1Introduction
2Market segmentation
3Governmental and environmental factors
4Economic indicators
5Capital requirements
6Proprietary Product Differences
7Absolute Cost Advantage
8Learning Curve
9Access to Inputs
10Proprietary Low Cost Production
11Brand Identity
12Access to Distribution
13Supplier concentration
14Impact of Input on Cost or Differentiation
15Threat of Backward or Forward Integration
16Accesses to Capital
17Summaries of Suppliers
18Buyers
19Buyer Volume
20Buyer switching cost
21Threat of backward integration
22 Price to total purchases
23Market leaders and their brands
24Conclusion
25 References
1.This paper will explore Porter's Five Forces to determine whether or not this is an attractive industry and what barriers to entry (if any) exist. In addition, we will discuss several critical success factors and the future of the soft drink industry within the UK.
Soft drinks are sometimes defined to cover mainly fizzy drinks (carbonates) and concentrates, or dilutables such as squash and cordials. However, Key Note has defined the sector to include all of the following categories of non-alcoholic beverages:
÷Carbonated or `fizzy' drinks -- includes colas, lemonade, fruit flavours and mixers for use with alcohol
÷Health drinks - herbal mixtures, or vitamin drinks such as redbull or lucozade
÷Concentrates or dilutables for take-home purchasing -- includes squash, comminute fruit drinks, cordials and syrups
÷Fruit drinks sold ready-to-drink (RTD), with some fruit juice content but not enough to legally warrant being called fruit juices
÷Fruit juices
÷Bottled water, comprising `natural mineral water' from a single named source, as well as flavoured waters, e.g.
Soft drinks on shelves in a Woolworths supermarket...
English: Macro photograph of coca-cola bubbles. De...
ubuntu soft drinkPerrier With a Twist.
Table 8.1: The UK Soft Drinks Market by Sector by Value (ãm at rsp), 1995-1999
% Change
199519961997199819991995-1999
Carbonates3,8504,0004,1504,0004,35013.0
Fruit juices/
Fruit drinks1,2101,2501,3501,4001,62534.3
Concentrates810825800775750-7.4
Bottled water39042545042550028.2
Total6,2606,5006,7506,6007,22515.4
% Change
Year-on-year-3.83.8-2.29.5
rsp -- retail selling prices
Source: Key Note
2. Market segmentation
Table 8.2: Major Manufacturers and Distributors of Soft Drinks, 2000
SectorMajor Brands
Company
Coca-Cola Enterprises Carbonates; fruit drinksCoca-Cola, Diet Coke, Lilt,
Fanta, Sprite, Five Alive,
Schweppesù
Britvic Soft Drinks Carbonates; fruit drinksPepsi, Diet Pepsi, Pepsi
Max, Tango, R Whites
7-Up, Quosh, Britvic
Robinson's, Aqua Libra
SmithKline BeechamCarbonates; concentratesLucozade, Ribena
Procter & GambleFruit drinksSunny Delight
AG BarrCarbonatesIrn Bru, Tizer
RHM FoodsJuicesDe L'Ora, Just Juice
Premier WatersMineral waterEvian, Volvic
NicholsCarbonates; dilutablesVimto
NestléBottled waterPerrier, Vittel, Buxton
ù -- Schweppes brands owned in the UK only
Source: Key Note
Table 8.3: Leading Take-Home Brands of Soft Drinksby Value (ãm at rsp), 1999
Value (ãm at rsp)
BrandMain Version(s)
Coca-ColaCarbonate (cola)620
Pepsi ColaCarbonate (cola)184
RibenaConcentrate170
Robinson's Concentrate/RTD167
Sunny DelightFruit drink161
LucozadeCarbonate (energy)119
TangoCarbonate (fruit)90
TropicanaFruit juice77
Irn BruCarbonate (fruit)73
LiltCarbonate (fruit)55
Ocean SprayFruit drink52
FantaCarbonate (fruit)51
rsp -- retail selling prices
Source: ACNielsen/Off Licence News 26th May 2000
Distribution
As in most drinks sectors, take-home has come to dominant the market volume, but with prices and margins constantly under threat, while consumption away from home continues to produce the value-added element.
