Question

Answer this question by using the contents below.

Place key findings from analysis into a SWOT

Porter’s Five Forces Industry Analysis

Soft drinks generally refer to carbonated soft drinks. Tea, coffee, sports drinks etc are usually not included. The profitability of any industry in the long term is assessed through Porter's five forces analysis.

Buyers

Non-alcoholic drinks are in demand for a long time, and the demand has been consistently growing. The industry size is around 60 billion dollars. American consumers on average consume 56 gallons of soda a year showing the importance of soft drinks in the American diet. The huge volume of business with the relatively inexpensive price makes this a viable market. Buyers can easily switch as there is not much price difference. The total volume of consumption has been increasing for decades. Globalization has fueled this volume growth further.

But loyalty to traditional brands is high. So even if they switch, they buy only from existing brands. But since there are only very few players, they usually buy only from one among the players. Brand loyalty is high in the segment with lovers for traditional flavors.

Distribution takes place through buyers- retailers, hotels, vending machines, eating outlets etc. buyers like supermarkets command a strong buying power due to the large volume of sales in such markets.

New entrants

Threat for new entrants is very low. The early entrants have acquired huge economies of scale and access to distribution that cat be matched by new players.

Competition for maintaining fountains in outlets like Subway, McDonald's etc., are high that it is difficult for new entrants to cut through. Since the companies offer numerous incentives for such machines it is difficult to break through for new player.

Since this a high-volume business, new entrants will difficult to break the brand loyalty, spend on advertising and acquire a volume of sales justifying investments.

Bottling industry very capital intensive and concentrate producers have high control over them making it difficult for new entrants.

Suppliers

Suppliers include bottling equipment manufacturers, secondary packaging suppliers, companies like coca cola prepare the drink but bottling is done by bottlers. Majority of the shares in bottlers are owned by the companies like Coca-Cola themselves. This reduces the supplier power. Since there are very few brands in the industry, suppliers rely on the soft drink manufacturers. Equipment suppliers also do not have much bargaining power as there are many such players. Raw materials for production are also easily available.

Threat of substitutes

Several health alternatives, sports drinks, fruit drinks have come up. Existing players have diversified to into non-carbonated beverages to tackle such attacks from substitutes. Threats form substitutes are countered through heavy advertising, easy availability of products etc. substitutes fail to match to reach such huge scale in advertising and distribution.

Competitors

Competition is intense with brand investing heavily in marketing and advertising. Also, they offer huge discounts for retailers. But they have been able to stay profitable, because of less competition. Brands enjoy high brand equity. Pepsi mainly concentrated on advertising and marketing with film-stars to sports celebrities for promoting their products, which became very successful. Many other new players followed this later.

Answer 1

The SWOT analysis is as follows:

1.Strengths

• ​Basic Consumer Need
• Large and Growing Market
• Many different flavour and packages available
• Low Cost of Production
• Soft Drinks are dominant in the non-alcoholic market
• Excellent branding and advertising by the market leaders in the industry
• Addictive Nature of soft drinks
• Distribution Channels

2.Weakness

• Health issues associated with drinking soft drinkings
• Obesity and weight gain due to the high levels of sugar
• Dominance of big brands makes it hard for new entrants to gain market share
• Environmental effects of packaging

3.Oppurtunities

• Reduce Environmental impacts of packaging
• Diversify more into health conscious drinks
• Continue to dominate the non-alocoholic drinks market
• Establish facts and use as potential PR

4.Threats

• Threats of substitutes(sport drinks,fruit drinks etc)
• Health issues associated with soft drinks industry
• Due to the recession consumer buying power in this market has reduced.
• Changing attitudes and demands of consumers more health conscious society
• Introduction of "Own Brands" from major retailers with cheaper price
• Distribution Costs-rise in cost associated