Industry Analysis - Energy Drinks

INDUSTRY ANALYSIS 1
Industry Analysis
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INDUSTRY
ANALYSIS 2
Introduction
Energy drinks are fascinating. This stems from the fact that they are used in making
individuals alert when, on the contrary, they would be ready for sleep. However, energy drinks
have failed to provide the same positive vibe as the nootropics could do. Rather, energy drinks
have led to several deaths. However, amidst such challenges, big brands such as Red Bull,
Monster Energy and Rockstar energy drinks still have the platforms that they use in pushing their
goods and services to their niche audiences. There are various reasons for this. However, just as
there are many strengths associated with these drinks, there are many weaknesses and threats that
are unfounded.
Porter five forces
Competitive rivalry-high
There are several beverage companies that manufacture energy drinks, for instance,
Monster, Red Bull and Rockstar, among others. However, Red Bull’s market share is larger than
that of competitors when combined (Businesswire, 2019). The energy drink industry is
growing and expanding at the same time, providing opportunities for rival companies also. The
competitors follow the footsteps of leading companies such as Red Bull and are constantly
diversifying their businesses by engaging in a number of sporting events. Despite Red Bull being
the market leader with regards to the share of the market in the energy drink industry, the
increasing number of rival companies means that a company venturing such an industry will be
high.
The threat of new entrants-low

INDUSTRY
ANALYSIS 3
Penetrating the energy drink industry is a daunting task and hard only if the new entrant
possesses an innovative idea that will map it out in the entire industry. It is also true that entry
barriers in such an industry are sufficiently high. The existing companies in the energy drinks
industry have made significant investments to establish their positions in the industry. Thus, a
new entrant will be compelled to invest significant investments as a start off. Hence, reaping
from massive economies of scale will take time for new entrants. Also, new entrants will be
faced with the challenge of establishing an international distribution, or a local distribution is a
barrier for entry for new companies. Obtaining a significant market share in the energy drink
industry would be the hardest part as the existing companies have established robust brand
images. Thus, the threat of new entrants for a company such as Red Bull, a market leader, would
be low.
Bargaining power of suppliers
Most of the companies in the energy drink industry utilize a production process that is
simple that only needs a few manufacturing raw materials. Companies such as Red Bulls use
massive raw materials, making it conducive for any company to become a supplier of such
companies. The switching cost for such companies is also low if a company decides to switch
suppliers. Hence, the suppliers are left with no bargaining power or the capacity to attempt to
have an influence on the prices of companies operating in this industry. Most suppliers are
known following their history with suppliers. This demonstrates the low bargaining power of
suppliers against dominant players such as Red Bull and Monster.
Bargaining power of buyers-medium

INDUSTRY
ANALYSIS 4
Despite having many competitors in the energy drink industry, the market is small
recognized for brand loyalty. A company such as Red Bull, due to its large share in the market,
commands particular bargaining power over its buyers. Hence, companies in such an industry
can raise their prices moderately and still not lose its market share due to extensive brand
loyalties in such an industry. Energy drinks are priced higher compared to other normal
beverages; the consumers of such drinks are high-income earners and are thus are insensitive to
changes in prices. A brand such as Red Bull contains caffeine, which has been found to make the
consumer become an addict to a certain level. Hence, the bargaining power in this context is
moderate.
Threat of substitutes-low
Coffee and fruit smoothies are substitutes for some of the energy drinks. However, in the
case of fruit smoothies, the commodity is natural, high caloric intake and convenience are the
pros. However, some companies have been faced with controversies, for instance, Red Bull.
Despite such controversies, average consumers still consume Red Bull and fail to shift towards
substitutes. Thus, the threat of substitution for a dominant player such as Red bull ends up being
low.
PESTLE Analysis of energy drink in Singapore
Political
Singapore is a state characterized by a stable political system. Singapore’s free trade
agreements with more than 30 trading partners across 20 regions have led to imports becoming
cheaper due to the reduction of import tariff facilitating easier and faster penetration is
Singapore’s markets. However, some initiatives by the government, such as a limited amount of