Table 8.4: Distribution of Soft Drinks by Value and Volume (%), 1999
ValueVolume
Carbonates
Grocers (take-home)6070
Catering/on-trade/impulse4030
Total carbonates100100
Concentrates/RTD
Grocers (take-home)7080
Catering/on-trade/impulse3020
Total concentrates/RTD100100
RTD -- ready-to-drink
Source:Key Note
3. Governmental and Environmental Factors, etc.
Globalisation has affected many drinks, producing two-way traffic in most countries
Colonial connections are important, having given rise to popular drinks such as rum, derived from the sugar-cane industry. However, the US has had a growing impact on the UK in drinks, with companies such as Coca-Cola, Anheuser-Busch and Procter & Gamble targeting the UK and other European countries for growth once their domestic markets have been saturated. In recent years, the international consolidation of drinks industries has forced governments -- both national and regional, such as the EU -- to pay closer attention to cross-border mergers as they influence domestic markets. This has affected companies such as Diageo, Coca-Cola, Cadbury-Schweppes and most of the larger European brewing groups.
The soft drink industry currently has had very little impact on the environment. One environmental issue of concern is that the use of plastics adversely affects the environment due to the unusually long time it takes for it to degrade. To combat this, the major competitors have lead in the recycling effort which starting with aluminium and now plastics. .
4. Economic Indicators Relevant for this Industry
INDUSTRY CONSOLIDATION
While many drinks markets have stagnated in recent years, the headlines have been grabbed by moves towards consolidating market share, sometimes in markets where oligopolies of a few powerful brand owners already existed.
Examples of the globalisation trend in drinks from recent years have been:
÷Coca-Cola and PepsiCo dominate the soft drinks market worldwide. In the UK, Coca-Cola took full control of its distribution company in 1997. (Ironically, Coca-Cola's move left its former partner, Cadbury Schweppes, to become a major force in US soft drinks). The local distributor for PepsiCo products, Britvic Soft Drinks Ltd, has been put on the market in 2000, as a result of Interbrew's purchase of the Brewing division of Bass.
5. Capital Requirements
The requirements within this industry are very high. Production and distribution systems are extensive and necessary to compete with the industry leaders.
INDUSTRY CONCENTRATION
Table 10: Number of VAT-Based Enterprises Engaged in the Manufacture of Mineral Water and Soft Drinksby Turnover Sizeband, (ã000 and %), 2000
Number of Enterprises% of Total
Turnover Sizeband (ã000)
1-493015.0
50-992010.0
100-2493015.0
250-4993015.0
500-9992512.5
1,000-4,9993015.0
5,000+3517.5
Total200100.0
Source: Business Monitor PA1003 -- Size Analysis of UK Businesses/Key Note
The manufacturing base for soft drinks in the UK is relatively small for such a ubiquitous product. Supply is dominated by multinational companies, such as Bass PLC (owners of Britvic Soft Drinks Ltd), Tropicana United Kingdom Ltd, Del Monte Foods (UK) Ltd, Smith & Nephew PLC, and SmithKline Beecham PLC. Batch processing or packaging lends itself to larger operations, and the food and drink sector has stringent regulations, which must be adhered to. This can boost the cost of production and act as a deterrent to entry.
6. Proprietary Product Differences
Each firm has brands that are unique in packaging and image, however any of the product differences that may develop are easily duplicated. However, secret formulas do create a difference or good will that cannot be duplicated. The best example of this is the "New Coke" fiasco of 1985. Coke reformulated its product due to test marketing results that showed New Coke beat Pepsi 47% to 43% and New Coke was preferred over old Coke by a 10% margin. However, Coke executives did not take into account the good will created by the old Coke name and formula. The introduction of New Coke as a replacement of Coke was met by outrage and unrelenting protest by the public. Three months from the initial launch of New Coke, management apologized to the public and reissued the old Coke formula. Test marking shows that there is only a small difference in actual product taste (52% Pepsi, 48% Coke), but the good will created by a brand can have significant proprietary differences. This is a high barrier to entry.
7. Absolute Cost Advantage
Brands do have secret formulas, which make them unique and new entry into the industry difficult. New products must remain outside of patented zones but these differences can be slight. This leads to the conclusion that the absolute cost advantage is a low barrier within this industry.
8. Learning Curve
The shift in the manufacturing of soft drinks is gravitating toward automation due to speed and cost. However, industry technology is low and the manufacturing process is not difficult, therefore the learning curve will be short and will have a low barrier to entry.
