Integrated Strategic Marketing Plan: Section Three
Jessica
Grimminger
Zachary Martin
Erin McIver
Russell Rowan
Ryan Village
Industry Definition
Coca-Cola is a product sold within the
Soft Drink Industry under the category of carbonated soft drinks. The Soft
Drink Industry is based on the production, distribution, and marketing of
nonalcoholic water-based beverages. This industry has a history extending back
to the 1700’s when a British chemist, Joseph Priestly, discovered a way to
synthetically carbonate water.
Industry
This Industry as a whole can be seen
as an Oligopoly due to there being only two firms controlling the vast majority
of the market with a 70% (Bailey,
2014) market share. These two
firms would be the Coca-Cola Company and Pepsi Co. This industry also has very
high barriers for new entrants due to high operating costs. The two major firms
with in the industry also use non-price product differentiation in order to
compete.
Over the past few years, the
carbonated soft drink category has seen declined sales throughout the industry.
This is due to increased health awareness among consumers on the side effects
of many of the ingredients used in these beverages, including sugar. Soft drink
manufacturers have been receiving pressure to create low
calorie beverages with less sugar.
Due to this pressure, the three largest soft drink manufacturers with in the
industry, Coca-Cola Company, Pepsi Co., and Dr. Pepper Snapple Group Inc., have
ensured that over the next decade they will aim to reduce high sugar beverages
by 20% (Bailey, 2014). The Soft
Drink Industry is shifting in products to meet these new consumer demands. This
shift in demand is offering this industry the opportunity to grow in different
markets such as the non-carbonated category of the Soft Drink Industry.
Shape of the Industry
Coca-Cola operates within one of the
largest global industries, the soft drink industry. In fact, in the
article titled “Market size of soft drinks in the United States from 2010 to
2014 (in million U.S. dollars)” it shows that the U.S. soft drink market has
swelled to over $98 billion as of 2014. It has seen steady gains over
this five year period.
Soft Drink Market Size
|
This highly competitive market includes a variety of
players fighting over market share. In the article titled “Soft Drinks:
Investing Essentials” by Isaac Pino, he includes a graph that details
individual market share within the soft drink industry.
This graphical representation shows that Coca-Cola
dominates this market as they hold 42% of total market share with Pepsi and Dr.
Pepper trailing behind at 30% and 15%, respectively (Pino, 2014). Each of
these companies hold vast product portfolio that include a variety of popular
soft drinks as evidenced by the visual representation found in the article “An
Overview of the US Nonalcoholic Beverage Industry” by Sharon Bailey.
Seen clearly, Coke is by far the most popular soft drink
brand in the United States, but Pepsi Corporation brands Pepsi and Mountain Dew
hold the second and third places and Dr. Pepper the fourth (Bailey, 2016). This
data shows that the shape of the industry continues to evolve as the market
progresses forward and each of these companies battle for both industry and
brand position.
Development of the Industry
The soft
drink industry has experienced interesting developments in the recent past that
has shifted the way companies in this market do business. While this
industry has increased in value, the demand for sugary sodas has declined.
In a market that has long been dominated by popular soda brands such as
Coke, Pepsi, Mountain Dew, and Dr. Pepper, there has been a paradigm shift for
alternative options. In the article “The 4 biggest ways American beverage
consumption will change in 2016” by Kate Taylor, she explains that these
companies are developing new healthy drink options as a result of changing
consumer preferences. New products will include organic Gatorade,
Aquafina flavored waters, sparkling Minute Maid, and sparkling Smartwater.
This is due in large part to meet the needs of the target market who are
now, more so than ever, focused on the health benefits of the beverages they
consume. In line with the health initiatives established by the audience,
soft drink companies will aim to redesign their products in both content and
packaging. Whether it is reformulating their current products or
developing new product lines, the aim will be to create products with fewer
calories, sugar, and caffeine. Also, many have already begun to offer
smaller cans and bottles that promote moderation. Isaac Pino backs up
these statements with statistics that show that unsweetened variants in soft
drink portfolios have seen the most growth in the past five years.
“According to IBISWorld, Dr. Pepper Snapple's Canada Dry
brand was the only one of its five core drinks to achieve volume growth during
the past half-decade, in part due to "unsweetened variants such as plain
and tonic water." Expect Dr. Pepper and its rivals to increase their focus
on a sparkling water category that's posting growth rates of 16.3% and 34% in
2011 and 2012, respectively” (IBISWorld as cited in Pino, para. 9, 2014).
All in all, these developments display a common trend away
from traditional soda brands and an increase in healthier beverage
alternatives. Research suggests that these changes will continue to be
implemented as the industry develops to meet the needs of changing consumer
preferences (Taylor, 2016).
