Many tools are used to analyse the threats and opportunities of the industry. Porter’s five forces framework is used to analyse the external environment of energy drinks. In this report, the Energy drink is taken into the consideration to analyse the product market whether it will have a strong position in future or not. At the beginning of the report, market share and the size of the market of the product is discussed. After that, Porter’s five forces framework has been taken to analyse the external environment of the market. At the end of the report, the recommendation is given for the improvement of the market. At the end of the report, the conclusion has been reported based on the analysis.
The first energy drink of the Australia is launched in August 1999 with the name of Red Bull, it was one of the most popular drink in the Australia market(State Library, 2018). It has the packaging of the ‘Tin green can’ which is also famous in the market. Vitamin B, caffeine, carbonated water, and taurine are the ingredients of its energy drinks. There are number of brands of energy drinks in Australia such as Red bull, monster, and others. The energy drinks brands in Australia have strong goodwill and large market share in the market. Energy drink market is expanding continuously; each brand of energy drink of Australia is highly innovated and has unique features in the marketplace. By increasing, the health awareness among the consumers demand of the energy drinks is increasing as well as revenue. Consumer of Australia is addicted to these beverages such as 60 % of the male and 40% of female are addicted of these energy drinks and it can be said that it will boost in future.
The annual revenue of the energy drink is 3.9% over the five years. Australia is one of 10th highest energy drink consuming country (Australian Bureau of Statistics, 2014).
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New entrants- Low Threat High cost requirement |
Bargaining power of Buyer- High power Various options |
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Bargaining power of supplier- High Power Less raw material |
Substitutes- Fresh juice Protein bars |
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Competitors- Protein bars or fresh juice |
It has been an emphasis that the energy drink has a low threat of new entrants because the existing brands have the strong brand name. New entries are not a strong competitive pressure for the energy drink industry because the few brands have their strong brand name in the market. Red Bull and other drink companies have a large market share and great distribution channel in the market; it is a very difficult task for the new entrant to compete for the existing firms of the market. Exiting firm considered, as a barrier for the new entrants, the other barriers for the new entrants is the high fixed cost of warehouses, economies of scale and other expenses. The high-cost requirement and the market situation make it impossible for the new companies to enter into the energy drinks market. The existing firms have less threat of new entrants and they can focus on their development (Worthley et al., 2010).
It has been evaluated that the energy drink market has the high barraging power of supplier just because of a large number of suppliers. Suppliers of the energy drink market have high competition in the market. There is a large number of manufacturer companies of energy drink market; most of them are using the tins and aluminium cans for the packaging of the product. Many energy drinks companies use these tins and aluminium cans for the packaging, which is rarely available in the market. Due to lack of availability of raw material, the bargaining power of supplier increases. There are very few suppliers in the market of tins and aluminium cans, which is the reason of high bargaining power of suppliers, and it is very difficult for the company to deal with the other supplier. To deal with the new supplier is difficult because it takes a lot of time to supply and deals.
It has been analysed that the energy drinks are the high bargaining power of the supplier because there is a large number of grocers, stores, and department who give the discounts on the products. Due to a large number of suppliers of energy drinks, the bargaining power of the buyer is increased in the market. The energy drinks companies give the beverage to these stores to increase the sale of the product. Low prices attract the customers towards the products, for the promoting the sale of the products these stores give beverage to the customer. Different brands have the different price of the same product thus, the buyers have many options to select the best option (Francis et al., 2017).
In the present situation, it has been that the intensity of the competition is high and strong. Energy drink industry has the high pressure from the rivalry because red bull energy drink grabbed the large market share of the market and other companies are growing fast. Red bull, cloud, monsters, and rockstars are the main players of the product. Greatest brand loyalty has a large customer thus the band name loyalty is also a competitive pressure for the existing companies. Red bull has acquired a 26.4-market share in the market; it increases the competitive pressure on the other companies. The new companies enter into the market by adding the new flavours in the energy drinks or by adding new qualities in the drinks (Dobbs, 2014). There are many new products launched by the other companies that can easily replace the product. Protein shakes and bars are the substitute or competitors of the product.
