The Global Soft Drink Market Situation

The Global Soft Drink Market Situation Executive summary The purpose of this business report is to provide insight on the market trends facing the soft drink industry and a detail strategy for the launch of a new carbonated soft drink Ice-cola in Pakistan. The idea of launching a carbonated soft drink in Pakistan is to change consumer tastes, a growing emphasis on product safety, and enhancing the market shares and profit percentage. Soft drinks are non-alcoholic (carbonated) as well as non-carbonated beverages which can be classified in number of categories. Soft drinks are in high demand and are preferred by almost every category of society in the world. More specifically, the demand for the carbonated soft drinks in Pakistan is highly influenced by certain characteristics like spiky taste, culture and social trends in parties and religious attributes. The strategy of new soft drink Ice-cola (which is going to be launched in Pakistan) will have to face competitive market in terms of other carbonated soft drinks particularly giants Pepsi and Coca -Cola because these soft drinks have already well maintained its positions in Pakistani market for a long time. However the strategy of new soft drink Ice- Cola has also competitive advantages in terms of changing consumer taste and refreshing sparking element that will ensure profitability and quality acceptance in Pakistani society. Introduction Soft drink industry Soft drinks are common preferences among all the individuals in almost every region of the world. The name soft drink especially separates alcohol element from this category and the term drink which includes a number of soft drinks like colas, sparkling water, iced tea, lemonade, squash, and fruit juices are among the most common types of soft drinks. Soft drinks are gradually overtaking hot drinks and other beverages as the major drink sector in the world. However the US remains the biggest market at present and Asia seems to be the main driver of sales growth in the future. Now-a-days soft drink is more favourite refreshment drink than tea, coffee and other hard drinks. Murray (2006) has explained the soft drink industry by stating, For years the story in the nonalcoholic sector centered on the power struggle between Coke and Pepsi. But as the pop fight has topped out, the industrys giants have begun relying on new product flavors and looking to other carbonated beverages for growth. Global Soft drink Market Situation Soft drink industry has a powerful impact on the lives of its consumers from throughout the world. The consumption of the soft drinks continued to increase year by year because of link between healthy diet and soft drinks. King (2010) states that in 2009 Eastern Europe, Africa, Middle East and Asia are fastest growing regions as compare to developed markets. In soft drinks category, bottled water, carbonated, non- carbonated and other fruit juices are available in the market. Bottled watered drinks have achieved sound sales growth due to distinctive attributes of the product which is refreshing element in hot weather and sugar free flavored water. On the other hand, a number of functional drinks had been also a part of consumers interest. Each soft drink has certain attributes which attracts its consumers. It is reality that some soft drinks remain very popular in the market for certain reasons such as brand image, quality and price. The market size of the soft drink industry has bee n changing with the time being. This industry has 46.8% market shares within non-alcoholic industry. The global soft drinks market was valued at $479bn in 2009 and is projected to grow at a CAGR of 3.1% to reach $556bn in 2014. According to financial forecast period to 2014, soft drinks sales are expected to increase 39.8% to PKR19.5 billion ($233 million). (Euromonitor Passport GMID) Pakistani soft drink market situation The soft drink market in Pakistan enjoys a dynamic growth in context of volume and value sectors because of Pakistan Government have reduced excise taxes to encourage soft drinks manufactures and importers. The Government of Pakistan has also decided to tax the soft drink industry on the production capacity rather than on actual production. Pakistani market situation about soft drinks achieved a slightly smooth and positive growth during the years. CAGR 4.2 % represent satisfactory line for soft drinks stability in Pakistan. Simultaneously there have been some inflationary pressures on soft drink industry. However still this industry remains stable successfully to keep the strength of market shares (Euro monitors Passport GMID). The cause for the positive market growth for soft drinks and particularly in carbonated drinks is because of the hot climate, peoples preferences and various life trends. Soft drink industry in Pakistan may expect increase of sale growth 30.5%. The price and consumption of soft drinks stand almost in an equal rate among various regions of Pakistan. In rural areas prices of soft drinks are slightly reduced than posh areas (Euro monitors Internationals soft drinks in Pakistan). Carbonated drinks Within the soft drink market, carbonated soft drinks continue to dominate the market, because of the traditional flavoured beverages, sugar- and caffeine-free drinks. Mostly Carbonated drinks are dominated by artificial flavours based on cola, sweetened with sugars or with non-caloric sweeteners. On consumption level, there are some factors which influence the consumers to buy carbonated drinks for certain reasons like, status symbol, taste, variety, brand ambassador and advertising