Understanding the Soft Drink Industry

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Table of Contents

Overview
NAICs Classification
Works Cited

Overview

The market for soft drinks in the country is competitive and is mainly made up of two manufacturing systems, one being the flavoring and concentrate companies while the other is the soft drink manufacturing companies. The industry is majorly dependent on the syrup produce, with analysts observing that it is the driver of several downstream operations.

The companies operating in the industry tend to follow a similar product life cycle that starts with a syrup producer then moving on to bottling before developing to distributors of products. The company finally grows to manufacture the product in large-scale, something that characterizes a merchant.

Finally, the organization turns out to be a consumer of manufactured goods. Regarding geographical location, many soft drink companies are found near the source of raw materials and the market meaning that they are situated in densely populated locations. Several distribution channels are followed when supplying the products to the consumer.

Recently, the industry is facing several challenges due to the slumping economy, as well as changes in the consumer consumption patterns, as many people are concerned with their health. Regarding the international market, all major companies operating in the industry are focused on the African and Hispanic markets, as they are viewed as the potential markets for growth given the fact that they have a stable consumer base. Another challenge facing the industry is the growing policy debate as regards to taxation of sugar beverages.

NAICs Classification

The industry name for soft drinks is manufacturing and the code is 31211. The category of industries under this classification should purely engage in the production of soft drinks, ice, and bottled water, including the carbonated drinks.

Market Segmentation

First, the industry players should understand the demands of the brand conscious consumers, which include those customers who are in their early twenties comprising of mainly the university students, the working class, and those who have the ability to join their friends in parties.

This category of consumers is carefree and exhibits a special character suggesting that they are freestyle. Therefore, they always want to be associated with the high-end products and their purchasing is based on the quality of the product. In other words, they always buy the image that signifies a stylish product, which exudes buoyancy.

The market is dominated by the average consumers as well and includes individuals who are prone to buying products out of tedious habit. These consumers acquire products because of the media influence, as they are brainwashed to believe that certain goods bring satisfaction. The teenagers dominate this category of the market, even though some university students fall under the class.

The third group of consumers is composed of peer-pressured individuals since they simply follow their friends in buying the products. The last type of customers is the soft drink addicts and this comprises of those individuals who follow the product without considering its substitutes or supplements (Gupta and Lehmann 89).

Periodicals Covering the Soft Drinks Industry

Several articles producing companies and magazines publish news and events related to the soft drinks and the entire industry. One such company is the national association of soft drinks manufactures, which is based in London, publishing Twickenham magazine since 1982.

The same organization publishes a journal article referred to as the soft drinks trade journal, which is an international journal on soft drinks industry. The periodical was published from 1947 to 1982. The British soft drinks association publishes the soft drinks management international, which is a global journal on beverages. In the US, food magazines, the global outlook, and the Poughkeepsie journal deal are some of the publications that talk about soft drinks.

Competitive Structure

The industry has a market structure that is two-tiered meaning that small group syrup producers give territorial franchises to bottling companies whereby they are made the only distributors of products. The Coca Cola was the first company to do this in early 20^th century, but others followed the same channel when they entered the market in the subsequent years. Based on this, the type of market exhibited in the soft drinks industry is an oligopoly because small groups of companies control the industry.

A close study of the market suggests that it is more of a monopoly since small firms that are not in direct competition with the distributing companies dictate policies and determine what should enter the market. Market power is defined as the ability of the company to raise the market price with an aim of increasing its profit margin (Lau 127). Companies operating in perfectly competitive markets do not have the power to increase prices without losing a substantial segment of the market.

However, the soft drinks industry is different since corporations can easily raise prices without losing any of their clienteles to opponents. Companies in the industry, including Pepsi and Coca Cola, have the capability of affecting the total quantity, as well as the prices of products in the market. The major companies operating in this industry are Coca Cola, Pepsi, Cadbury Schweppes, and the Dr. Pepper Snapple Group.

Future Prospects

An analysis of the microenvironment reveals that the soft drinks industry is expected to perform better in the future mainly because of the steady product innovation. Companies are known to identify consumer demands and needs while at the same time aspiring to adjust by adopting the new technologies in order to survive in the competitive market.

The recent trend whereby the soft drink companies are winning exclusive rights to supply products in schools and stadiums is an advantage to the industry, as this will help them in developing faster. In the industry, clients are dedicated to a variety of brands since studies show that consumers of carbonated beverages are always enthusiastic to certain foodstuffs meaning that they seldom acquire any other from the market.

The sales of many companies in the industry are expected to go up and this will facilitate profitability. Even though competition is expected to be stiff in the future, companies are already seeking markets oversees and this will ensure that they survive in the highly competitive market (Warf, Frederick and Stutz 16).

Works Cited

Gupta, Sunil, and Lehmann, Donald. Managing Customers as Investments: The Strategic Value of Customers in the end. Upper Saddle River: Pearson Education/Wharton School Publishing, 2005. Print.

Lau, Ronald. Competitive factors and their relative importance in the US electronics and computer industries. International Journal of Operations & Production Management, 22.1 (2002): 125135. Print.

Warf, Frederick, and Stutz, Barney. The world economy: resources, location, trade, and development. Upper Saddle River: Pearson, 2007. Print.

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