Heavy Investment is requirement

For any new company to enter in the beverage industry, heavy capital is required for producing sodas and beverages. The companies Pepsi and Coke do backward integration by creating their own cans for being cost effective. Also, heavy capital is needed in conducting research for formulating healthy and tasty beverages which takes a lot of time as well. Capital is also needed in conducting promotional activities to create awareness among the mind of consumers.

Formulation of tasty drinks

For any beverage company to have astrong position in the market it is essential that its products are tasty and also healthy which does not cause illness. The reason why there is huge competition among Pepsi and Coke is because of  the taste of their beverages. The taste of Pepsiis a lot sweeter whereas Coke beverage has a strong taste. Any changes made to thesebeverages would result in customer dissatisfaction due to their addiction.

High advertisement and promotions

For any new company, heavy investments arerequired in advertising and promotions for creating awareness in the minds of customers. The company has to conduct attractive advertisements in order to attract customers from the main brands which are Pepsi and Coke.

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Creating customer loyalty

Majority of the people are already loyal towards Pepsi and Coke; thus it is difficult for the new beverage company to convince them to buy the product. The worldwide market is pretty much dominated by Pepsi and Coke. Any new company which enters the market finds heavy resistance from the people to shift to other brands.

Environmental Friendly

Majority of the companies which produce beverages are heavily damaging the environment of the world. As most of the processes for the production of beverage require heavy machines and inresult, these machines create ahigh amount of pollution and damagethe environment. For being eco-friendly, most of the countries’ governments issued laws for making of greenhouses for reducing the emissions.

Others

The other reasons which are the barriers for a new company to enter in the beverage industry are improving brand positioning in the mind of the consumers, improving distribution, prices, quality, and other factors.

Market Attractiveness: Porter 5 forces

For analyzing the beverage industry, we would use the tool Porter 5 forces which consists of bargaining power of buyer and supplier, threat of new entrants, substitute product and competitive rivalry.

Bargaining power of buyers

The bargaining power of buyers is low in the beverage industry especially onthe companies Pepsi and Coke. The customer loyalty among these companies is strong as even switching to other branded companies would not provide the same taste and quality. The strategy for lowering the bargaining buyer of the customer is through creating brand positioning in the mind of the customer.

The steps for making customer loyalty is through thequality of the beverages, prices, advertisements, CSR initiatives and among few others. The switching cost for the customer is low, however, the brand loyalty highly intervenes with shifting to another brand.

Bargaining power of suppliers

The bargaining power of suppliers in the beverage industry is low due to the high number of suppliers and the switching cost for the beverage companies is low. The companies are able to easily switch to another supplier which offers better quality supplies along with low prices. It is difficult for the suppliers to switch to another company such as who is dominant in the beverage industry, for example, Pepsi and Coke. The raw material needed in manufacturing drinks is mostly sugar along with other materials.

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