campaign especially in Pakistan. The demand for the carbonated soft drinks is mainly influenced by the taste of the customers, age groups and the demographic conditions. For example the demand for carbonated drinks escalates to high number in Pakistan especially during the summer period and slightly drops in winter. The main target segment for carbonated drinks is the youth. The carbonated cola drinks are high in demand in Pakistan because of a number of reasons for example; all cola carbonated drinks are served in restaurants, hotels and parties within meals and customers enjoy a spiky and refreshing flavour of carbonated drinks which is not possible by other soft drinks (fruit juice etc). Moreover Alcohol is not consumed due to religion restrictions in Pakistan. However on the whole carbonated based drinks like Coca- cola, Pepsi (low caloric cola drinks) have been remained at the top demand in Global soft drinks industry. There could be more significant volume opportunities in future by carbonate taking its enough shares, with carbonates likely to pick up most of the volume growth as previous % shows like 23.8 % and 24.0 % in 2008 and 2009 respectively. (Euro monitors Passport GMID) Soft drinks Chart by Volume Percentage Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euro monitor international estimate, Euro monitor GMID passport. From the above graph, it could be analysed easily from 2003 to 2009 the volume % of cola carbonates as compare to other soft drinks has achieved higher %. It clearly indicates that cola carbonates (soft drinks) are consumed and produced more than other drinks in the market due to the demand and higher consumption level. Competitors In the present market of soft drinks in Pakistan there are some giant and minor competitors for Ice- Cola in the market. The following classification of soft carbonated drinks in Pakistan in terms of competition can draw a clearer picture. Classification in terms of competition First Preference Pepsi Second Preference Coca-Cola Followers Preferences 7-up, Mountain Dew, Sprite, Marinda, etc The others Amrat -cola etc. Pepsi and Coca-cola Pakistani carbonated soft drink market is dominated by Pepsi. Today Pepsi brand is part of global portfolio of beverages brands which includes carbonated soft drinks, juice drinks, coffee etc. Pepsi is a carbonated beverage that is produced and manufactured by Pepsi Co. Now there are a number of Pepsi variants available in the market such as (Diet Pepsi, crystal Pepsi, Pepsi twist, Pepsi max and Pepsi Gold etc) and Pepsi is recognized as No 1 Pakistan National drink. Major competitor of Pepsi is Coca- Cola. Pepsi is bit sweeter than Coca- cola and is liked by all (Pepsico.co). Coca- cola is next to Pepsis competitor and international recognized brand. Coca- Colas basic strength is its brand name. With this brand name the sales growth is increasing ever year and under this trade mark Coca cola,- zero, Diet Cock and Coca- cola Zero has developed its own competitive market. Coca- Cola volume growth is very aggressive in different markets in the world, particularly in three markets Viet nam, India and Pakistan. The volume growth is 27%, 25% and 18% respectively. While Pepsi with its diversification in drinks, packaging and broad market sector is more successful than Coca-cola to maintain its successful position in the Pakistani market. Pepsi and Coca-cola brands have various % in terms of market analysis in different markets of the world. According to Beverage digest report 2009 in the U.S market PepsiCo 30.8 % market share while Coke have 42.67 % market shares. This shows cokes positive strength as compare to Pepsi in U.S market. (Coca-cola .com). (Research proposal for soft drinks) Pepsi and Coca-Cola market scenario in Pakistan Pakistani beverage industry is dominated by Pepsi and Coca-cola brands. These are two major brands in carbonated soft drink industry in Pakistan. Pepsi-co faced initial problems while settling in Pakistan in 1959. However it came again in 1963 with dominant strategies. It used franchised entry mode to develop its market in Pakistan. One of the major reason of its success as compare to Coca-cola in Pakistan is this, it cater a huge segment and due to the diversification of their product line and particularly franchising entry for them to take quick decisions. The taxes that Pepsi saves because of using franchising entry mode enables it to focus more on advertisements and promotions of their products increase sales profit. Availability and meeting the consumer demand is one key factor that contributes to Pepsi success in Pakistan. At first, Coca-cola operated its business in Pakistan in 1950 as a franchise and became the leader of the soft drink industry because there was no competition at that time but in 1960 it has to face competition in the shape of Pepsi. In 1966 coca-cola operated its business in Pakistan as a multinational company and took over all the franchises business at that time. Since that time it became very hard for Coca-cola to maintain its markets shares as previously. Being a multination company it has to pay huge amount (3 times higher than Pepsi) of tax to Government. (PepsiCo, Inc.) SWOT Analysis of Pepsi and Coca-cola Strengths Pepsi Coco-cola Establish name and sound reputation of company International brand image The demand of Pepsi is more high than its competitors Coca-cola bottle image and use of it brand image on various objects International competitive position and more market shares than competitors Broad advertising and promotion opportunities in business world Weakness Pepsi Coca-Cola Pepsi does not offer any