9. Access to Inputs
All the inputs within the soft drink industry are commodity items. These include cane, beet, corn syrup, honey, concentrated fruit juice, plastic, glass, and aluminium. Access to these inputs is not a barrier to enter the industry.
10. Proprietary Low Cost Production
The process of manufacturing soft drinks is not a proprietary process. The methods used in the process are relatively standard within the industry and the knowledge needed to begin production can easily be acquired. This is not a barrier to entry.
11. Brand Identity
This is a very strong force within the industry. It takes a long time to develop a brand that has recognition and customer loyalty. A well-recognized brand will foster customer loyalty and creates the opportunity for real market share growth, price flexibility, and above average profitability. Therefore this is a high barrier to entry.
Table 15: Main Media Advertising Expenditure on Fruit Juices and Health Drinks (ã000), Year to June 2000
ã000
Procter & Gamble Sunny Delight7,117
Red Bull6,309
Solstis4,045
Ribena Tooth Kind range3,268
Lucozade -- Sport2,982
Lucozade -- Drink2,332
Sunsweet prune juice1,512
Ribena drinks range1,237
Ocean Spray cranberry juice range1,120
Ribena Smoothie1,114
Ribena -- Guala drink927
Lipovitan B3869
T&T Fruit Drinks784
Oasis 710
Robinsons Disney promotion697
Lucozade -- Energy drink664
Tropicana Pure Premium range611
Del Monte Extra Juice563
Lucozade -- low calorie545
Sunraysia prune juice503
Robinsons Fruit Breaks318
Del Monte Orange Juice with Bits309
Gerber Foods -- Um Bongo202
Source:ACNielsen MMS
12. Access to Distribution
Distribution is a critical success factor within the industry. Without the network, the product cannot get to the final consumer. The most successful soft drink producers are aggressively expanding their distribution channels and consolidating the independent bottling and distribution centres. From 1978 to the present, the number of Coca-Cola bottlers decreased from 370 to 120 (Industry Surveys, 1995). In addition, 31.9% of the soft drink business is in supermarkets, where acquiring shelf space is very difficult. This is a high barrier to entry.
13.. Supplier concentration
Supplier concentration is low due to the fact that the main ingredients are sugar (cane and beet), water, various chemicals, and aluminium cans, plastic and glass bottles. There are many places to get sugar and ingredients for soft drinks because they are commodity items. The containers (aluminium cans, bottles etc.
Even though these are a small percentage of inputs, all the major soft drink companies own companies that produce flavouring extracts and syrups (Industry Surveys, 1995). This is probably due to the fact that they all have "secret formulas" and this is how they protect the secret. Coke, Pepsi, and Dr. Pepper all have "secret formulas". This makes the concentration of suppliers for extracts very low but they are owned by the soft drink industry. This backward integration by the major players makes the power question moot.
Suppliers do have limited power over the soft drink industry. The concentration of suppliers remains relatively low, which would seem to give the supplier power. The shear mass and volume that the industry buys negates that effect and balances, if not tips it back toward the soft drink industry.
Since people were demanding more and more ways to lose weight and consume fewer calories, the diet soft drink exploded in sales. This demand made the soft drink industry find an alternative to sugar to sweeten their product. This substitute turned out to be Nutrasweet non-sugar sweetener. All in all, there are a lot of substitutes for packaging but not for sweeteners because these sweeteners must have government approval.
The aluminium can, plastic bottles and glass bottles (less now) are all pretty much dependent on the soft drink industry for their livelihood. This makes the supplier have pretty much no power over the industry.
14. Impact of Input on Cost or Differentiation
since the inputs are basic elements there is no differentiation and therefore no impact on the final product for using different inputs. If the price of the input changed, it would dramatically change the price of the product as the aluminium cartel did in 1994. Since the major inputs are commodity items, the prices can change dramatically due to environmental forces. If the sugar industry suffers a loss due to weather or because of political unrest (like in Cuba), then the prices go up and the soft drink industry is usually left absorbing them. The soft drink industry cannot, in all cases, simply pass along the price increase. Customers and distributors are more prices sensitive than ever. This makes the supplier have a fair amount of bargaining power over the industry.