It emphasizes that the energy drinks have a number of substitutes that can replace the energy drinks. Fruit juice, protein shake, coffee and green tea are the substitute of the company. Substitutes of the energy drinks have a strong brand name that is a risk for the energy drink. It is observed that the tea market provides caffeine that is also providing by the energy drinks. Tea and coffee are the main substitutes for the energy drink. Blend coffee becoming famous in the world thus the coffee café opened and provides the different taste to the consumers. Coffee and fruit juice are available at a cheap price as compare to the energy drinks. Cost is also a reason for the high substitute of energy drinks, which is a threat to the energy drinks.
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Opportunity |
Growth of the market |
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Threat |
High competition |
It has been analysed that the energy drink market has an opportunity to expand the market by adding new flavours. Consumers becoming more conscious for their health which make an opportunity for new firms to enter into the market.
It has been evaluated that the energy drink firm has high threat of competitors. By developing the market, new firms are attracting toward the market with the substitute product (Ballard, Wellborn-Kim, and Clauson, 2010).
With the increasing manufacturer of the energy drinks, the competitive rivalry is at a high level in the food industry that reduces the future attractiveness of the market. However, in the energy drink market, the consumers are the main driver of the industry that can be increased the demand for the drink. On the other hand, the trend toward the quality of life helps the market to grow fast. Healthier and fresh drinks make a strong positioning in the market. To add the new flavour it can attract the new consumers which also helps to grow fast. Innovation tends to increase the focus of the customer toward the market. Optimisation and collaboration within the value chain increase the customer values and attracts them toward the energy drinks.
Conclusion
From the above analysis, it has been concluded that the consumers are becoming more conscious for their health thus the consumer consume energy drinks. It is observed that the energy sector growing fast because of becoming popular in the market. Energy drinks sector have low threats because the existing firms of the energy drinks have a strong brand value that is difficult for the new forms to complete the exiting firms. Energy drinks are becoming popular but the other healthy product is also growing fast and becoming popular thus the energy drinks have a high threat of substitute products. Fruit juice and protein shakes are the main competitors of the energy drinks that is also a reason for the high pressure of competition. It has been seen that the energy drink market is growing fast thus the number of firms are also increases which increase the bargaining power of buyers and suppliers. It has been observed that the energy drinks market will grow fast due to increasing the customer demand.
References
Australian Bureau of Statistics. (2014) Australian Health Survey: Nutrition First Results – Foods and Nutrients. [online] Available From: https://www.abs.gov.au/ausstats/[email protected]/Lookup/4364.0.55.007main+features7102011-12 [Accessed 4/08/18].
Ballard, S. L., Wellborn-Kim, J. J. and Clauson, K. A. (2010) Effects of commercial energy drink consumption on athletic performance and body composition. The Physician and sportsmedicine, 38(1), pp. 107-117.
Dobbs, E. M. (2014) Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp. 32-45.
Francis, J., Martin, K., Costa, B., Christian, H., Kaur, S., Harray, A., Barblett, A., Oddy, W.H., Ambrosini, G., Allen, K. and Trapp, G. (2017) Informing intervention strategies to reduce energy drink consumption in young people: findings from qualitative research. Journal of nutrition education and behavior, 49(9), pp.724-733.
Grand View research. (2018) Energy Drinks Market Analysis By Product (Alcoholic, Non-Alcoholic), Product Type (Non-Organic, Organic, Natural), Target Consumer (Teenagers, Adults, Geriatric), Distribution Channel (On-Trade, Off-Trade & Direct Selling) And Segment Forecasts, 2018 – 2025. [online] Available from: https://www.grandviewresearch.com/industry-analysis/energy-drinks-market [Accessed 4/08/18].
Roy Morgan. (2013) Transport, Retail and Recreation workers are the industry leaders in energy drink consumption. [online] Available from: https://www.roymorgan.com/findings/5712-energy-drink-consumption-by-employment-industry-march-2014-201408010110 [Accessed 4/08/18].
State Library. (2018). Drug and alcohol information for PDHPE students. [online] Available from: https://guides.sl.nsw.gov.au/c.php?g=671834&p=4729782 [Accessed 4/08/18].
Worthley, M.I., Prabhu, A., De Sciscio, P., Schultz, C., Sanders, P. and Willoughby, S.R., (2010) Detrimental effects of energy drink consumption on platelet and endothelial function. The American journal of medicine, 123(2), pp. 184-187.
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