• Order
  • BHR
  • Offers
  • Support
    • Due to unforeseen circumstances, our phone line will be unavailable from 5pm to 9pm GMT on Thursday, 28th March. Please be assured that orders will continue to be processed as usual during this period. For any queries, you can still contact us through your customer portal, where our team will be ready to assist you.

      March 28, 2024

  • Sign In

Disclaimer: This is an example of a student written essay.
Click here for sample essays written by our professional writers.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com.

Analyzing the soft drinks industry

Paper Type: Free Essay Subject: Marketing
Wordcount: 3788 words Published: 1st Jan 2015

Reference this

Since consumer environment can only progress into further innovative expectations, the soft drinks industry is expected to rapidly adapt and produce new and exciting products. For this reason, the industry provides a variety of drinks which are divided into categories such as carbonates, still and juice drinks, dilutables, fruit juices, and bottled water. With a market domination of 42% Carbonated drinks are usually sweet drinks which contain high levels of sugar, artificial colors and carbon dioxide to make them ‘fizzy’.

Dilutable or concentrated drinks which own 23% of the market are also known in the UK as ‘squashes’, they have no added sugar and are diluted at home.

There are three types of bottled water which have 16% of market share, firstly Natural mineral water which can only undergo through a filtration process as it comes from an untreated source, secondly spring water which is collected through a non-polluted source and is permitted to undergo treatments and lastly table water which may come from a variety of sources and can undergo permitted treatment that may result to a loss of natural mineral salts which are later added.

Fruit juice is 100% natural-pure juice and contains no added sugar, colors, flavorings or any other artificial ingredients it surprisingly owns just 10% share of the market.

Still and juice drinks are drinks which may contain fruit juice along with other ingredients such as sweeteners and preservatives and are in the last place within the market competition with just 9% market share

The report will analyze four main companies that dominate the industry and their products; one from each category of carbonated drinks, dilutable, fruit juice and still water which are Coca-Cola, Robinsons, Buxton bottled water and Co-operative own label brand; juice respectively.

This report will focus on analyzing the industry as a whole. In brief, the above mentioned products will be stressed in such a way that will determine where each competitor stands in the market.

1 Introduction

In the following report the analysis of the soft drink industry within the UK will be given looking at the industry background, market information and further investigation on the industry’s leading products with comparison; eventually developing own hypothesis and strategies. The sources used for this report are mainly soft drinks reports from previous years, a variety of relevant websites; a specific website is the upmystreet website which indicates the geographical location of at least 60 manufacturers in the UK; and a number of academical books provided from the library.

2 Industry structure

2.1 Number of companies

Some useful statistics on the structure of the industry were given by the Government’s annual company survey based on VAT returns.

The analysis shows that in 2007 the number of manufacturers in the UK were 225. The same number existed in 2003 while in 2005 the industry saw a rise from 2000 by 25 manufacturers with 230.

Source: Soft drinks market report 2008/Key Note

While in 2007 the number of manufacturers in the Soft drink industry had been at 225, updated information were given in the BSDA report 2010 by Zenith International (Specialist food and drink consultancy) which stated that over 250 manufacturers were contacted in order to gather the required data about the industry. This shows that the industry has added more than 25 manufacturers which indicates that the industry is expanding; gaining consumers with the variety of products they have to offer but they will also have to face a bigger competition in the market.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!

Essay Writing Service

2.2 Geographical spread

According to the UpMyStreet website (part of Scripps Networks Interactive, the US leader in home, property and food information and advice), provides any detailed information required about specific areas or locations within the Uk. Even though the number of companies has grown, the geographical spread of the manufacturers in the UK remains the same; the website provides information location wise for only 60 companies; the location of the companies according to the website covers all of the UK, mostly situated in major cities like London, Glasgow, Cardiff, Bristol, Leeds, Sough.

OBM companies for example such as Coca cola enterprises Ltd or Britvic Soft Drinks Ltd cover a number of different locations for their offices, factories and distribution centers; while this indicates that the industry is a clustered one according to the same type of companies being in the same area which they benefit from for a number of reasons one of them being that they have fast and easy access to transport infrastructure, these two companies mentioned above which are based in London, are horizontally integrated; dominating the industry with a shared percentage of market domination of 60%.