15. Threat of Backward or Forward Integration
With the current climate of "sticking to the core of the company," there is little threat of backward integration into the supplier's industry. This is after the fact that they already have integrated into the extracts to protect their secrets. The integration into the extract-producing segment of the suppliers will be the extent of the backward integration. The suppliers do not have the capital required to forward integrate into the soft drink industry. This makes the industry attractive for investment.
16. Access to Capital
The soft drink industry is very profitable and therefore looked upon favourably by financial institutions. This includes the stock market, direct investors and banks.
17. Summary of Suppliers
When you sum up the different aspects of the suppliers you come to the quick conclusion that the power is definitely in the hands of the soft drink industry. This makes the industry very attractive for investment and for the companies already in the industry from the supply aspect. This means that it is attractive to new entrants as well.
18. Buyers
Buyer Concentration versus Industry Concentration
The buyers for the soft drink industry are members of a large network of bottlers and distributors that represent the major soft drink companies at the local level. Distributors purchase the finished, packaged product from the soft drink companies while bottlers purchase the major ingredients. With the consolidation that has occurred within the industry, there is little difference between the two.
Distributors are assigned to represent a specific geographic area, for example a town or a county. In turn, these distributors are responsible for distributing the product to the retailers who sell the products to the end consumer. In recent years, the national companies have been purchasing independent bottlers in an effort to consolidate the business and gain some distribution economies of scale.
19. Buyer Volume
The contractual agreements, which are present in this industry, dictate that the major soft drink companies will sell their products to the distributors. Therefore, buyer volume is not a factor for this industry.
20. Buyer Switching Cost
Independent bottlers have contractual agreements to represent that company within a certain area Switching costs would include establishing new relationships with other companies to represent and the legal costs associated with distributors being released from the contract.
21. Threat of Backward Integration
It is doubtful that local distributors will move into the actual production process of soft drinks. Distributors specialize in the transportation and promotion of the product that they rely on the carbonated beverage companies' produce.
However, major retailers; for example SPAR and ASDA have begun distributing their own private label brands of soft drinks. These private label competitors will not provide the variety of packaging alternatives, which make the national leaders so successful (PepsiCo 1995 Annual Report). For example, Pepsi offers 12-ounce cans, 20 ounce bottles, 1 litre bottles, six packs, twelve packs, cases and "The Cube" 24 can boxes.
Pull Through
Pull through is not a factor from the independent bottler's perspective. These bottlers have a franchise agreement to represent a major carbonated beverage company on the local level. These distributors are legally bound to represent these companies and therefore cannot choose not to promote certain types of beverages.
22. Price to Total Purchases
Soft drinks are the single product that the distributors are concerned with so price is very important to them. Soft drink companies rely on these distributors to represent them on the local level, so it is important to maintain a healthy relationship.
Impact on Quality and Performance
All three of the leading carbonated beverage producers, Coca-Cola, PepsiCo, and Cadbury Schweppes believe that their buyers (distributors) are an important step in taking their products to the end consumer. The service, which their distributors provide to the retailers, makes a difference to the retailers who sell the product to the end consumer. The actions of that distributor reflect on the soft drink company so if the distributor does not provide the level of service that retailer or restaurant desires, it may harm the company's image.
Substitute Products
Relative price/performance relationship of Substitutes
The carbonated beverage industry provides a non-alcoholic means of satisfying an individuals desire to quench their thirst. Traditionally, coffee and tea would be considered substitute products. In recent years, carbonated beverages have seen the emergence of many new substitute products that wish to reduce soft drink's market share. The soft drink market has been traditionally competitive, without the added friction from "ready to drink tea, shelf stable juice, sports drinks and still-water" competitors also. (Gleason, 1996) Leaders in these emerging segments include Quaker Oats, with their Snapple and Gatorade products, Perrier, and Lipton Iced Teas. "In other words, Pepsi isn't Coke's biggest competition, Tap water is." (Gleason, 1996). Generally speaking, soft drinks are less expensive to the consumer than these substitute products.
Buyer Propensity to Substitute
Buyer propensity to substitute is low due to the contractual relationships between the soft drink companies and the distributors.
