trend of other developed markets and reflected the strongest
outlook Australia has had in more than two years for job prospects, personal finances, and the ability to buy things
over the next 12 months. Australia was the third most confident market globally, boasting a Consumer Confidence
Index score of 115 which was 25 points above the global average of 90. An overwhelming 74% of Australians said
their perception of local job prospects over the next 12 months was excellent or good; 70% believed that the state
of their personal finances was positive; and 59% (the highest score globally) claimed the next 12 months was an
excellent or good time to buy the things they wanted and needed.
The results are consistent, with the continued rise in Australia’s employment growth fuelling a strong labour
market and underpinning household income. Our economy also benefited from expansion over the first half of
145
AdNews 14 January 2011, 2010 review
Retail world, Ac Nielsen Special report, 19th July 2010. P.20
147 Retail world, Ac Nielsen Special report, 19th July 2010. P.20
148 Retail world, Ac Nielsen Special report, 19th July 2010. P.20
149 Retail world, Ac Nielsen Special report, 19th July 2010. P.20
146
150
Retail world, Ac Nielsen Special report, 19th July 2010. P.23
2010 Review,Ac Nielsen adNews,14th January 2011. p.14
152 2010 Review,Ac Nielsen adNews,14th January 2011. p.15
151
63
2010 with Gross Domestic Product (GDP) growth forecast to be around 3.25% for the year – a result of rising
commodity prices, increased public investment and a growing population.153
The Demanding Consumer
“Hard times have a way of transforming consumers and the past couple of years have been harder than most.
While the Australian economy emerged in 2010 relatively unscathed from the GFC, the downturn has left an
indelible impression on consumers’ attitudes and purchasing behaviours.
During the economic downturn, consumers shopped around for specials to cut costs, and this has created a new,
savvy consumer who is more demanding than ever. Despite the positive outlook among Australians, we are still
seeing evidence of cautionary behaviour, with almost half of all consumers channelling their spare cash into savings
(47%), and 40% using surplus cash to pay off debts, credit cards and loans.
Plus, the majority of consumers are curbing their household expenditure by trying to save on gas and electricity;
cutting back on take-away meals, new clothes purchases and out-of-home entertainment, and making the switch to
cheaper grocery brands. A strong labour market and perceived financial position may be driving up our confidence,
but in reality, while we are also seeing a return in business confidence among grocery manufacturers – it has been
tempered somewhat by the sluggish growth performance of the grocery channel overall (value sales growth for
total grocery excluding tobacco dropped from a healthy 7.8% for the Moving Annual Total (MAT) 16 August 2009,
to just 3.6% for the same period this year). This was driven by a combination of continued deep discounting by the
retailers, a 5% fall in value for grocery baskets compared to a year ago, and the rise of the savvier shopper who is
continuously on the hunt for “value for money”.
Australian shoppers are prepared to shop around for the best deal. The average shopper repertoire now includes
about four different stores in a week. In fact, it’s estimated that more than 30% of all Australian grocery purchases
are made on promotion. Aside from heavy retailer promotional activity, we are seeing a decline in the amount
spent per shopping trip – from $49.80 in 2009 to $48.40 this year; and each of these trips have become more
rational with a 5% increase in the purchase of items costing less than $5, while the purchase of items priced
between $10-15 has declined by 4%.”154
Private label perception in the eyes of the shopper has come a long way over the past five years, with many seeing
the benefits it can offer in terms of “value for money”, and as a good quality alternative to name brands. Private
label continues to steadily gain traction with its representation in all of the major grocery retailers, recording an
increase in value share for the quarter to 2 October 2010, to just under a quarter (23.9%) of total supermarket
sales. Nielsen Homescan indicates that everybody buys private label products (100% household penetration), with
the average household spend reaching over $200 for the first time ever in the latest quarter – up $3.48 on the
previous quarter.
Online Shopping
“As Australians demand better deals on everything they purchase, online trading is also playing a larger role in the
shopping channel mix, with the key drivers being the availability of a broader range of products and services and
the ability to get products and services at a cheaper price than they are available through traditional retail
channels. Among Australia’s internet population, the vast majority (96%) have made an online purchase.”155
The diversifying consumer
“Cultural diversity from changing immigration, population growth and ageing consumers is set to impact Australian
retailing in the next four decades. Key insights from the 2010 Nielsen Shopper Trends Report reveal that the
Australian shopper is evolving, and to succeed in the future, retailers and manufacturers will need to develop
strategies that accommodate growing ethnicity, population increases and an ageing society. Nielsen research
shows that among Australian households in 2010, Thai cuisine was the second most popular eaten out-of-home
(after traditional Australian); followed by Italian, Chinese and Japanese. Asian food items in Australian family
pantries has grown by 268,000 households since 2007. This represents an opportunity for grocery marketers to
provide simple and convenient Asian meal solutions. From a marketers perspective, it is important to understand
how ethnicity impacts on how people shop and demand for products and brands – which products and brands
consumers are looking for and where they expect to find them.