discount to its retailers High prices Target consumers are only young people Rare availability in remote areas of Coca -cola in Pakistan Pepsi tins are not available in far remote areas of Pakistan Taste differentiation is not successful and great, almost similar to Pepsi Opportunities Pepsi Coca-Cola Company is thinking to enter rural areas Successful brand image may enhance the opportunity to advertise less popular products Sponsoring many cultural shows and sports give an opportunity to enhance sales growth of Pepsi Increasing opportunities of internet offers Training and service opportunities Company is trying to Threats Pepsi Coca-cola Major competitor is coca-cola, at international level cock brand is more strongly advertised rather than Pepsi Dominant threat to this industry is changing consumers drinking habits in terms of health Imitators of Pepsi brand in Pakistan and customers complaint about the non-availability of original drink Major competitor (Pepsi) has a strong position in the market. Non carbonated drinks such as juices and tea have maintained good position in the market External threats of labor strikes in Pakistan (Pepsi. Com, Coca-cola.com) Performance analysis of Pepsi and coca-cola Make a graph or pie chart here to show Pepsi and Coca-cola Scenario, collect data by your self Sales analysis Market share analysis Expense analysis Financial analysis Analysis in own words Reasons of launching Ice-Cola in Pakistan To increase sales growth, revenue and market shares To maintain good reputation in the market among competitors To introduce a new brand in to soft drink industry Brand Philosophy of Ice-cola Ice- cola would be a new soft drink for the people of Pakistan and for all the other people of the world. Carbonated cola drinks are usually for eradicating thirst and for have a feeling of refreshment. Same is the production philosophy with Ice-cola. It will introduce an innovative and refreshing taste in the soft drink market and enhance the number of carbonated drinks in the industry. Mission Statement Ice-Cola mission is to be the first priority of consumers in soft drinks market and it will provide best and different taste to consumers. Therefore, they can enjoy a fun and refresh feeling after having it. This brand believes in strives for honesty, fairness and integrity in the whole process of launching. Industry analysis of Ice Cola According to Aaker (2009) Market analysis builds on customer and competitor analyses to make some strategic judgments about a market (and sub market) and its dynamics. Ice cola is pure Pakistani product because it will produce domestically and Ice cola will have competitive advantage against the other imported soft drinks like low cost etc. As earlier mentioned it is pure Pakistani drink so the company can take the advantage of be Pakistani and buy Pakistani also. Ice cola can be customized according to the various needs and demand of the Pakistani culture, which may take place from time to time. During the development of the idea of this product the technological changes are kept in mind. Initially during the production of ice cola existing technology will be used. Later on with the passage of the time if there is change in technology then new technology will be introduced for long run after appropriate pre- testing. Currently there are no as such legal concerns about this business. Being a food item there is no as such restriction imposed by the government because as this product is domestically produced and all the ingredients used is HALAL. As there are many soft drinks are available in the local market but Ice-cola focus will focus on the health of the consumer. This product is healthy and it will produce locally so more consumer will replace there other carbonated drinks and energy drinks by some locally produced healthier carbonated drink. Company is forming its own market with the unique taste with cola flavour and original taste without the effect of any harmful chemicals. Over the couple of years the sale of soft drinks in the Pakistan has doubled and the demand of the soft drinks especially locally produced increased within the last three years so the growth rate of the industry would be sound. Over the last three years no new firm has entered in the Pakistani soft drink business and no new product has been launched by the competitors so since last three years. Distribution channels of ice cola. Theory Existing distribution channels can be described by how direct they are to the customer. Trends and emerging channels, new channels can offer the opportunity to develop a competitive advantage Channel power structure for example in case of a product having little brand equity, retailers has negotiating power over manufacturers and can capture more margins. Market segmentation of Ice-Cola According to Ferrell and Hartline (2008) to enter into a new market, any product strategy would follow the criteria of segmentation according to the chosen market scenario. They illustrate that there could be different approaches to segment the market. Various approaches do work in different circumstances. Most of the time it depends that where (chosen market) the product is going to be launched. However it should follow certain characteristics like substantial, accessible and measureable. So it can generate profit. Ice cola will be use different methods of segmentation of product in Pakistan on the basis of à ¢Ã¢â€š ¬Ã‚ ¢ Geographic Segmentation à ¢Ã¢â€š ¬Ã‚ ¢ Demographic Segmentation à ¢Ã¢â€š ¬Ã‚ ¢ Psychographic Segmentation Geographic Segmentation a) Geographic Region Ice cola first of all will target it product