ENERGY DRINKS

COMPETITION IN ENERGY DRINKS, SPORT DRINKS AND VITAMIN-ENHANCED BEVERAGES

OUTLINE OF THE PRESENTATION

1. Presentation of the subject 3

2. Macro-environment, characteristics of the segment 3

3. Competition in the alternative beverage industry 5

4. How is the market changing ? 7

5. Strategic group map of the alternative beverages industry 10

6. Marketing mix : 4P 11

7. Keys factors of success 12

8. Recommendations 13

9. Conclusion 14

Sources 15

1. Presentation of the subject

The alternative beverage market is not new. It has already existed for many years, with the creation of new products by the most important companies (which are pepsico red bukk and hansen natural corporation Coca-Cola, Pepsi Co). However, since the mid-2000’s, the alternative beverage industry is experiencing a rapid growth, higher than the carbonated soft drinks. Alternative drinks are innovation items in the beverage industry such as sport drinks, energy drinks, or vitamin-enhanced beverages. Those innovations are characterised by their flavors, efficient distribution systems and a global products innovation. They compete with water, soft driks, juice, tea and other common drinks, with low prices, and high brand recognition, easy to accept. Nowadays, alternative beverages takes more and more market share in the whole beverage market.

2. Macro-environment, characteristics of the segment

o What is an alternative beverage?

o Alternative beverages targets

o Market size

o Beverage market share

o Relevant components in the macro-environment

On the economic plan, we can notice that this market had an important expansion during the mid-2000's, and the actors managed simultaneously to practice high prices and to get high margin profits. Even if the market has been very impacted by the economic crisis in 2008/2009, with a decrease of sales around 12.5% for energy drinks and flavoured waters, it knew a new expansion since the 2010s. This mainly occurred in the emerging and attractive markets, which have an increasing purchase power, such as South America or the Middle East. In fact, the market of alternative beverages has become strong over the years and targets more and more consumers, in order to increase again its size.

This great expansion during the last decade can be explained by the very specific marketing strategy used by international firms, such as Coca-Cola, Red Bull or Pepsi Cola, which highlight the "social aspect" of their product. They try to attract some precise targets : boys teenagers and young workers, that usually like extreme sports and music. So, in order to make them buy their products, alternative beverage companies are now specialized in sponsoring sport and music events all over the world. That way, they guarantee the best visibility to their products. But this marketing strategy is threatened by social and health concerns. According to physicians and medical researches, this kind of beverages could cause some arrhythmias and insomnia in case of over consumption, especially for children and young people. The fact that there is a trend to mix these beverages with alcohol is also a problem that people are worrying about. This mix increases the risk of traffic accident and violence. In addition, there is a lack of transparency concerning the ingredients that are used to produce the beverages and their effects on our health, for example with taurine, caffeine or kava. All these interrogations can lead to a certain mistrust from potential consumers, and so could curb the expansion of the alternative beverages.

What is surprising is that the concerns explained above are not supported by the government and the legislation. In fact, the Food and Drug Administration does not regulate the ingredients used in the alternative beverages, whereas the carbonated beverage market is regulated concerning the level of caffeine present in the beverages. There are just a few warnings about mixing alternative beverages with alcohol (after the request of general attorney) and the use of kava and melatonin. But nothing is done to force alternative beverage companies to make awareness campaigns on packagings or to limit the use of these ingredients. Only, the Monster brand decided to put warning about over consumption on its products.

Finally, the alternative beverage market tried to develop a lot new marketing techniques and tools, following its strategy of differentiation. In fact, the market is almost the only one using both social networks and the sponsoring of international events to catch its targets. This innovative way of communication is directly connected to their targets (young people that are keen on sports and social networks) and their wish to present their products like distinctive and fashionable ones. Also referring to the technological aspect of the macro-environment, we can notice that the alternative beverage market managed to use the existing chemical knowledge to offer to its consumers an impressive number of flavours (up to 28 different ones for some beverages). This ability to extend its product lines thanks to chemistry, enables the market's firms to maintain a certain level of sales and so to improve their economical situation just after the economic crisis in 2008.

o A specific market

The alternative beverage market has followed a different economic evolution than the traditional beverage market. This mainly because these two markets were not born at the same time. Alternatives beverages are quite new products (launched in the 2000s) compared to carbonated beverages, like Coca-Cola and other sodas, that appeared in the XIXth century. In fact, the soda market had the time to expand all over the world, and now it is considered as a mature and saturated market. The world population is aware of what this market offers, and buys its products, there

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