Over the past 50 years Australian households have been adopting Mediterranean cuisine as part of their everyday
menu, with ingredients available in both supermarkets and specialist retailers. Now, as migrant ion shifts from
153
2010 Review,Ac Nielsen adNews,14th January 2011. p.15
154
2010 Review,Ac Nielsen adNews,14th January 2011. p.14 PRIVATE LABEL
2010 Review,Ac Nielsen adNews,14th January 2011. p.14
155
64
European count rise towards Asian countries, there is a need to understand how these influences will change the
way Australians shop, what they buy, where they buy it from and what they eat.”156
Australian Population
“In the 12 months to 30 June 2010, Australia's population increased by 377,100 people, reaching 22,342,000. The
annual growth rate for the year ended 30 June 2010 (1.7%) was lower than that recorded for the year ended 30
June 2009 (2.2%).”157
Table: 1
Median Age
“At June 2010, the median age of the Australian population (the age at which half the population is older, and half
is younger) was 36.9 years, up from 36.5 years in 2005. The median age of males increased from 35.7 to 36.0 years
and the median age of females increased from 37.3 to 37.8 years over this period.
The median age of all states and territories increased between 2005 and 2010. In 2005, South Australia and
Tasmania had the equal oldest median age, both at 38.6 years. However, between 2005 and 2010, the median age
of Tasmania increased more than any other to become the oldest state or territory at 39.9 years in 2010. The
Northern Territory remained the youngest state or territory with a median age of 31.2 years, up from 30.7 in 2005.
The SD with the lowest median age at June 2010 was Northern Territory - Bal (29.4 years), followed by North West
in Queensland (29.9) and Kimberley in Western Australia (30.7). The highest median ages were recorded in Yorke
and Lower North in South Australia (46.5 years), Mid-North Coast in New South Wales (44.6) and Southern in
Tasmania (44.2).”158
Working Age Population (AGED 15-64 YEARS)
“At June 2010, there were 15.09 million people of working age (15 to 64 years), an increase of 1.36 million or 9.9%
since June 2005. The proportion of the total population in this age group increased marginally from 67.3% to 67.6%
over this five-year period.
The Northern Territory had the highest proportion of people of working age at June 2010 (71.4%), overtaking the
Australian Capital Territory (71.2%) for the first time in over 20 years. Tasmania continued to have the lowest
proportion (65.2%).
Between June 2005 and June 2010, Victoria had the largest growth of people aged 15 to 64 years (361,000),
followed by Queensland (350,900) and New South Wales (339,300). Western Australia had the fastest growth of
people of working age (14.1% over this five-year period), followed by Queensland (13.0%).
The SDs with the highest proportions of working age people at June 2010 were Pilbara in Western Australia
(72.7%), Darwin (72.7%) and Canberra (71.2%). The SDs with the lowest proportions were Yorke and Lower North in
South Australia (61.0%), Mid-North Coast in New South Wales (61.5%) and Wimmera in Victoria (61.9%).”2
Adults aged 19 years and over
Food intake
Non-alcoholic and alcoholic beverages accounted for over 60% of total food and beverage intake, by weight, for
adult Australians (2,460 g for men and 2,020 g for women). The contribution of beverages to the total weight of
food and beverage intake may have been influenced by climate and was highest in the Northern Territory (74% for
156
2010 Review,Ac Nielsen adNews,14th January 2011. p.14
Australian Bureau of Statistics. 2010. Population by Age and Sex. [ONLINE] Available at:
http://www.abs.gov.au/ausstats/abs@.nsf/mf/3201.0. [Accessed 05 March 12].
157
158
Australian Bureau of Statistics. 2010. Population by Age and Sex, Regions of Australia. [ONLINE] Available at:
http://www.abs.gov.au/ausstats/abs@.nsf/Products/3235.0~2010~Main+Features~Main+Features?OpenDocument#PARALINK12. [Accessed 05
March 12].