in major cities of Pakistan like Rawalpindi, Lahore, Faisalabad, Karachi and then it started targeting its products into different other cities. Then it will target whole country and afterwards will operate in other countries of Europe and East globally. So its geographic segmentation will be large. b) Density Ice cola first operated in Rawalpindi, Lahore, Faisalabad and Karachi. Then it will start targeting urban, rural and sub-urban areas of Pakistan. c) Climate This is also fact that climate has great effect in targeting different market segments. Ice cola will mostly target in the hot weather countries like Dubai, Pakistan, Saudi Arabia. Demographic Segmentation Target Market of Ice cola Teenagers Adults Sport persons And also late 50s Total population of Pakistan is 165 million (GDP 2008). Ice cola targeted all genders including males, females especially youngsters. The focus target of Ice cola would be age group between 15-32. Age The focus target age would be 15-32 because it represents the larger portion of the Pakistani population. As it has been estimated from the above figures that target consumers are between 15-32. Therefore highest 39.20 % of total population will consume Ice-cola at the most. The higher the consumption level, the higher the profit would be in the long run. Religion As Ice cola is operating in Islamic country. Therefore it will make its products with HALAL MATERIAL. Because it targets Islamic countries like Pakistan, Saudi Arabia. As, alcohol and different other materials that are prohibited in Islam, so Ice cola will not use any kind of material in its product. Therefore internationally it will target Muslim Countries first and later it will operate at global level. Psychographic Segmentation This will be the most important segment which Ice cola will use in its product. It will tell us what customer thinks about our product. It describes point of view of customer about the product. It is the science of using psychology and demographics to better understand customers. So when Ice cola will realize the needs of customers. Then it will start working on different products according to customers need and demand. Pakistans climate is usually warm and humid which causes dehydration and increase in thirst. In Pakistan soft drinks are not only considered a liquid intake but considered as a status symbol among friends, colleagues and family affairs. Holidays and particular religious events for example; Eid and fasting month (Ramadan) the sale of soft drinks increase. Moreover in the other seasons (winter) soft drinks sales do not affect highly but keeps a steady progress. For the next coming years (2010-2014) it can be estimated a steady growth overall. Increase in sales growth is expected due to the young Generation favorable approach and sparking fun towards carbonated cola drinks in Pakistan. Market entry strategy and market development Operation plan Operation plan of the product includes inventory, shipping, storage, and inventory control procedure and customer service. Kent (2003) states that inventory are a significant element of any businesss operation plan which gives hold to the structure of business. Inventory is the raw material or stock goods held by any business. Effective inventory management (control) in operation plan can lead the business to generate huge profit and poor monitoring might be in result of disaster of the business. In case of Ice cola just in time inventory will be used in case of product. It will reduce the storing cost which will give us competitive edge against target customers. All manufacturing operations will take place in Ice cola factory. Aaker (2009) illustrates that distribution system include three type of sections. For example; Alternative distribution channels, new emerging channels and powerful channels. He emphasis on this issue that do not consider only existing channels but also think for new potential ones through which product could be more easily available for its consumers and business users. For Ice-cola production outward suppliers will pay the shipping charges for the finished goods. In case of bulk purchase of the goods company will pay only 30% charges, purchase of 50,000 units in a month is the limit for the propose. Trained workers and machine operators will be hired from the other factories as a part time employee at 900Rs. a day and they will train our permanent workers. Finished product of the Ice cola drink will be stored in company retained building which has capacity to store 150,000 units in it. Rent of the building is Rs. 35,000 per month. Ice-cola will maintain the finished goods inventory of 60,000 units at any time including the factory. Kent and Omar (2003) specify the importance of maintenance and customer service particularly in term of new product launching. A new business can take two way benefits. At first, it can make loyal relationship with its consumers by providing guidance and support after a sale. Secondly, it could prove additional positive source of revenue in the form of life time customers. By keeping in touch with customers and providing quality assurance after sale is a key point to generate profit through product. A detail survey could be conducted after six month period of launching the product to find out the market trends, response and consumer demand. Later on product can be changed according to needs. Marsen (2007) narrates certain points in term of facilities in operational strategy to run the business successfully. It is very important to note that how target customers are going to get the product. Key suppliers and transportation