The global battle of the soft drink industry giants

Consumers’ preferences can change drastically through the years. A lot of factors can have its influence which sometimes makes it challenging for the companies to be creative and flexible. A few years ago the battle in the soft drink industry was between the giants Coca-Cola and Pepsi. Today, consumers’ preferences have changed mainly because they started exploring another option and preferring new flavours.

The predominant economic factors that are important to evaluate the soft drink industry are the size of the market, profitability, and growth. Without forgetting competition, trends and industry factors along the way.

In 2005, the market share of the soft drink industry was 46.8 per cent out of the whole non-alcoholic industry — according to Datamonitor. Also, they found that in 2009 the total market value of soft drink industry reached $367.1 billion. In 2004, the soft drink volume was 325,367.2 million litres compared to today’s amount of 228 billion litres of volume. That shows that this industry had — and still has — the potential for high profits despite the competition of other non-alcoholic sectors including coffee and tea, bottled water, energy and sports drinks.

According to Barbara Murray, who in 2006 stated that the three dominant players in the industry are Coca-Cola with a market share of around 50 per cent, Pepsi of around 21 per cent and Cadbury Schweppes with 7 per cent market share, the industry giants are also looking at “non-carbonated beverages for growth. “Meaning, the carbonated drinks became only one of the product palette that the companies started offering. Diversifying products have given the companies the opportunity to continue their growth and make more profits. That is the main reason why they establish themselves in other markets such as bottled water, sports drinks, confections and snack.

Compared to a decade ago, the current market situation has experienced some changes. The carbonated soft drinks market is expected to grow to 243 billion litres by 2018 — according to the Canadean beverage forecast. After water, it is the second biggest market, even if does not launch with a growth as fast as energy drinks and spirits. Compared to Europe and Asia that each share 20 per cent of the global market, the domination comes from the US, with 50 per cent of the consumption.

There are few challenges that the industry is facing. First, the constant alarm from the health advisors about the high sugar content in these products. Then, consumers grow older and transition into other markets like water or juice, and other types of beverages, instead soft drinks. The soft-drinks giant might consider changing their marketing strategy because of the changing demographics. In the developed areas, where marriage is postponed and there is a rising tendency of single-person household, brands should consider targeting the individual instead.

With all the scientific research behind the benefits of healthy food, and all the lobby groups whose purpose is recycling and waste reduction, a huge impact on people’s overall understanding has been made. Because of that, the companies were forced to launch new products, such as low or no-sugar products. Also, some of the companies are seeking other alternatives instead of the usual plastic packaging.

The Coca-Cola Company has a longterm vision of building a significant contribution to the economy of used and reused sources. Their goal is: “sourcing 25 per cent of PET plastic from recycled or renewable material. Since then, we have encountered challenges including low supply/high demand, crude oil price collapse and regulatory restrictions,’’ says Coca-Cola’s director of sustainable packaging, April Crow.

The company’s vision is going in the right direction so far. According to Crow, Coca-Cola’s “PlantBottle packaging now accounts for 26 per cent of the company’s packaging volume in North America and 7 per cent globally, making Coca-Cola the world’s largest consumer of bioplastics.” Their success consists of a strategic planning and combining the environment protection with high-quality products.

One of the many factors that increased growth on the soft-drink market is the innovative marketing champagne. Whenever there is a global sports event, the main sponsors are the soft drink giants. PepsiCo started a partnership with NBA, in April 2015 and became the official NBA partner. Also, PepsiCo has launched new products with new flavours. The company launched the Pepsi Proprietary glass bottle for pub and restaurant use. The innovative design of the bottle, which can only be achieved by using glass as a building material, has great features and stands out from the competition.

What can come as a challenge in the near future are potential local and international regulations that will serve for soft drink reduction in the country. For example, Mexico implemented additional taxes of the number of sales of soft drinks in 2014. That resulted with 6 per cent sales decrease by the end of the year. Today the leading vendors along Coca-Cola and PepsiCo are Red Bull, Nestle Waters, Dr. Pepper Snapple, Danone and Tingyi. In the Middle East, drinks that are quite popular are Mirinda and Mountain Dew.