65
men) and one of the lowest in Tasmania (59% for men). The contribution of alcoholic beverages to food and
beverage intake was higher for men (10%) than women (3%) (see tables 2 and 3) 159
Coca-Cola Amatil:
Coca-Cola Amatil (CCA) manufactures, distributes and markets carbonated soft drinks, still and mineral waters, fruit
juices, coffee and other alcohol-free beverages. The company also distributes alcohol-based beverages through its
joint venture company Pacific Beverages. It is also involved in processing and marketing of fruits, vegetables and
other food products. The company operates in Australia, New Zealand, Fiji, Indonesia and Papua New Guinea. It is
headquartered in Sydney.160
The beverage business consists of non-alcoholic and alcoholic businesses. The company, through its non-alcoholic
beverage business, manufactures, distributes and markets carbonated soft drinks.161
The company’s sparkling beverages brands include: Coca-Cola, Diet Coke, Coca-Cola Zero, Sprite, Sprite Zero, Fanta,
Lift, Deep Spring Natural Mineral Water, Appletiser, Grapetiser, Kirks, and Bisleri. Its still beverages brands include:
Mount Frankling Lightly Sparkling Water, Pump, Pumped, Vitamin water, PowerAde Light, PowerAde Isotonic,
Nestea, Neverfail Spring Water, Goulburn Valley, Goulburn Valley dairy co., Goulburn Valley fruity drink, Fruitbox,
Grinders, and Peats Ridge Springs. The company's alcoholic beverages brands are Peroni Italy, Bluetongue, Miller,
Russian standard vodka, Grolsch, Pisner Urgwell, Peroni Leggera, The Macallan, Canadian Club, Maker’s Mark, The
Famous Grouse, Souza, Highland Park, Bols Amsterdam, Cockburns, Harveys Bristol cream, Basil Haydens, Oldcrow,
Galliano, Bbakers, Millerchill, Bookers, and Tamdhu. Its food (SPC Ardmona) brands include: SPC, Goulburn valley,
Ardmona, IXL, and Taylors.162
The company recorded revenues of A$4,609.4 million (approximately $4,240.4 million) in the fiscal year ended
December 2010, an increase of 1.1% over 2009. The company's operating profit was A$844.9 million
(approximately $777.3 million) in fiscal 2010, an increase of 7.3% over 2009. Its net profit was A$497.3 million
(approximately $457.5 million) in fiscal 2010, an increase of 10.8% over 2009.163
Coca-Cola was introduced to Australia in the 1930s. In 1964, British Tobacco Company (Australia) purchased a
controlling interest in Coca-Cola Bottlers (Perth).164
AMATIL changed its name to Coca-Cola Amatil (CCA) in 1989, and the Coca-Cola Company became CCA's major
shareholder.165
CCA expanded in South East Asia with the formation of joint ventures with the Indonesian Tirtalina Group and the
Indonesian Pan Java Group in 1991. In the following year, the company sold its Snack Foods Division to United
Biscuits of the UK. The company opened its new plant at Richlands in Brisbane, Australia in 1994.166
159
Australian Bureau of Statistics. 2008. ABS. [ONLINE]. http://www.abs.gov.au/ausstats/abs@.nsf/mf/4802.0. [Accessed 08 Feburary 12]
160
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.4
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.5
162 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.5
163
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.4
164 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
165 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
166 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
161
66
CCA acquired Rio Beverages in New Zealand in order to increase its exposure to the juice and lifestyle beverages
segments in New Zealand and Australia, in 2002. In the same year, the company acquired Pacific Beverages; and
CCA sold its PET manufacturing assets for approximately $157 million.167
In 2003, CCA acquired Neverfail Springwater, a specialist in the delivery of bulk water to Australian homes and
offices; and Peats Ridge Springs.168
CCA opened an automated materials handling facility in Mentone, Victoria and also purchased Crusta Fruit Juices in
Australia along with its subsidiary, Quenchy Crusta Sales, a cold chain distribution company, in 2004. In the same
year, CCA acquired Quirk's Refrigeration.169
The company purchased the Northern Territory soft drink sales, distribution and production assets from Parmalat
Australia in 2005. This acquisition made CCA the sole licensee of Coca-Cola products in Australia.170
The company signed a new three-year agreement with the National Rugby League Partnership (NRL) in March
2010.171
Brands - Sparkling beverages: Coca-Cola Diet Coke Coca-Cola Zero Sprite, Sprite Zero, Fanta Lift Deep Spring Natural
Mineral Water Appletiser, Grapetiser Bisleri172
Still beverages - Mount Frankling Lightly Sparkling Water Pump Pumped Vitamin water, PowerAde Light PowerAde
Isotonic Nestea Neverfail Spring Water Goulburn Valley, Goulburn Valley Dairy Goulburn Valley fruity drink Fruitbox
Grinders Peats Ridge Springs173
Major competitors of Coca-Cola Amatil Ltd: National Beverage Corp. PepsiCo, Inc. Just Water International
Limited174
According to Group Managing Director statement the Coca-Cola Amatil Ltd is focused on: effectively balancing
pricing, volume growth and market share to improve our profitability and market position as well as infrastructure
programs in expanding capacity, operational efficiency and cold drink coolers, as well as successful new product
and package innovation.175
CCA will continue to focus on executing its organic growth strategy. Company focus will be on efficiency, service
and revenue gains right across the business. Investment in capacity and capability improvements, capacity
expansion and the accelerated rollout of cold drink coolers. CCA’s major capital investment program continued to
reduce operating costs and materially improve customer service levels in 2010, leading to higher returns for CCA’s
shareholders.176
CCA’s beverage market leadership position continued to strengthen in 2010 with increases in both volume and
value share across all channels despite more aggressive competitor pricing in the second half. The business also
fully recovered cost of goods sold increases through a combination of pricing and mix management.177
Continued growth of Coke Zero which grew volumes by 7%. Coke Zero now holds over 40% share of the diet cola
category in the immediate consumption channel, a 3% share gain over the past 12 months. Mother energy drink
grew volume by 6% as a result of new flavour and pack variants and now has 24% of the total energy drink
market.178
CCA has been successfully executing an organic growth strategy for a number of years and will continue to do so in
2011. The key strategic focus for the business will be to:
Continue to grow the core Australasian business through further new product and package innovation, acceleration
of our cooler placement programme and delivery of efficiency gains from Project Zero; Accelerate the growth of
our Indonesian business with increased investment in one-way-pack production capacity and rollout of cold drink
coolers into the market place; and continue to grow our share of the alcoholic beverages market in Australia and
New Zealand.179
Strengths:
167
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
169 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6
170 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.7
171
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.7
172 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.14
173 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.14
174 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.16
175 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17
176
Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.19
177 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17
178 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.18
179 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.19 - 20
168
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current strategies:
SCA:
Intent:
10) MARKET DEFINITION: global beverages industry consists of total revenue generated through sales of beers,
ciders, winesflavoured alcohol food beverages and spirits and also softdrinks.