Table 13: Selected Major Fruit Juice and Health Drink Suppliers by Turnover (ãm), 1998/1999/2000
Company NameSales (ãm)Year end
SmithKline Beecham PLCù8,381.031/12/99
Procter & Gamble Ltdù1,819.930/06/99
Coca Cola Enterprises Ltd1,134.431/12/99
Britvic Soft Drinks Ltd426.902/10/99
Gerber Foods Soft Drinks Ltd215.825/12/99
Cott Beverages Ltd115.301/01/00
Princes Soft Drinks Ltd108.331/12/95
Del Monte Foods (UK) Ltd82.431/12/99
Red Bull Company Ltd80.331/12/99
Tropicana United Kingdom Ltd 45.730/06/98
Calypso Soft Drinks Ltd22.230/09/99
Merrydown PLC15.731/03/00
ù -- includes turnover for health products
Source:ICC Juniper database
Because of the consistent growth of both the domestic and foreign markets, the soft drink industry is attractive for investment.
.23. MARKET LEADERS AND THEIR BRANDS
SmithKline Beecham PLC
SmithKline Beecham PLC is primarily a pharmaceutical and healthcare group.
Brand Information
The company also owns the Lucozade brand, Solstis energy drinks brands, Ribena juice drinks, and Smoothies.
Financial Results
SmithKline Beecham PLC derives the bulk of its sales from products outside the scope of this report. In the year ending 31st December 1999, turnover generated was ã8.38bn with pre-tax profits of ã1.67bn. This compares with the previous year when turnover generated was ã8.08bn with pre-tax profits of ã902m.
Procter & Gamble Ltd
Procter & Gamble Ltd is owned by the eponymous US company and is mainly involved in the supply of detergents and health and personal care products. However, the company also owns the UK's leading juice drink brand: Sunny Delight.
Brand Information
Sunny Delight is owned by Proctor & Gamble Ltd. A new low sugar version was introduced in September 2000. The light version contains 10% fruit juice and a tenth of the sugar content of regular Sunny Delight -- which had been criticised on its sugar content. There is no added sugar, but the drink is sweetened with artificial sweeteners and has added vitamins A, B1 & B6. Future plans for the brand included screw caps on the 500ml and 200ml bottles in early 2000. In the longer term, an added calcium variant was being considered for the brand.
Financial Results
Procter & Gamble Ltd derives the bulk of its sales from products outside the scope of this report. In the year ending 30th June 1999 turnover generated was ã1.82bn, with pre-tax profits of ã317.4m. This compares with the previous year when turnover generated was ã1.83bn with pre-tax profits of ã286.5m.
Coca Cola Enterprises Ltd
Coca Cola Enterprises Ltd is a leading global drinks company. Its UK subsidiary is involved in the manufacture, sale and distribution of soft drinks.
Brand Information
Juice and fruit juice drink brands supplied by the group include Five Alive, Oasis, Capri-Sun and Kia-Ora.
Financial Results
In the year ending 31st December 1999, Coca Cola Enterprises Ltd reported sales of ã1.13bn and pre-tax profits of ã160.2m. This compares with the previous year when turnover generated was ã1.01bn with pre-tax profits of ã138.5m.
Britvic Soft Drinks Ltd
Britvic Soft Drinks Ltd is a subsidiary of Bass PLC. In addition to its fruit juice and health drinks brands the company also supplies Tango, the major carbonates brand.
In 2000, Britvic Soft Drinks Ltd acquired Orchid Drinks which supplies brands including Amé, Purdeys and Duchy Originals. Britvic viewed the Orchid range as complementary to its existing portfolio, giving the company a stronger presence in adult soft drinks. At the time of the takeover, Orchid brands held a premium position in the adult soft drinks category and had a combined retail value of around ã16m.
Brand Information
Britvic Soft Drinks Ltd were forced to delay the launch of Fruit Shoot, an extension for the Robinson's brand family, until the product had been investigated for potential risks to young children arising from the sports bottle cap. The aim of Fruit Shoot was to present a more trendy playground image than established cartons. The product was finally launched in time to capitalise on the summer and back-to-school trade in 2000. Britvic estimated that first year sales of the product would reach ã30m.
Financial Results
Britvic Soft Drinks Ltd generated sales of ã426.9m in the year ending 2nd October 1999, a rise of 1.1% on the previous year. Pre-tax profits declined slightly to ã6.4m
Gerber Foods Soft Drinks Ltd
Gerber Foods Soft Drinks Ltd is a subsidiary of the Luxembourg-registered company Quadriga Holdings SA. The company processes and distributes fruit juice and fruit juice drinks.