facilities might be close to the operation centres according to the nature of the business. These facilities should be positioned adequately to make the profitable way of business. Marketing Plan Product Wilson (2006) illustrates about product and product dimensions that for a number of customers product is only a tangible and physical entity which is placed in the market for buying and selling. However product is main priority of any business organization because through this firm plans to achieve its objectives. Moreover, Wilson (2006) narrates the relationship between customer and product. Product should be designed according to the core market requirement. Price Ferrell and Hartline (2008) strongly advocate the significant value of pricing strategy because this is the only element of marketing mix that leads to revenue or profit and price has a direct connection with customer demand. Therefore, price of a product could be charged in a number of ways such as value, optional, psychological, geographical etc. In case of Ice-cola, the firm will fallow its motto BE PAKISTANI BUY PAKISTANI as a result company will offer a high quality product at a low price. It will allow firm to position as a one of the best quality and price wise best brand. This provides companys partners an opportunity to sell a high quality product, while increasing their margins and selling a high quality product to the resellers. Purchase price of retailer of one can would be Rs 25. Discount Offers In the competition with the other soft drinks available in the market Ice- cola will offer at special reduce prices to gain the market shares in special events like Ramadan, Eid, Basant and other events. Price setting statistical data Promotion Aaker (2009) states that modern marketing has replaced ancient meaning of promotion with the concept of MC (marketing communication) or the coordination of all promotional activities such as ( media advertising, direct mail, personal selling, sales promotion, public relations, packaging, store display, website design, personnel) to produce a unified, customer-focused message. Any way of promotional medium could be adapted according to the product development. Ice -cola will be promoted by different communication channels in the Pakistani market. Communication channels TV campaigns (Through cable) Bill board Local news paper Advertising campaign Placement Place deals with the distribution channels and various options for the consumers to access the product. Baines (2008) describes that according to the type of the product placement or distribution channels are positioned. Sometimes middleman may involve in the distribution and placement of the product. This is all about mainly satisfying the consumers and makes convenient approach for consumers to access the product in time. Ice-cola would focus on the big and high growth market cities of Pakistan like Lahore Islamabad, Karachi, Faisalabad and Multan and then Ice cola will also focus on the small cities and rural areas of Pakistan. Therefore Ice cola will available every single grocery store in Pakistan. In future Ice -cola could be launched internationally in Middle Eastern and European countries. People Write it for ice-cola According to Baines and Fill (2008) (people) customer service staff of any firm play significant part in term of product presentation, convince their consumers to take competive advantages of it. They create a corporate image and maintain that image in the minds of consumers which could be the most effective marketing tool to have potentail customers in the long run for market decelopment.   Five ps image should be here like this Positioning Porters value chain model It determines where value is added and for isolating the costs. The cost structure is also helpful for formulating strategies to develop a competitive advantage Use this model according to ice-cola Organisational Plan Ice cola will be partner firm. The partnership will be lie between the founders of the company. Partnership will be according to their share of capital invested in the firm. Profit will be distributed between them as per their percentage share in the firm. The every decision will be taken with the consensus and majority of votes will be required to take the decision. On every important document the signature of at least three members should be there. This will also be implying on the financial matters of the firm. Partners and their contribution to capital are as follows. Name of the partners Contribution Saba Imtaiz 19 % Suhail Ahmed 15 % Asma Zubair 16 % Yasir Ali 19 % Isha Saghir 18 % Wahab Munir 13 % Hierarchal Structure The hierarchal structure of the Ice cola company would be as follows: Board of directors Partners of firms Chief executive officer Asma Zubair Chief financial official Talha Shahid Marketing manager - Nimrha Basheer HR Manager Abdul Hanan Production manager Sidra Zaheer Operational manager Nadia Afzal Organisational Chart Board of Directors CEO Finance Marketing Human Resource Manager Manager Manager Finance Finance Marketing Marketing HR HR Officer Officer Officer Officer Officer Officer Forecast Financial Plan Project financial statement of company (Ice-cola) is given below Performa Income Statement (PKR 000s) Pest analysis Profitable strategy Key success factors These factors help to achieve marketing objectives Access to essential unique resources Ability to achieve economies of scale Access to distribution channels Technological progress These factors could change over time as the product progresses through its life cycle. Critical reflection on the assignment process Conclusion