Market value(11) Beverage manufacturers usually differentiate their products, meaning they can occupy different
areas of the beverage industry at the same time, reducing their reliance on revenues from one product.
INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011,
www.datamonitor.com,
Company Profile – PepsiCo: global snack and beverage company (carbonated/non carbonated, swwet, salty,
wholegrain). PepsiCo operates in 200 countries and has large scale operations in north America, mexico and the UK.
PepsiCo operates through business units; PAF, PAB, PI, the business units are further divided into six reportable
segments FLNA, QFNA, LAF, PAB, Europe and Asia and AMEA (p 26-7).Coke-Cola Company engages in the
manufacturing, distribution and marketing of non-alcoholic beverages consentrates and syrups. The company
okwns the worlds most valuable brand: Coke Cola. Coke Cola primarily produces sparkling beverages. Most of the
products are manufacturered and sold by bottling partners (convert them into finished packaged products). Cokacola bottles beverages either in plastic, glss or cans. (P 30 -4). ANHEUSER-BUSCH INBEV – engaged I the production,
distribution and sale of beer and soft drinks. Company sells lagers, premium beers ad specialty brews in over 23
countries, The companies offer a portfolio of over 200 brands, that includes global flagship brands Budwiser, Stella
Artois and Becks180.
Top 3 players in the AUS market – Coca-Cola, Asahi Brewery and PepsiCo. These 3 hold 54.9% of the total soft drink
market Companies may choose one of two distribution channels; (1) intergrated buiness approach – selling reatytooncume drinks to retailers or adopt a business model where they sell raw materials to a network of bottling
companies181.
Australia’s resources boom boosted advertising spend- ing in 2010 to the pre-GFC levels of 2008. The strenghtened economy helped Australia out-do markets globally and a market boom in August, with significant ad spending during the federal election, ensured the Australian media market was surging182.
Compared to 2009, the media market last year ampli- fied by an estimated 13% and remained strong, albeit at
lowering percentage increases after mid-year.
Improved performances was key as the market started lifting in the second half and particularly in the last quar- ter
of 2009183.
On a year-to-date basis to November 2010 - adjusted to reflect equal numbers of weeks to 2009 - only five of the
39 major categories decreased184.
Among the top 20, which combined represented 89% of all media ad spending, only the Media category recorded a
marginal 1% decline185
COMPANY
Strengths:
current strategies:
SCA:
Intent:
INDUSTRY
It is imperative for manufacturers to shorten the time to market so they can build their initial market share.
Redbull's stranglehold in energy drinks is a prominent example of the benefits of first mover advantages. In the
drinks industry, it is often the early bird that catches the worm.186
Traditional cola was the baby-boomers' drink of choice when they were young. As obesity and other health
concerns become more of an issue among aging boomers, manufacturers are racing to court and understand
today's youth.187
180
INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,
181
INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011,
AdNews 14 January 2011, 2010 review
183 AdNews 14 January 2011, 2010 review
184
AdNews 14 January 2011, 2010 review
185 AdNews 14 January 2011, 2010 review
186 Pepsi: adding flavor to the cola war, 2003, Datamonitor, p.2
187 Pepsi: colourful soda, 2002, ‘Best Practices in Drinks 2002’, Datamonitor, p.2
182
68
…a number of manufacturers have introduced new stevia products, including Coca Cola and PepsiCo.188
[INTERNATIONAL/GLOBAL MARKET] The global beverages industry grew by 15% in 2010 to reach a value of
$1,749,350.9 million. In 2015 the global beverages industry is forecast to have a value of $1,909,008.8mil. The
compound annual growth rate of the industry period 2010-15 is forecast to be 1.8%. Market volume The global
beverages industry grew by 13% in 2010 to reach a volume of 245,177.3 million Kg189.
