Competition in Energy Drinks

Industry's Macro-environmental Components

Coca-Cola is relying on the alternative beverage market to maintain volume growth in mature markets where consumers were decreasing their consumption of carbonated beverages. The macro-environmental factors affecting Coca-Cola include economic conditions, demographics, social and regulatory factors (Strategic Management. 2012). One of the benefits of the alternative drink market is the higher drink prices leading to a larger profit margin in comparison to carbonated beverages. However, during times of economic duress higher priced, novelty, items are the first to be removed from the shopping list. This was illustrated during the economic slowdown between 2008 and 2009 which lead to a reduction of 12.5 percent in purchases of flavored and vitamin-enhanced beverages and a 12.3 percent reduction in sports drinks (Gamble, J. 2012). Energy drinks were the only segment to not see a reduction in sales however only 0.2 percent growth was experienced during this time period (Gamble, J. 2012).

Demographics are essential because each type of beverage caters to different market segments and assists in the appropriate product distribution of alternative beverages to different geographic locations. Energy and sports drinks are appealing for younger, athletic populations whereas vitamin-enhanced beverages are advertised to individuals leading a healthy lifestyle. If the local population is skewed lower in age a higher infiltration of energy and sports drinks and a lower concentration of vitamin-enhanced beverages may be a good strategy. However, if the population of a certain geographic location seems to be healthier and more fit in influx of vitamin-enhanced drinks and sports drink may be more appropriate. The ratio of energy drinks, sports drinks and vitamin-enhanced beverages should be relative to the age range, economic levels, and activity level of the geographic location.

For Coca-Cola's alternative beverage segment social and regulatory factors can work together, for and against this market. All of the alternative beverages have fallen under public scrutiny at one point or another regarding the safety of ingredients and the advertised or perceived benefits of the drinks. The FDA regulates ingredients and the manufacturing of carbonated beverages however it doesn't regulate, with the same scrutiny, the manufacturing of alternative drinks (Gamble, J. 2012). This allows producers to utilize ingredients that may not be approved by the FDA in alternative beverages, possibly at levels that may be hazardous. This is prevalent in the ongoing scrutiny of energy drinks. The pressure from society and the FDA have led to warning labels on energy drinks and the alteration of recipes in some cases. While the FDA hasn't stepped in to regulate energy drinks, sports drinks, and vitamin-enhanced drinks as of yet this may be a future threat to this market segment and Coca-Cola should remain vigilant regarding this component.

Industry