In 1998, Gerber gained a long term licence for the UK and Republic of Ireland to produce and sell Libby's C, and other fruit juices, together with Um Bongo from Nestlé (UK) Ltd. The company already held the UK licences for Ocean Spray and Thomas the Tank Engine juice products as well as supplying the Sunpride and Southern Delight brands.
Ocean Spray entered the smoothies market in 1999 and has the medium term aim of boosting the impulse and snack sectors in distribution plans.
At the beginning of 1999, Gerber purchased MD Foods juice division -- including its Blackburn production plant -- to keep up with demand for Sunny Delight which it produces for Procter & Gamble Ltd.
Brand Information
At the beginning of 2000, Gerber Foods Soft Drinks Ltd invested up to ã6m into a marketing support programme for Ocean Spray. The packs were redesigned to make the logo more prominent and the packaging appear more contemporary. The aim is to attract younger consumers who were purchasing the drink through licensed premises, but not at retail. Spring Dew, a combination of cranberry and elderflower, was introduced in Spring.
Three cranberry cordials: cranberry, cranberry and blackcurrant, and cranberry and orange were produced in conjunction with Princes Soft Drinks Ltd from Spring 2000. The products were a brand extension for the range and were positioned as premium mainstream. The launch was supported by an on-pack taste challenge to drive trial, and a money back guarantee for consumers if they did not like the taste.
In October 2000, the cranberry-based pure juice range was reformulated. This was in a bid to attract consumers who would potentially be put off by the sour taste. The range was relaunched with new packaging, backed by a heavyweight promotional campaign. The recipe juices were sweetened with apple and grape juice to increase appeal to those who only want to drink cranberry for health reasons. Vitamin C was also added to the formulation.
Libby's C, the first vitamin enriched juice, was rebranded and reformulated in August 1999. The new look encompassed silver, futuristic packaging and encouraged a 15% boost in sales. Libby's Tomato Juice was relaunched for autumn 2000 with new packaging advising consumers that a 200-millilitre glass would provide 5mg of lycopene, a proven antioxidant. In 2000, the Libby's Organic range was extended with the introduction of a 200ml single serve drink in Apple or Orange varieties.
Financial Results
Gerber Foods Soft Drinks Ltd boosted sales by 28.2% to ã215.8m in the year to 25th December 1999, although pre-tax profits declined slightly to ã5.1m.
Cott Beverages Ltd
Cott Beverages Ltd supplies an estimated 40% of retailer own-label carbonated soft drinks, including energy drinks. The company is a subsidiary of Cott Corporation of Canada. The company has been looking at developing low acidity children's drinks, products with added vitamins, minerals and calcium, and nutraceutical drinks.
Brand Information
Fruitfull, an organic soft drink range, was launched in 2000.
Financial Results
During the year to 1st January 2000, Cott Beverages Ltd experienced a fall in sales to ã115.3m. Pre-tax profits for this year were ã8.9m. Turnover was ã127m for the year ending 2nd January 1999 when pre-tax profits were ã10m.
Princes Soft Drinks Ltd
Princes Ltd, the holding company of Princes Soft Drinks Ltd, describes its main activity as the import, manufacture and distribution of food and drink products to the grocery trade, and is involved in many activities outside the direct scope of this report. The company is part of the Japan-based Mitsubishi Corporation, and supplies the Princes brand of juices as well as own label for most of the multiples. In 1998 the company acquired the Waterford Juices business giving the facilities to supply the chilled juice sector. Previously, the company had been producing and marketing ambient juices at its Cardiff plant.
Brand Information
Princes Soft Drinks overhauled its miniature and 1 litre juice drinks range to help drive sales in the independent sector from October 2000. The new packaging was geared towards child appeal. The former 250ml carton was relaunched in 288ml format with brightly coloured packaging. The 1 litre juice drinks were given recloseable lids, which helped to drive 43% sales growth in the Princes Pure Juice sales, in 1999.
At the end of 1999, Princes Soft Drinks entered the chilled fruit juice sector with the launch of Princes Finest Pure Orange Juice and Apple Juice.
In 2000, Princes Soft Drinks gained the licence to produce miniature juice drinks under the Noddy character. The initial flavours offered were orange, strawberry and blackcurrant.
The Jucee range saw an extension into the canned carbonate sector with the introduction of 330ml aluminium cans from May 2000. The launch package included a targeted mailing to 13,000 independent retailers to generate product awareness.