The compound annual growth rate of the industry in the period 2006–10 was 2.2%. Market volume forecast In
2015, the global beverages industry is forecast to have a volume of 262,286.5 million Kg, an increase of 7% since
2010. Market segmentation I - Beer, cider & FABs is the largest segment of the global beverages industry,
accounting for 33.5% of the industry's total value190.
Market segmentation II - Europe accounts for 46% of the global beverages industry value. Industry Performance;
The performance of the industry is forecast to decelerate, with an anticipated CAGR of 1.8% for the five- year
period 2010-2015, which is expected to drive the industry to a value of $1,909 billion by the end of 2015191.
Since the economic downturn, manufacturers have sought cost-effective packaging, which also helps differentiate
products. There has been expansion in the use of newer substrates (such as RPET, PLA and other biodegradable
plastics, barrier films and pouches). Innovative packaging shapes and designs are aimed at specific target
consumers. Value added functional features have been introduced (i.e. re-closable can ends and pouches designed
for vending applications), which are used to attract more customers192.
Entrance to the industry could prove problematic when the large scale of leading incumbents and brand loyalty is
taken into account, however substitutes are cheaper and just as popular with consumers, providing new entrants
with an avenue to entrance. All of these factors increase rivalry between players. Entrance to this industry can be
achieved by starting up a new company, an existing company diversifying operations or by the acquisition of an
existing company. There is growing opportunity to enter the industry on a small scale by occupying a niche. In order
to compete with leading incumbents, new entrants must operate on a large scale. This requires significant capital
outlay, which poses a barrier to entry for some. Furthermore, leading incumbents have strong brands already
present within the industry. Brand loyalty is key in this industry and can therefore provide increased
competition193.
SWITCHING COSTS aren’t high, leading companies such as Nestle have diversified operationse e.g Nestle producing
tea and coffee as well as soft drink. Overall there is a moderate threat from alternatives! Industry Competition: The
global beverage industry is fragmented with leading incumbents such as Coca-Cola, Pepsi Co, Nestle and Anheuser
Busch holding. Moderate industry growth over recent years does little to reduce the level of rivalry, however
developing markets in the middle east provide market players with viable expansion opportunities. Overall, there is
a moderate degree of rivalry in this industry. 35.1% of the total industry value. The large number of industry players
serves to increase rivalry. The main substitutes to soft drinks and alcoholic beverages are other beverages such as
tea, coffee or milk. Products are easily differentiated with brand loyalty having key influence194.
Market share - The Coca-Cola Company is the leading player in the global beverages industry, generating a 16.3%
share of the industry's value195.
Market rivalry
The global beverage industry is highly fragmented. The presence leading incumbents and lare numbers of market
players boosts rivalry.
The global beverage industry is characterized by the presence of large companies such as PepsiCo and Coca-Cola.
Market Growth: The global beverages industry is forecasted to experience decelerated revenue and volumes
growth during 2010-2015. Industry Growth and Decline; In comparison, the European industry declined with a
compound annual rate of change (CARC) of less than 0.1%, and the Asia-Pacific industry increased with a CAGR of
6.1%, over the same period, to reach respective values of $805.5 billion and $400.7 billion in 2010196.
Aus softdrinks generated tot revenues of $11 billion in 2010 representing compound annual growth rate (CAGR) of
3.3% for the period spanning 2006 – 2010. Carbonate sales are the most lucrative for the Australian soft drinks
market in 2010 – generating total revenues of 6.6billion, equivilent to 59.9% of the overall market value. To reduce
the threat of substitutes, big players offen have diverse product offerings e.g PepsiCo offers breakfast cereals and a
range of soft drinks. Overall there is a moderate threat for substitutes197.
188
New drinks review: stevia gaining ground as the new sweetener of choice, 2009, Datamonitor, p.2
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190 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
191 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
192 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
193 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
194
INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
195 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
196 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011
197 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011
189
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Market Value The Australian Carbonated Soft Drinks market grew by 3.7% in 2001, to reach a value of $1,446
million. The compound annual growth rate of the market in the period 1996-2002 was 3.8%. The strongest growth
was in 1997, when the market grew by 6.9%.The largest fall in the market was recorded in 2000, when the market
shrank by (1.1%).
Market Segmentation I Cola is the largest sector of the Australian Carbonated Soft Drinks market, representing
72.3% of the market in value terms. Mixers is the smallest sector of the Australian Carbonated Soft Drinks market,
representing 4.8% of the market in value terms. Market Share I Coca-Cola products account for the largest share of
the Australian Carbonated Soft Drinks market, with 41.2% of the market in value terms. The top three brands in the
Australian Carbonated Soft Drinks market (Coca-Cola, Diet Coke, Diet Pepsi) account for 64.7% of the market
between them198.
