Introduction
There have been various changes in the retail food and beverage industry which has been impacting the companies to an extent. Apart from the still competition in the prevailing market scenario, the industry is going through significant changes due to various prevailing factors such as change in the consumer tastes and preferences, changes in the governmental regulation and advancements of technology in the market. It has been predicted there are certain changes in the market trends which has been shaping the food and beverage industry. The consumers and the government are increasingly focusing on the organic food items and locally produced food rooted (Laughman, 2019). Moreover, there has been environmentally concerned group which impacts the smooth functioning of the business organizations for example the Coca Cola Company and PepsiCo Company. The changes in the market trends enable this organization to bring forth relevant changes in the products offered to the consumers (Laughman, 2019). The purpose of this report is to analyze the trends and changes in the consumer forces of the food and beverage industry which impacts the food and the beverage industry. It understands the concept of the chosen article and implements theories to compare and contrast the strategies of the two selected companies. Lastly, it summarizes the main points of the report and concludes the report.
Key concept of the article
As per the article by Casey Laughman (2019), The beverage industry has been undergoing several changes in the external business environment. The article focuses on the changes in the trends of the consumers, their tastes and preferences which threats the business environment of beverage industry (Kemp 2013). There has been a lot of uncertainty in the business environment such as changing consumer needs and demands, automation and advancement of technology, rise in new markets and other regulatory changes. The challenges of the beverage companies go on and on as mentioned by Casey Laughman (2019), in the article. Further, the article talks about the level of uncertainty that can faced by Coca Cola and PepsiCo, the largest companies in the world. The articles points out the changes and the initiatives taken by the organizations such as building infrastructure which allows the organizations to face the challenges (Kemp 2013).
The large organizations are taking various initiatives to overcome the challenges int he highly evolving business environment in the beverage industry. For example, both Coca coal and PepsiCo have been widening the range of products sold by them to address the changing needs and demands of the consumers (Martinez 2013). The consumers are highly conscious about the sugar content in the beverage and its unhealthy nature. Therefore, the companies are offering healthy drinks option for the consumers (Ramos et al. 2015). Most importantly, there are regulatory concerns as well along with the environment harm caused by the industries in the beverage industry. The amount of non-renewable waste generated by the company affects the whole world. In order to address these issues and challenges the beverage companies are already taking initiatives. Coca cola aims to reduce the plastics bottle and its impact on the environment by the year 2020 (Kemp 2013). The company has announced investments on latest technologies and machinery which allows the companies to reduce the usage of plastic bottle and to utilize the recycled bottles into more efficient usage (Laughman, 2019). On the other hand, PepsiCo has been aiming to change the packaging process of the products. The initiatives taken by the organization will be discussed in detail in the later part of the assignment (Kemp 2013).
Analysis of trends and developments in food and beverage industry
PESTEL analysis
Political factors: According to Acosta, Coronado and Ferrándiz (2013), the food and beverage manufacturers are under the control of the FDA. The companies need to comply with the measures and standards of the FDA. There are various regulations, laws and policies of the country in the operating countries. Most importantly, there is an increasing environmental and health consciousness among the consumers (Kemp 2013). There are growing regulations and legislations regarding the packaging materials, reusability of the packaging materials. These changes in the laws and regulations of the government impact the operations and the activities of the business organizations.
Economic factors: As mentioned by Bommer, O’Neil and Treat (2014), the companies are exposed to several market risks taken into deliberations. The PepsiCo Company and coca cola company is bared to significant commodity prices, interest rates and the foreign exchange rates. The PepsiCo company and Coca cola company operates in the global market which involves exposure to exchange rate fluctuations, inflation rates and other economic factors. These variations impact the profitability of the business organization.
Socio-Cultural factors: In the opinion of Chapel, Mariz and Ernest (2015), there is an increasing trend for healthy food items and organic beverages. This change in the consumer tastes and preferences affects the operations and profitability of the organizations. The companies in the organization must change the product offerings as per the tastes and preferences of the consumers. As per Collis and Rukstad (2008), it has been found there the soft drinks products cause various health issues and problems. This threats the companies operating in this industry.