The soft drink industry is a fragmented one due to the fact that there are a lot of small/medium companies but could also be described as a volume industry along with fragmented as it has a few big companies too. The industry is ultimately a traditional one as there are stable prices due to the fact that there is brand stability through brand establishment, limited innovation levels and volume production.

*OBM-Original Brand Manufacturing

2.3 Production and markets

These are the different stages of the soft drink industry production commodity chain. Production is based in the UK and mainly stays within the company if the company is large enough to be able to carry out the whole production; like Britvic Soft Drinks Ltd who owns a number of brands. The market companies use to sell their brands is within the UK and the channels they choose to promote are retailers which include supermarkets, small shops, newsagents, petrol forecourts, organizations which are restaurants, schools, hospitals, workplaces, cafes, cinemas, pubs and bars and also wholesalers. The industry is generally focused on sells within the UK but some major companies like Britvic Soft Drink Ltd who owns just over 22 established brands is exporting products to 50 other countries; the industry is not just expanding it is also spreading internationally.

2.4 Lyfecycle

Table 3: Industry Lyfecycle

Source: Michael E. Porter (1980), adaptation: Stephanie Anastasiou

As shown on table 3 the soft drinks industry is in its maturity stage, a stage where brands are already established and where the number of manufacturers makes the competition among the companies in the industry more intense; Jill Ardagh, Director General of the British Soft Drinks Association said: “Consumers are loyal to the drinks they know and trust but remain open to innovative products and brand extensions which meet their ever-evolving needs.” Some companies may even come up with substitutes of existing products with a lower price due to the fact that everything has been done before therefore there is need of innovation and so companies have to think of new strategies to promoting their brands and ultimately gaining a respectful position in the market; Britvic Soft Drinks Ltd whilst successful in the UK elaborated its market oversees to gain competitive advantage over its competitors.

2.5 Strategic groups

Strategic groups within an industry are companies who share the same or similar strategies therefore belonging in the same group. Michael E. Porter (1980): ‘an industry can be mapped several times, using various combinations of strategic dimensions, to help the analyst see the key competitive issues. Mapping is a tool to help diagnose competitive relationships, and there is no

Source: Michael E. Porter (1980), adaptation: Stephanie Anastasiou

There are many companies in the soft drink industry which run their business in the UK market. Strategies vary according to each company. There are three strategic groups within this industry.

Companies belonging in the volume production group, are companies that have a variety of brands under their wings, manufacturing most of the categories of soft drinks providing the consumer with a variation of carbonates, dilutables, fruit juices, still and juice drinks and bottled water, exploiting their chances of consumption in the market.

Due to brand domination over the years their brands may seem close to heart for the older generation as their very first products were the first to be introduced to the public, therefore their challenge is to not only keep the older generation interested but to attract their key audience which is the younger generation. They strategically do that by the clever use of marketing exposure of advertisements whether that is by ambient media, television ads, interesting young-looking websites where the audience can engage with by entering competitions, their new no-added sugar products which will certainly grab the attention of health conscious consumers also lowering environmental impact and a normally used strategy which includes special product offers. Their methods of distributing are through retailers, wholesalers and organizational channels.

These companies are most likely to be market leaders who have established brands, known to the audience which covers all age groups, due to their history in the market.

Companies which fall in the specialty production group are companies that specialize in manufacturing one specific soft drink. These are mainly smaller companies with brands that could be described as fairly new in the market and who may not have brand establishment or recognition by the consumer.

Own label brands can hardly compete in a strongly competitive market such as the soft drinks industry which produces high quality and high valued products, as the only strategy they have to use is lower price, they are only distributed in niche markets; in their own retailer.

Barriers of entry can be identified in the above groups. For example barriers protecting the volume production group in table 4 from being attacked by the other two groups are brand image and identification and distribution channels, while barriers protecting the own brand group are controlled scales of economy.

2.6 Value chain and networks

The value chain contains all the activities that are performed in a company which are used to design, produce, market, deliver and support its product. Activities vary with different industries and companies within; The Soft Drinks industry focuses mostly on the primary activities and specifically on market and sales due to the products within the industry being similar they focuse on their marketing and advertising strategies.