Market Distribution Off-trade accounts for the largest share of distribution in the Australian Carbonated Soft Drinks
market, with 56.2% of the market in volume terms.
Market Forecast In 2006 the Australian Carbonated Soft Drinks market is forecast to reach a value of $1,703 million,
an increase of 13.8% since 2002. The compound annual growth rate of the market in the period 2002-2006 is
predicted to be 3.3%199.
MACRO
AUS BEVERAGE MARKET:
In Brief: Market value in Aus soft drinks grew by 3.3% in 2010 to reach value of $10,953 million. Market value
forecast: In 2015 Aus soft drinks forecasted to vale $12,721.8mil. Market Volume: Aus soft drink market grew by
2.9% in 2010 to reach a volume of 4,649.7 million litres. Market volume forecast n 2015 for the Aus market =
volume of 5,308.1 litres (increase of 14.2% since 2010). Market segmentation: carbonates is the largest segment of
the soft drinks market in Aus accounting for 59.9% of the markets total value. Aus counts for 85% of the Asia Pacific
soft drinks market value. Market Share: Coca-Cola Company is the leading player in the Australian soft drinks
market, generating 39.4% share of the markets volume. Market Rivalry: Aus soft drink market = concentrated, top 3
players holding 54.9% of the total market volume. The market has the presence of leading players such as the cocacola company, Asahi Breweries and PepsiCo200.
While Australia continues to be one of the most optimistic developed markets globally; there is still pessimism
clouding the year ahead as we juggle the good with rising interest rates, escalating debt levels, increasing utility
costs and economic uncertainty with the recent change in leadership so close to the upcoming Federal Election201.
ENVIRO FORCES
Threats to the industry may be reduced consumer spending in natural disaster states??
Commentators, including Princeton University’s Alan Blinder, estimate 40 million jobs could be at risk of being
offshored over the next 20 years and suggest American workers should specialize in services that can be delivered
face-to-face. In contrast, Jensen and Kletzer expect the process of globalization in services will proceed much as it
has in manufacturing: They estimate only 15–20 million jobs are at risk of being offshored to low-wage, laborabundant countries; approximately 40 percent of these jobs will be in the manufacturing sector, long considered
“at risk”?202.
http://www.iie.com/publications/interstitial.cfm?ResearchID=880
LEGAL
TECHNICAL
Pepsi has announced plans to produce its own vanilla-flavored cola, following the success of Coca-Cola's Vanilla
Coke. Copycat competition is coming from own brand colas as well. Soft drinks makers need to shorten the time it
takes to get new products to market so they can make the most of any first mover advantage. Pepsi is launching a
vanilla-flavored cola drink to challenge Coca-Cola's rival product. The two companies are renowned for going head
to head in the cola drink market where product imitations are commonplace and competition is aggressive. CocaCola launched Vanilla Coke in May last year. The product has proved successful - it has sold over 90 million cases in
the US. These new developments in the soft drink market highlight the increasing threat of own label brands taking
198
Australia - Carbonated Soft Drinks, Market Profile, www.datamonitor.com
Australia - Carbonated Soft Drinks, Market Profile, www.datamonitor.com
200
INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011,
201 NIELSEN SPECIAL REPORT– JULY 2010, Insights into the shopper of today and the future; Economic concern and rising utility costs keeping
aussies up at night. By Chris Per cy
202 Policy Brief 08-1
"Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Services by J. Bradford Jensen, Peterson Institute for
International Economics
and Lori G. Kletzer, Peterson Institute for International Economics, January 2008
199
70
market share.203 Marketing practitioners are now faced with growing demands to show greater awareness and
speed in planning product launches to reduce the threat of being pre-empted.204
“Coca-Cola is a brand that is recognized world wide. It is sold in over 200 countries and has been a leader in
globalization. In the past few months Coke has made strides toward the production of their new ‘PlantBottle’. The
PlantBottle will be made of PET plastic. This bottle will also contain 30% materials from Brazilian sugar cane and
molasses. The goal is to make the PlantBottle 100% recyclable. The first bottles will be introduced in Denmark, then
Vancouver (for the winter Olympics) and the US, with eventual launches in Japan, Mexico and Brazil as well. Coke
is certainly not the first company to attempt to achieve a fully recyclable container. Starbucks slaved for 10 years to
produce their fully recyclable cup. In 2008 they saved over 100,000 trees simply by putting their delicious drinks in
these recyclable cups. If all companies would make such strides, the environment would certainly benefit. But it
is not just companies that need to help out the environment. Even if every beverage container used was 100%
recyclable, still thousands of pounds of plastic end up in landfills every year. Everyone needs to do their part to
ensure that the PlantBottle, and other products like it, achieve its green goals.”205
Macro/Technical In result of inadequate programs new technological advancements and efforts to expand
economic liberalization are receiving significant political backlash206.
New entrants need to access distribution channels, such as retailers. This can prove problematic as retailers are
likely to stock brands popular with consumers, thus may be less willing to give any shelf space to new products until
they are well established207.