Technological factors: According to Mahalik and Nambiar (2016), there are various technological acknowledgement in the market and improvements in technology such as six sigma and MRP-II. This is an opportunity for the organizations, it might improve the efficiency of the business organizations and the quality of the products offered to the consumers. This might help the organization to offer beverages as per the changing needs and demands of the consumers in the market.
Environmental factors: In the opinion of Mahalik and Nambiar (2016), the government and the consumers are highly conscious about the impact of the company’s operations on the environment. Therefore, it needs to consider changing its business operations and activities which has minimal impact on the environment.
Legal factors: There are strict laws and regulations concerning the environment and the quality of the beverages offered to the consumers (Martinez 2013). Therefore, the organizations need to comply with the changes in the laws and regulations of the government.
Five force analysis
Bargaining power of the buyers: The bargaining power of the consumer is medium in the market. Accoridng to Prahalad and Hamel (1997), the consumer switch brands on the basis on the price and the expense of the products. The soft drinks offered by the company are not considered to be an absolute necessity to the consumers (Kemp 2013). Therefore, price plays an important factor to retain the customers.
Bargaining Power of the suppliers: In the opinion of Roethenbaugh (2015), the major players in the industry aim to acquire the best raw materials and supplies from the suppliers. The suppliers in the market do not face any competitive pressures. Therefore, the supplier power is high in the industry. It mainly depends on factors such as price of the products and the way in which the product is delivered to the customers (Kemp 2013).
Threat of new entrants: The investment cost of new start up business in the industry is high. The presence of dominant players in the industry such as Coca cola and PepsiCo is a barrier for new entrants. It might take lot of time and investment for the new entrants to reach top position in the market, due to the presence of dominant players in the market (Roethenbaugh 2015).
Threats of substitutes: As per Morgan (2013), Coca cola faces stiff competition from PepsiCo. A Price factor is the only reason why people switch from one brand to another. The name and reputation of the brands play in important role in retaining the consumers.
Rivalry among the existing players: The prevailing competition among the firms in the industry is high as mentioned by Sun (2013). The companies in the industry undertake promotional tools and strategies to gain new customers and retain existing customers in the market.
Potential implications of the industry trends on the companies
According to Vander Wekken et al. (2014), the millennial are one of the major trends in the industry. As per the analysis, it has been identified that the consumers are highly conscious about their health and health food and beverage intake. In the opinion of Sloan and Adams Hutt (2013), the consumer increasingly prefers unique taste and innovations in the beverage drinks rather than sugary drinks and carbonated drinks. There has been a sheer growth in the popularity of fermented drinks which contains health benefits (Martinez 2013). These changes in the consumer tastes and preferences have impacted the operations and the activities of the business organization. Moreover, as per Malik, Willett and Hu (2013), the beverage industry has seen an increase in the availability of new range of products in the markets, from stress relievers to immune system health. The consumers increasingly prefer more than hydration. According to Mahalik and Nambiar (2016), there is an increase in the complex desires of the consumers in the market. The consumers prefer non-alcoholic beverages which is an opportunity for the companies like Coca Cola and PepsiCo. They are making an active choice to reduce the consumption of alcohol; hence they are opting for soft drinks. This is an opportunity for the companies to offer non-alcoholic beverages and increase the range of beverages offered to the consumers. Furthermore, as mentioned by Malik, Willett and Hu (2013), sustainability has been considered to be one of the key issues which impact the development of the beverage companies. The consumer as well the government are increasingly aware of the impact of the operations and activities of the organization on the environment. Therefore, as per Mahalik and Nambiar (2016), the organizations have to reconsider the process of manufacturing the drinks and undertake process and packaging which has minimal effect on the environment. They have to take measures and actions to reduce their impact on the environment. Additionally as mentioned by Porter (1989), the consumers are increasingly consciousness about the number of plastic bottles and cans in the market. These trends and changes in the external market environment of the organization might impact the operations of the organization and affect the profitability of the organizations involved (Martinez 2013).