Table 5: The generic value chain

Source: Michael E. Porter, Competitive Advantage, 1985

A network open to public is the BSDA British Soft Drinks Association which shares general information about soft drinks. It is the national trade association and has a significant place in the industry:

Influencing the government

Communicating with the media

Promoting sustainability

Enhancing sector skills and competences

Source: The BSDA British Soft Drinks Association website

The British Soft Drinks Association generates legal, technical and social views on the industry. According to the website they currently have 90% membership of the industry’s manufacturers. The BSDA provides its members (manufactures/franchisors, Factors and associates) a number of specialist services such as advice on all aspects of the industry, discount on specialty publications and training courses and the inclusion of members on the BSDA’s database which automatically redirects members or the public to their website advertising their brands and services; this database is also important to retailers, manufacturers and suppliers for commercial research. Members of the association have the opportunity to attend an annual lunch in which they are able to engage with important figures from government, related industries and organizations. The BSDA is a key factor of the industry as it is the only network where members are given the opportunity to create and build on relationships which allows for further future developments of each companies.

2.7 SWOT Analysis

Strengths

The domination of brand established products such as coca-cola is a persistent effect in creating consumer demand for soft drinks

The slow but steady growth of marketing channels such as retailers, has opened up new markets for soft drinks.

The strong support of brands with advertising and marketing techniques which generate a demand from retailers thus consumers

Scales of economies are possible through the introduction of environmentally concerned production for example packaging, reducing transport costs, which was influenced by key market trends that concern the health conscious consumer of today

Weaknesses

Many soft drinks face the challenge of naturally fitting in with healthy living or environmental concerns

Some well established soft drinks have gained brand loyalty by consumers

The majority of soft drinks is easily imitable

There are not high barriers of entry within the industry due to the availability of ingredients and packaging

Opportunities

The growing expectations of the consumer’s need for new products or flavors provides a continues opportunity for innovation

The easy adaptation of most products to versatile consumer tastes

Threats

The low-cost production of own label brands and other cheap brands

Accusations of soft drinks being a cause to the obesity problem

Threats from other internal products gaining market share. For example, sparkling water may take share from carbonates

Possible changes that may affect the external environment are political, economic, social, technological otherwise known as PEST.

Political changes have an important influence on the industry; “Health awareness has driven demand since 2000, both from consumers and at governmental level (e.g. legislation on the sale of unhealthy drinks in schools, and on their advertising on television during children’s programs). New Products tent to have a low-sugar or healthy, natural message, examples including coca-cola Zero…”.Soft Drinks market report (2008) Key Note

Economic changes can occur when low consumption due to bad weather arise. An innovative brand in the market focusing on a young audience meeting their needs may cause a downturn to an existing brand.

Technological aspects may be new machinery introduced to the market which allow the replacement of a number of employees, this may cut down on a company’s cost, although on the other hand the cost used to supply a company with the new machinery may be gained after an amount of time which a company may ultimately suffer a loss.

Social issues may occur due to the older generation recognizing some brands while the younger generation may need to be introduced to them, brand adaptation to younger trends, sponsoring particular sports due to their popularity, using famous idols in advertisements.

The end of the structure analysis of this report shows that the soft drinks industry has a large number of companies within the UK which fall into three categories. The industry is at its maturity stage where there is a high level of competition.

3 Key competitors

After researching the industry, the soft drinks market leaders which are chosen from each strategic group are Coca-cola Enterprises Ltd and Britvic Soft Drinks Ltd which use similar strategies and belong to the volume production group, Buxton Mineral Water Co Ltd in the specialty production group and the own label group with Co-operative juice.

Coca-cola Enterprises Ltd

Coca-cola Enterprises Ltd employs 4,650 people and has 7 manufacturing sites across the UK which manufacture 650,000 cases daily on production lines and deliver to customers; with a production of around 260 million cases of their products every year. The company makes, sells and distributes its products in the UK to a range of customers including retailers, wholesale suppliers and organizations. The company manufactures carbonates, dilutables, bottled water, juice drinks and fruit juices.

Find Out How UKEssays.com Can Help You!

Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.

View our services

According to the Coca-cola Enterprises Ltd corporate website, the company is looking to minimize, as it is stated, the environmental impact of their products and reduce their carbon footprint by 15% by 2020. As water is the key ingredient in manufacturing a soft drink, the company will reduce the usage of water in making a Littre of drinks by 10%. They seek improvement on their packaging by making them lighter and more recyclable; their aiming to establish 80 recyclable zones in the UK by 2011 (in 2008 they recycled 97% of their manufactured waste with just 3% going to landfill).