Supermarkets and Hypermarkets (48.5%) are the most significant distribution channel in the AUS market. Followed
closely by on-trade retailers (32.5%) .
The buyer power of retailers is moderate. Supplier power isn’t great, as most inputs are readily available
commodities. Would be difficult for new entrant to compete with brand strength and reach existing players – may
be possible to achieve small scale success stressing unique production method or nutritional benefits. Even if new
entrants opted for business model employing use of bottoling partners (eliminating much of the production
process) there is still need to invest in manufacturing capacity in order to produce the concentrates208.
SOCIAL
…advertainment is very costly and for smaller companies there are cheaper alternatives with proven success rates
such as guerilla marketing.209
“For decades, Coca-Cola’s main competitor has been Pepsi. However, in recent years Coca-Cola has faced
increasing competition from non-carbonated drinks such as tea, coffee, and fruit juices. This has been especially
true in Japan. In response to this growing trend, Coca-Cola has developed a new product – green tea-flavored Coke.
The product targets mainly health concious women in their 20s and 30s. In response to this product, Pepsi is
planning on launching basil-flvaored Pepsi. As of right now these new products are going to be sold in Japan only,
however if Coca-Cola’s new bevarage is met well by customers, it will be marketed in other countries such as the
United States and countries in Western Europe.
Is it possible that the global bevarage market could see a major shift in the next decade? More consumers are
becoming concious about the health threats that some carbonated drinks pose, and about the benefits from drinks
such as green tea. Coca-Cola and Pepsi are taking steps to make some of their carbonated products more appealing
to this segment of consumers. But will this trend be concentrated mostly in Asia, or will it be a truly global
phenomenon?”210
203
Pepsi: adding flavor to the cola war, 2003, Datamonitor, p.2
Pepsi: adding flavor to the cola war, 2003, Datamonitor, p.2
205 Global Edge. 2000. Coca-Cola Amatil. [ONLINE] Available at: http://globaledge.msu.edu/blog/post/562/ge-blog-series--go-green--part-4.2--planting-new-ideas [Accessed 08 February 12].
204
206
Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics
Testimony before the Subcommittee on Investigation and Oversight House Science and Technology Committee
June 24, 2008
207 ) INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011,
208
209
INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011
Pepsi: that’s advertainment, 2003, Soft Drinks in the USA to 2006, Datamonitor, (DMCM0237), p.2
210 80
Global Edge. 2009. Viktoriya Ivanova [ONLINE].. http://globaledge.msu.edu/blog/archive/2009/6.[Accessed 08 Feburary 12].
71
(5) Costs to workers, families, firms and communities are exacerbated by the lack of national comprehensive
strategy to deal with these economic disruptions. The collection of out-of-date/ inadequate programs provide too
little assistance for those in need.
Workers are the first to feel negative consequences of economic restructuring due to increased domestic and
international competition.
Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for
International Economics Testimony before the Subcommittee on Investigation (pto)
and Oversight House
Science and Technology Committee
June 24, 2008 http://www.iie.com/publications/testimony/t
(16) There has been increased demand for organic products, including organic wines, spirits and beers. These
specialty products can often be sold at a higher price.
INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011,
www.datamonitor.com,
(19) Players in the Australian soft drink market need to distinguish their products to some extent by stressing the
health benefits (esp’ juices and functional drinks) as well as taste.
Trend moving away from soft drinks and moving towards healthier healthier fruit juice and bottled water.
INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011,
(29) Key insights from the 2010 Nielsen ShopperTrends
Report reveal that the profile of the Australian shopper
is evolving, and in order to succeed in the future, retailers and manufacturers will need to develop strategies that
accommodate growing ethnicity, population increases and an ageing society. “From both a supplier and retailer
point of view, it is important to understand how ethnicity impacts shopping patterns.”
ECONOMIC
Costs to workers, families, firms and communities are exacerbated by the lack of national comprehensive strategy
to deal with these economic disruptions. The collection of out-of-date/ inadequate programs provide too little
assistance for those in need.
Workers are the first to feel negative consequences of economic restructuring due to increased domestic and
international competition211.
There has been increased demand for organic products, including organic wines, spirits and beers. These specialty
products can often be sold at a higher price212.
Players in the Australian soft drink market need to distinguish their products to some extent by stressing the health
benefits (esp’ juices and functional drinks) as well as taste.Trend moving away from soft drinks and moving towards
healthier healthier fruit juice and bottled water213.
Key insights from the 2010 Nielsen ShopperTrends
Report reveal that the profile of the Australian shopper
is evolving, and in order to succeed in the future, retailers and manufacturers will need to develop strategies that
accommodate growing ethnicity, population increases and an ageing society. “From both a supplier and retailer
point of view, it is important to understand how ethnicity impacts shopping patterns.”214
ECONOMIC
The Peterson Institute calculates that the US economy is approximately $1 trillion richer each year owing to past
globalization—the payoff both from technological innovation and from policy liberalization—and could gain
another $500 billion annually from future liberalization (Bradford, Grieco, and Hufbauer 2005 [pdf])215.