Comparison and contrast of two companies
PepsiCo strategy (strengths, weakness, opportunity and threats)
According to Acosta, Coronado and Ferrándiz (2013), as the beverage industry is going through transition with the changes needs and preferences of the consumers as well as technological changes, it has been affecting the business of the company. In order to address the changes in the trends of the consumers and the other necessary changes, the company has undertaken strategies to focus on digitalization, sustainability and marketing. As mentioned by Bommer, O’Neil and Treat (2014), iot has undertaken performance with purpose agency 2025 to follow in the near future. With the increase in the level of competition among the firms in the industry, PepsiCo has increased the choices of the products offered; it has added more healthy and nutritious choices in the product portfolio. The company has been investing heavily in the marketing and research and development of the company in order to meet the growing needs and preferences of the consumers.
According to Acosta, Coronado and Ferrándiz (2013), PepsiCo tactfully uses its strengths to overcome the threats and take advantage of the prevailing opportunity in the market. The biggest strength of the company is strong brand image. However, Coca Cola being the biggest competitor in the market, it challenges the strength of the organization. With the strong brand image and positive reputation of the company it has managed to face competitive pressures. With the CSR sustainability of the organization is has been able to retain the trust and confidence of the consumers. The only weakness of the company is it dependence on the US market. Accordiing to Prahalad and Hamel (1997), the company earns majority of its revenue from the US market. The fluctuations in the exchange rate highly affect the market. However, as per Morgan (2013), with the emergence of new advanced technology in the market, the company is able to invest in R&D. This is an opportunity for the company. The legal and regulatory changes by the government threat the company.
Coca-Cola strategy (strengths, weakness, opportunity and threats)
According to Vander Wekken et al. (2014), in order to address the trends and market changes of beverage industry, Coca-Cola developed its global marketing campaign to support the entire range of products offered to the consumers. It has widened the range of drinks offered to the consumers such as Diet coke, No sugar coke, Coke Zero and Coca-Cola life in order to address the growing trend of health consciousness among the consumers. The company has invested in marketing campaigns and increased its online presence on the social media platforms such as “Taste the Feeling” (Welsh, Lundeen and Stein 2013). This campaign emphasizes on uplift, taste, refreshments and other personal connections. Coca-According to Chapel, Mariz and Ernest (2015), Cola promotes the product offering with emphasising on fewer calories without alcohol, without caffeine and no calories on the drinks. The company seized the opportunity of technological advancements and evolving preferences of the consumers by taking steps to reshape the business. It has identified the need for faster, efficient and smarter operation systems. Coca-Cola has reconsidered the core business model. It has expanded its portfolio of products into more than 500 brands such as tea energy drinks, juices and other beverages. As per Chapel, Mariz and Ernest (2015), The company has launched range of alcohol free sparkling drinks and free fizzy wines. Further, it has produced soft drinks bottles with 100% recyclable material to address the growing cautiousness among the consumers about the environmental impact.
According to Malik, Willett and Hu (2013), Coca-Cola uses its incredible brand identity to retain the customers in the market. The major weakness of the company is that it is a major producer of carbonated drinks, they have not addressed to the healthy solution to it. This influences the health complications. The advancement of technology and the changes the consumer preferences are an opportunity for the company. The legal and governmental regulations along with the standards of FDA threat the profitability of the organization. Therefore, it needs to take measures to overcome the threats and challenges.
Conclusion
Therefore, from the above analysis, it has been identified that the trends of the beverage industry is changing at a rapid rate. The change in the external market environment poses to be a threat and challenges the smooth functioning of the business operating in the industry. The report has identified the changes and trends in the food and beverage industry. It has been identified that the consumers are highly conscious about the healthy food intake; there are technological advances and changes in the governmental laws and policies as well as environmental concerns. However, the PepsiCo and Coca-Cola have been taking various actions and steps to overcome the issues and challenges in the external environment. The report has analyzed the potential implications of the industries and its impact on the two companies. It has analyzed the current strategies implemented by the companies to overcome the threats and challenges of the organization and the competitive advantages of the companies.
References
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