The Marketplace
- Supermarkets/Grocery
Stores: these are the largest source of revenue for the beverage industry
and 41.2% of their total revenue. (Ibisworld)
- Gas Stations/ Convenience Stores: these are key for this industry because they
are usually open 24 hours. These stores represent 19.9% of the total
revenue. (Ibisworld)
- Vending Machines: these are placed where consumers have not alternative. Bus
stations, airports, work places, etc. These currently account for 14.4%
but this number is decreasing due to healthier options that are not being
put into vending machines. (Ibisworld)
- Warehouse Centers/ Club Stores: they make up 12% of the beverage industry revenue
and this is stable and going to increase. (Ibisworld)
- Other
retailers such as restaurants, liquor stores and online
retailers make up the rest of the industries revenues. (Ibisworld)
Current Condition of the Marketplace
The marketplace for the beverage industry is
different than it once was. Major beverage companies are about developing new
healthy beverages. If they are not doing that, they are at least trying to
conceive a healthier image (Taylor, 2016). Also, pushing the beverages to be single
serve, this will help the healthier image, the companies are trying to achieve.
With all competition creating healthier versions of their main soft drink,
Cokes answer to this is Coca-Cola Plus. The soda and beverage industry is
currently at an annual growth of -1.3% and being that it is in the mature
lifecycle it will be difficult for the industry to bounce back (Ibisworld). The soda and
beverage industry is increasing in the import and export markets.
Changes
in the Marketplace
Changing
demographics and purchasing behaviors make it crucial for beverage industry
leaders to understand and capitalize on key consumer insights that identify
growing trends (PR Newswire, 2017) . An opportunity we
are starting to see for companies is creating more healthy beverages that are packaged
in fresh and eco-friendly containers. These new changes will include packaging
that will provide appropriate product protection that aligns with enhanced
brand values for health and environmental responsibility. With Millennials holding
huge buying power in today’s market, beverage companies are gearing their
products to be more real and made with less processed ingredients. Beverage
companies are removing preservatives and artificial ingredients, and replacing
them with natural and nutrient-dense ingredients. Consumers are increasingly
looking to beverages to play new roles in their diets and health routines.
Drinkable breakfasts and the "snackification" of beverages are fueled
by consumer interest in nutrition and performance drinks that act as meal
replacements and guilt-free snacks (PR Newswire, 2017) . That said,
beverage companies should expect consumers in 2017 to demand beverages that
work harder, whether for refreshment, satiety, energy, immunity boosting, sleep
aid, blood sugar management, or a host of functional benefits now associated
with these multifunctional power beverages (PR Newswire, 2017) .
Direct Competitors
Coca-Cola is definitely
a giant of the beverage industry, and as a major company, they are used to
having many competitors to contend with for the consumer market. Their biggest
direct competitors are PepsiCo and Dr. Pepper Snapple Group. All three of these
companies sell brands for soft drinks (including diet versions), juices, sports
drinks, bottled water, flavored waters, energy drinks, bottled (or canned)
coffee, and teas. Below is a table explaining each company’s directly competing
products.
Coca-Cola
Company Brands
|
Dr.
Pepper Snapple Group Brands
|
PepsiCo
Brands
|
|
Soft
Drink
|
Coca-Cola
|
Dr.
Pepper
|
Pepsi
|
Diet
Soft Drink
|
Diet
Coca-Cola
|
Diet
Dr. Pepper
|
Diet
Pepsi
|
Fruit
Juice
|
Minute
Maid
|
Hawaiian
Punch
|
Tropicana
|
Sports
Drink
|
POWERADE
|
BODYARMOR
|
Gatorade
|
Bottled
Water
|
Dasani
|
Deja
Blue
|
Aquafina
|
Flavored
Water
|
Vitamin
Water
|
Bai
|
Sobe
Lifewater
|
Energy
Drinks
|
Monster
|
Venom
|
AMP
Energy
|
Ready
to Drink Coffee
|
Gold
Peak Coffee
|
High
Brew
|
Starbucks
Ready to Drink Beverages
|
Ready
to Drink Tea
|
Gold
Peak Tea
|
Snapple
|
Brisk
|
(Buehler, 2016) (Dr.
Pepper Snapple Group, 2012) (Dr. Pepper Snapple Group A, 2017) (Dr. Pepper
Snapple Group B, 2017) (PepsiCo, 2012) (PepsiCo, n.d.) (The Coca-Cola Company
A, 2017) (The Coca-Cola Company B, 2017).
Indirect Competitors
Besides direct
competitors, Coca-Cola must also deal with indirect competitors, those with
products who can fulfill the same consumer’s needs. Within the beverage
industry, the consumer’s needs are to drink. Because Coca-Cola has so many
different kinds of beverages, most smaller companies would actually be
considered direct competitors, so the most threatening indirect competitors are
alcoholic beverage companies. The main companies in the alcoholic beverage
sector are Anheuser-Busch, Heineken Holding, and MolsonCoors Company (World’s
Top Exports, 2017). They each sell different brands in beer, light, beer, hard
ciders, and premium beer. While these companies are considered competitors to
Coca-Cola, there are restrictions to their products that allow Coca-Cola to
reach more consumers. For example, the legal restrictions on alcohol do not
allow for individuals under the age of 21 to drink, and you cannot drive while
intoxicated or have an open container in the car within reaching distance.
Also, there are social and physical restrictions for drinking alcohol. Some
people may get sick very easily after ingesting alcohol and it is largely
considered indecent to drink early in the day.
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