Financial Results
Princes Soft Drinks Ltd generated sales of ã555.9m in the year ending 31st December 1999. This was an increase on the previous year's turnover of ã66.8m. Pre-tax profit increased slightly from ã8.4m to ã8.9m
Del Monte Foods (UK) Ltd
Del Monte Foods (UK) Ltd imports and distributes a range of canned fruits, as well as being involved in the processing of fruit juices and juice drinks.
Brand Information
Fruit Burst with 15% juice targets the school lunch pack market. The three-strong juice drink range was introduced in 2000, the blends containing at least 30% juice. They were packaged in 480ml resealable bottles, and were supported by instore sampling, advertisements in October editions of health and lifestyle magazines, and sampling at health clubs and gyms.
In summer 2000, Del Monte became the largest mainstream juice brand to enter the smoothie market with a new range of products targeting `young, sophisticated and discerning consumers with busy lifestyles'.
The company challenged Ocean Spray with the introduction of Del Monte Cranberry Reserve juice drink from May 2000, in 1 litre packs.
Financial Results
During the year ending 31st December 1999, Del Monte Foods (UK) Ltd experienced a 27.5% rise in sales to ã82.4m. However, pre-tax profits declined slightly to ã2m.
Red Bull Company Ltd
Red Bull Company Ltd is a subsidiary of Jerrard Company Ltd, registered in the British Virgin Islands. The company is involved in the retail and wholesale of energy drinks, including the leading Red Bull functional energy brand.
Brand Information
The National Union of Students (NUS) is trialling Red Bull kiosks in student bars.
Financial Results
Red Bull Company Ltd generated sales of ã80.3m in the year ending 31st December 1999. This marked a more than fourfold increase on the previous year. The company also made pre-tax profits of ã21m following losses during the two previous trading periods.
OTHER COMPANIES
Tropicana United Kingdom Ltd
Tropicana United Kingdom Ltd entered the UK market in 1991 and developed the `not from concentrate' juice sector. The group was sold by Seagram Co. Ltd of Canada to Pepsico Incorporated of the US, in summer 1998. The group acquired Copella Fruit Juices Ltd at the start of 1998.
Brand Information
Tropicana United Kingdom supplies the Tropicana and Copella premium fruit juice brands. A new look was unveiled for Tropicana Pure Premium juice at the beginning of 2000. The design aimed to improve the branding and colour coding between varieties and increase chiller cabinet impact.
Tropicana United Kingdom rebranded its calcium-added chilled fruit juice in spring 2000 to emphasise the fact that it contains calcium. Tropicana Plus became Tropicana Pure Premium with Calcium, and also carries the National Osteoporosis Society's Bone Friendly logo.
In 1999, Tropicana launched immediate consumption bottles (ICBs) to target that specific market.
A new fortified juice -- Tropicana Pure Premium Multivitamins -- was added to its product range in October 2000. The juice is pure pressed from 12 fruits and has no added water or sugar. The vitamins include C, E, B6, B2, B1, and provitamin A.
Financial Results
Tropicana United Kingdom Ltd boosted sales by 43.6% to reach ã45.7m in the year ending 30th June 1998. Pre-tax profits also increased substantially to ã2.9m.
Calypso Soft Drinks Ltd
Calypso Soft Drinks Ltd is a subsidiary of Cook Bros. (Tattenhall) Ltd. The company is the market leader in the cup drinks sector with an estimated 81% market share. The group also claims a 5% share of the small cartons sector representing 10.4 million litres of fruit drinks.
Brand Information
Calypso Soft Drinks Ltd supplies the Calypso and Flintstones brands of juice drinks.
For summer 2000, Calypso Soft Drinks Ltd brought out a Variety Snack Box aimed at the children's snacking market. The pack contains a Calypso Juice Drink, a packet of Golden Wonder crisps, a cake bar and a gift. The packaging features characters from Calypso's website, and games and puzzles are printed inside.
Financial Results
Turnover at Calypso Soft Drinks Ltd rose by 7% in the year to 30th September 1999 to reach ã22.2m. Pre-tax profits increased from ã59,000 in 1998 to ã400,000 in 1999.
Merrydown PLC
Merrydown PLC is engaged in the manufacture and marketing of premium quality ciders and non-alcoholic soft drinks. The company supplies the Merrydown cider brand as well as Shloer.
Brand Information
Shloer introduced new 275ml bottles to its range for 2000. The bottles were aimed for single serve drinking opportunities including picnics and packed lunches. Shloer 2g0, was a new premium fruit juice drink launched in a flask shaped 330ml bottle in 2000. The product targeted the single serve, impulse purchase sector with a bottle featuring silver sleeve labels, and flavour illustrations on sleeve labels in citrus colours.
Financial Results
Merrrydown PLC suffered a slight decline in sales during the year ending 31st March 2000, to ã15.7m. However, the company also recovered from a loss making position in earlier years to generate pre-tax profits of ã700,000. The company commented on its 2000 results stating they reflected the completed turnaround of the business, and the restoration of its premium brands.
Rubicon Beverages Ltd
Rubicon Beverages Ltd is the market leader in the exotic fruit juices sector and has been developing its position with the introduction of new flavours and blends.
Brand Information
In July 2000, Rubicon Beverages Ltd rolled out a new look pack design showing accurate illustrations of the fruit in the six-strong range. The new look appeared on Tetra Brik Aseptic RE-Cap one litre cartons and Tetra Brik Aseptic 250ml cartons. It was promoted with a television (TV) and radio campaign, as well as money-off promotions and sampling activity.
Rubicon Beverages Ltd supplies the leading brand of exotic juice drinks with variants including Lychee, Mango, Guava and Passion fruit. The range was launched in new look packs for summer 2000, and supported by a package of TV, radio, money-off promotion and sampling activities. In autumn 2000, a new look was given to the range of 300ml glass bottled exotic juice drinks. The design closely followed the look of the cartons, highlighting the quality exotic fruits which go into the range.
At the start of the year, Sun Exotic Tropical fruit blended drinks were introduced for drinking by themselves or as mixers. The launch was supported by a special introductory price, public relations activity, testing and a television advertising campaign.
Financial Results
When this report went to print in November 2000, no financial results for Rubicon Beverages Ltd were listed on the ICC Juniper database.
24. Conclusion
As we have seen above soft drinks is a mature industry that in the years 1995-1999 has seen an increase in value by 10% taking the sector value to over 7 billion pounds. Due to advertisement and technological innovations amongst a change to eating habits there has been a trend towards an increased consumption of soft drinks. Although in Britain soft drink consumption is effected by the weather (there is a seasonal increase in consumption the summer months) underlying growth is fuelled innovation in packaging, flavours, competition in marketing, wide distribution, health consciousness fast food growth and strong brand images. Accessibility to venting machines and an increase to small snacks instead of meals has led Britain to a similar consumption trend to the U.S.A and the rest of Europe.
Considering the case of a smaller existing rival producer it would be very difficult to compete with the larger firms. Those firms due to economies of scale are a lot more cost effective and they also enjoy the privilege of consumer loyalty due to very strong brand image. The importance of the brand image can be seen in the 1985 fiasco of coca cola, when they announced that they would change the cola formula. Testing groups showed that the new formula tested better, but the consumers in America kept their loyalty in the old recipe. ). On July 10, 1985, eighty-seven days after the new Coke was introduced, the old Coke was brought
back in addition to the new one. This was greatly due to dropping market share and consumer protest.
The recommended strategy for the smaller existing rival producer would be the Differentiation. Energy drinks have been one of the fastest growing segments due to the success of red bull. Consumers are becoming increasingly health conscious. There are many consumers that seek to avoid sugar as a fat free solution. Furthermore ingredients such as caffeine or guarana for extra vitality are very appealing to the consumers. The development of the market has allowed a number of small brands to compete successfully with the major soft drink producers. The success of red bull and Lipovitan B3 is an indicator of this. Red bull managed to outsell coke(in single can format) during 1999. the product offers to provide consumers with stimulation as well as energy in further development from the isotonic drinks in the late 1990.
25. References
Keynote Market information centre
www.keynote.co.uk Accessed at 17-6-01
Mintel Publications
http://sinatra2.mintel.com
Accessed at 20-6-01
Guardian and observer
http://guardian.chadwyck.co.uk
Accessed at 20-6-01
Economy in transition resources foe economists
http://catalog.eerc.kiev.ua/Data_Bases/Ukraine/EERC_Database
Accessed at 3-7-01