Speeches and Papers, Answering the Critics: Why Large American Gains from Globalization Are
They expect these losses to be offset by job gains in high-wage activities from services exporting. The United States
will retain its comparative advantage in high-skill, high-wage production and increase these activities in tradable
service industries as trade barriers diminish. While the loss of low-wage activities that are offshored and the gain
211
Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics
Testimony before the Subcommittee on Investigation (pto) and Oversight House Science and Technology Committee
June 24, 2008
212
INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011,
213 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011
214 "Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Services by J. Bradford Jensen, Peterson Institute for
International Economics
and Lori G. Kletzer, Peterson Institute for International Economics, January 2008
215
Speeches and Papers, Answering the Critiques: Why Large American Gains from Globalization Are Plausible by Gary Clyde Hufbauer, Peterson
Institute for International Economics, May 2008, © Peterson Institute for International Economics. P.3
72
from high-wage service exports will cause dislocation, the globalization of services production is likely to have
productivity-enhancing effects similar to the impact of globalization in the manufacturing sector, offering significant
potential to improve living standards in the United States and around the world216
Competitors/Economic - US Economy faces intense competition both domestically and internationally. Increased
competition may benefit the economy though access to more, less expensive and better products and services it
also places significant costs on American workers and their families, firms and communities217.
(4) Trade Adjustment Assistance (TAA) - TAA provides workers 78 weeks of income maintenance payments, in
addition to the traditional 26 weeks of UI, for as long as they participate in training. In addition, the program
includes a 65 percent HCTC, a limited wage insurance program, and job search and relocation assistance. Under
wage insurance, otherwise known as Alternative Trade Adjustment Assistance (ATAA), workers above the age of 50,
earning less than $50,000, can receive half of the difference between their old and new wages, for up to 2 years,
subject to a maximum of $10,000. This program is designed to assist the large number of workers who experience
earnings losses after reemployment. In order to be eligible for TAA, workers must have been laid off from a plant
for which at least one of the following 3 criteria "contributed importantly" to its decline in employment and sales:
- an increase in imports
- aid off from an
upstream or downstream producer a shift in production to another country218
The 2009 update of TAA addressed both of these major shortcomings (that the bill originally only covered workers
in the production of goods not services and that it focused primarily onof the program and updated it in many small
but important ways. Though it did not receive the attention it deserved, the 2009 TAA bill was one of the most
important revisions of US worker adjustment legislation in decades219.
Obama Administration extension of the TAA (Trade Adjustment Assistance) program due to a largely eclipsed
debt-limit rancor. TAA provides training and other assistance to workers who lose their jobs due to foreign
competition220.
Virgin Australia:
The Virgin Cola Company was a joint venture with the Canadian soft drink company Cott & Company, the world’s
largest supplier of retailer own-brand soda drinks. Virgin Cola was introduced in the UK in 1994 and achieved
318
GCT15 10/26/2004 4:34 PM Page 318RICHARD BRANSON AND THE VIRGIN GROUP OF COMPANIES IN 2004
initial success in the pub and restaurant trade. The drink was packaged in a “Pammy” bottle based upon the body
of Pamela Anderson. After gaining a peak of 8 percent share of the UK market, sales declined. In 1997, Virgin Cola
lost about £5 million on revenues of £30 million. In 1998, Virgin acquired Cott’s share of the business and launched
Virgin Cola with a $25 million investment and the goal, according to Branson, of “driving Coke out of the States.”11
Despite gaining massive publicity, there was little evidence of Virgin being able to convert media coverage into
sales. By 2002, Virgin Drinks Company was still marketing Virgin Cola in the UK, Continental Europe, and Asia, but
no sales figures were available.
https://www.blackwellpublishers.co.uk/grant/docs/15Virgin.pdf
216
Policy Brief 08-1"Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Servicesby J. Bradford Jensen, Peterson
Institute for International Economics
and Lori G. Kletzer, Peterson Institute for International Economics, January 2008. P.3
217 Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics
Testimony before the Subcommittee on Investigation and Oversight House Science and Technology Committee
June 24, 2008
218
Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics
Testimony before the Subcommittee on Investigation and Oversight House Science and Technology Committee
June 24, 2008
219 Op-ed, Trade Adjustment Assistance: Lost in the Shuffle by Greg Mastel, Dutko Worldwide
and Howard F. Rosen, Peterson Institute for
International Economics, Op-ed in the Hill
November 5, 2010
220
TAA Reauthorization: Necessary and Appropriate by Greg Mastel, Dutko Worldwide
and Howard F. Rosen, (Peterson Institute for
International Economics) Op-ed in the Hill
July 21, 2011
73
74