Description and justification for the country recommendation
V-Energy drink is a potent soft drink touted as having stimulant effects on the body making the person who consumes it to feel more alert and energized.
V-Energy Drink’s SWOT Analysis
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Strength Has a strong financial basis Strong brand name recognition Dominant market share in Australia and New Zealand Attractive packaging design |
Weaknesses Company has limited resources compared to the competitors such as Red Bull Low market share outside of Australia and New Zealand |
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Opportunities The performance in the UK indicates a potential for the drink to expand in the European market starting with Germany |
Threats Stiff completion from established energy drinks such as Monster and Red Bull. The competitors have more resources compared to Frucor. Health conscious populace Maturing market |
Frucor focuses its efforts on selling its V-energy drink to the young consumers (18-24 years), who need the extra energy to keep on top of their hectic lifestyle. There have been challenges in marketing to this group as they have a hectic lifestyle with a short concentration span (Cadogan 2009). However, it has discovered that using the old methods effectively brings in better results compared to the new media fads. Frucor advertises on TV and cinema among other media, and the company CEO believes that this has made all the difference (Datamonitor (Firm) 2008).
Germany Market
The choice of Germany as a market on which to expand the V-Energy drink was informed by a PESTEL analysis of the country. Germany has all the important features necessary for the success of a business launch.
Politics
Germany has a stable democratic form of government with regular elections where the citizens choose their favorite leaders based on competing for political, social and economic policies of the candidates. Political stability is a crucial ingredient in providing an enabling environment for establishing and running a business.
Economy
Germany is one of the biggest economies in Europe, with an economy with resilient expansion and a low employment rate. The country’s economy is based on manufacturing with brands such as BMW, Mercedes, Lufthansa, and Nivea among others supplying the world market with their products (Peichl & Pestel 2011). The steady economic growth, coupled with low unemployment rates ensures that a large portion of the population are gainfully employed and have disposable income which they can use to purchase luxury energy drinks like the V-Energy Drink.
Social and Cultural Factors
Germany is a multicultural society composed of a population of over 80 million people with different cultural and religious backgrounds. Most Germans enjoy a good lifestyle and can afford their basics and have surpluses that they use for luxuries and enjoyment (Jonas & Roosen 2008). However, they have joined the health bandwagon as a trend for most people in developed countries. The health-conscious individuals relate the food they take with the illnesses in the society. Sugar and some stimulants are considered especially harmful to health, a fact which makes most people avoid products with the said ingredients. The health considerations might have an impact on the energy drinks market (Peichl, Pestel, & Schneider 2010).
Technology
Germany is a country known for its technological advancement in most of its operations. If the Frucor decides to manufacture its products in the country, the productions cost will be much lower because it will take advantage of the efficient production processes. At the same time, the development in the information technology systems such as the internet allows the company to advertise its products online and also allows consumers to buy and pay for products online to be delivered at their doorsteps (Shahzad, Khattak, Khattak, & Shahzad 2015).
Environment
The Environment in Germany is conducive to the establishment and running of businesses. The four seasons (summer, winter autumn, and spring) are mild with rare extreme temperatures.
Legal
The legal environment in Germany is conducive to establishing the business as there are few legal restrictions unless the products have the potential of harming the populace.
Competitor Identification
The energy drink market has shown resilience even in economically tough time indicating consistent growth. There are a few brands of energy drinks that dominate the market including Red Bull (43%), Monster Energy (39%), Rockstar (10%), and AMP (3%). The same brands dominate the German beverage market and will constitute the significant competitors that V-Energy drinks will have to contend with, and overcome to make inroads in the market.
Furthermore, the market has experienced growth in new launches which will further complicate the success chances for the V-Energy drink. In 2015, the beverage market experienced 29% growth in new launches with Germany the leading light in the sector with 9% followed closely by the US at 8% (Energy Drink Launches Grow 29% In Five Years as Global Sales Reach 8.8 Billion Litres, 2018)
In Europe, the beverage market has expanded significantly with new players entering the competition and spurring growth. Western Europe countries consumed 1.3 billion liters of energy drinks in the FY 2016 with Germany and the UK leading the park with 262 million liters and 545 million liters respectively (Mothersbaugh, Hawkins, Mothersbaugh, & Tom 2016).
Innovation in the beverage market drives the entrance of new products and spikes the completion. The main drivers in innovation are the competitive forces in the environment and the consumer preferences.
The scenario in the Next five years
The main driving force in the energy market in the future will be on the healthy varieties which are sugar-free and made from natural ingredients. Already, the market is bracing for the introduction of healthy varieties of energy drinks from major manufacturers such as Red Bull and Monster, with new entrants the following suit. In Germany, 15% of all the new energy drinks launched in the market had natural caffeine ingredients from coffee. The health-conscious individuals market is driving the demand for naturally flavored products, and the trend is likely to hold in the future.
V-drink is a soft drink produced by an Australian company called Frucor. The drink falls in the category of Energy drinks as it contains ingredients such as caffeine which is a stimulant and keeps a person alert and also boosts a person’s energy. Through excellent marketing strategies, Frucor has pushed the V-Energy drink to dominate the soft drinks market in New Zealand, Australia, and Asia. Also, the drink has a significant market share in the UK energy drinks market. Following success in these markets, the company has decided to introduce the drink into the German market (Australian Brands 2018).
Australian Brands, 2018, Frucor Suntory, Accessed 19 September 2018, https://frucorsuntory.com/brands-au/
Cadogan, J. W. (2009). Marketing strategy Vol. 1, Vol. 1. Marketing Strategy. Los Angeles, SAGE.
Datamonitor (Firm). (2008). Monster Energy case study: building successful brands in the competitive US energy drinks market. London, Datamonitor. https://search.ebscohost.com/direct.asp?db=bth&jid=8P0V&scope=site.
ENERGY DRINK LAUNCHES GROW 29% IN FIVE YEARS AS GLOBAL SALES REACH 8.8 BILLION LITRES, 2018, MiNTEL, Accessed 19 September 2018, https://www.mintel.com/press-centre/food-and-drink/energy-drink-launches-grow-29-in-five-years-as-global-sales-reach-8-8-billion-litres
Jonas, A., & Roosen, J. (2008). Demand for milk labels in Germany: organic milk, conventional brands, and retail labels. Agribusiness. 24, 192-206.
Lauster, F, 2016, Innovation bubbles the soft drinks arena in Germany, TEFEN Management Consulting, Accessed 19 September 2018, https://www.tefen.com/insights/industries/Consumer_Goods/innovation_bubbles_the_soft_drinks_arena_in_germany
Mothersbaugh, D. L., Hawkins, D. I., Mothersbaugh, L. L., & Tom, G. (2016). Consumer behavior building marketing strategy. New York, N.Y., McGraw-Hill Education.
Peichl, A., & Pestel, N. (2011). Multidimensional Affluence Theory and Applications to Germany and the US. Bonn, IZA.
Peichl, A., Pestel, N., & Schneider, H. (2010). Does size matter?: the impact of changes in household structure on income distribution in Germany. Bonn, IZA. https://ftp.iza.org/dp4770.pdf.
Shahzad, F., Khattak, J. K., Khattak, M. J., & Shahzad, F. (2015). Impact of consumer socialization on soft drink consumption and mediating role of consumer generational behavior. British Food Journal.
Market value of soft drinks in the United Kingdom (UK) from 2013 to 2018 (in million euros), Statista Accessed 19 September 2018, https://www.statista.com/statistics/491383/soft-drinks-united-kingdom-uk-market-value/
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