Energy Drinks

Assignment Questions:

1. What are the strategically relevant components of the global and U.S. beverage industry macro-environment? How do the economic characteristics of the alternative beverage segment of the industry differ from that of other beverage categories? Explain.

There are 3 components that are essential. For this product category, taste is of course huge. And the other 2 are the image and the purpose. (ex: Energy drinks providing energy) The alternative beverage segment is unique in a way that other categories can't be. These drinks have a much higher price tag on them, therefore having a greater profit margin for retailers. The biggest statistic I read was that the energy drink pricing volume might be as much as 400% higher than carbonated soft drinks.

2. What is competition like in the alternative beverage industry? Which of the five competitive forces is strongest? Which is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the potential profitability of new entrants?

The strongest would be 5-Hour Energy because of the genius innovation behind their product. It was the first of its kind when it was introduced and it skyrocketed. The current weakest force is NOS Energy Shot, which actually saw a -10.4% growth from 2008-2009. I think the most effective force is Red Bull because of their brand image and popularity.

3. How is the market for energy drinks, sports drinks and vitamin-enhanced beverages changing? What are the underlying drivers of change and how might those forces individually or collectively make the industry more or less attractive?

The market for these beverages has seen a drop in the last few years. Sales have decreased from the previous year for 5 years consecutively. I think that this is due to the knowledge the consumers are receiving about the nutrition and health details that are being discovered.

4. What does your strategic group map of the energy drink, sports drink, and vitamin-enhanced beverage industry look like? Which strategic groups do you think are in the best positions? The worst positions?

I would group together a combination of the 3 types. Within each type, I would not necessarily sell every flavor that is offered, but the ones that seem to be "hot: in that specific area. I think a great strategy would be to do promotions more frequently, especially since profit margins are so steep to begin with.

5. What key factors determine the success of alternative beverage producers?

The key factors are the 3 I mentioned in question number 1. Brand image, taste, and purpose. Purpose is most crucial for energy drinks specifically. If the purpose is not the strongest factor, then success can never reach its full potential. Also, having a strong existing brand image can excel