As the consumers of today are becoming more health conscious, the company’s main strategy is to encourage people to be more active by providing nutritional information on their products, the way they market their products, and supporting programs that encourage wellbeing and healthy lifestyles and extending their brands by introducing more low and no-added sugar products. For example the most recent coca-cola product added in their range has been coke zero (carbonate) which has black packaging and a flavor similar to classic ‘coke’.

Source: CCE corporate website

Britvic Soft Drinks Ltd

Britvic Soft Drinks Ltd has similar strategies, with around 2,100 employees and six production sites across the UK, offices and distribution centres they sell 1.4bn litres of soft drinks annually. The company’s production process starts with buying fruits for over 2,000 suppliers globally, where are shipped to the UK along with concentrated juices, transported to their sites by lorries where the manufacturing process takes place. Their aiming to also lower their impact on the environment by reducing carbon emissions by 30% by 2020, reduce their water usage, and save on energy sources as much as they can. As John Gibney, Finance Director and CR Programme Sponsor of Britvic stated on the company website, Britvic’s strategies are to focus on making their brands adaptable to consumer’s expectations; for products that deliver value with a combination of integrating social and environmental considerations, the environmental performance of their packaging (minimising waste, encouraging recycling), supporting local communities and healthy lifestyles and employee wellbeing.

Britvic has a variety of 22 brands; Robinsons is one of the leading dilutable drinks the market with a history of 75 years. The strategy for this purtiqular squash is its association with a famous worldwide sport; Wimbledon where consumers can enter competitions to win tickets, and the fact that it has become a part of family-life.

“Our strong market positions, balanced portfolio and track record in innovation has enabled us to deliver the quality and value that consumers want, whilst meeting our commitments as a responsible business.” Britvic Corporate responsibility report (2009)

Source: Britvic Soft Drinks Ltd Corporate website

Buxton Mineral Water Co Ltd

Buxton Mineral Water Co Ltd belongs to the Specialty Production group. The company specializes in the manufacture of natural mineral water which can only undergo through a filtration process as it comes from an untreated source; St. Ann’s spring in Buxton. Their products are supplied to the same marketing channels Coca-cola Enterprises Ltd and Britvic Soft Drinks Ltd use; retailers, organizations and wholesalers. According to their website the company reduced their water usage by 51% between 2006-2009. Buxton reduced impact on carbon footprint by 20% between 2004-2009 in their transportation of their product, they aim in making their distributions as efficient and sustainable as possible.

According to the Buxton website their bottles are the lightest in the UK by cutting down on plastic by 20%. The strategies they use are creating a variation of bottles by using different amount of water in each and the practicality of each for example the 25 cl for children suitable for lunchboxes due to their size and sports caps which sponsor the England cricket team where they gain brand exposure due to the popularity of the sport and the usage of water becomes a trend to consumers due to the consumption of sport celebrities.

Source: Buxton Mineral Water Co Ltd website

Co-operative Group Ltd

The co-operative company is a big chain of supermarkets across the UK offering not just food but services like banking, travelling, pharmacy, funeral care, insurance, legal services, electrical and motors. It employees 120,000 people, has 5.5 million members and around 4,800 retail outlets. If a retailer like Co-op knows success in not just food but in the expansion and exploration of new challenging areas as the one’s mentioned above then perhaps the next step is to introduce own label products which is what supermarkets in the UK are doing at the moment. If a retailer has a good background and the consumer relates to its values then that will possibly reflect on the retailer’s own label brand which the consumer will not hesitate to buy. Consumers are also looking to reduce their overall bills, often through promotions and own labels. The only downturn of own label brands is that they are not being advertised and will only be known to customers within the supermarket.

Source: The Co-operative Group Ltd corporate website

4 Conclusion

The purpose of this report is to comprehensively understand the soft drinks industry within the UK market., It is extremely competitive and for that reason it is difficult for new companies to enter the market in which there are over 250 manufacturers all of which have a number of strengths as well as weaknesses developing their own strategies some similar with others accordingly to groups they are exploring opportunities within the market to promoting their brands and ultimately gaining profit. As generations change the industry is slowly growing and is able to adapt to new trends.

 

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: