Strategic Analysis: Trends, Companies, and the Beverage Industry

This report offers a comprehensive analysis of the beverage industry, examining the impact of changing consumer preferences, technological advancements, and governmental regulations. It begins with an overview of key concepts, followed by an analysis of market trends and developments, utilizing PESTEL and Five Forces frameworks to assess the external environment. The report then explores the potential implications of these trends on companies and provides a comparative analysis of PepsiCo and Coca-Cola, evaluating their respective strategies, strengths, weaknesses, opportunities, and threats. The study highlights the importance of adapting to evolving market dynamics, including the growing demand for healthier options and sustainable practices. The report concludes by summarizing the main points and emphasizing the need for strategic agility in the face of industry challenges and opportunities.

Running head: STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
TRENDS IN BEVERAGE INDUSTRY
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Author Note

1STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Key concept of the article......................................................................................................2
Analysis of trends and developments in food and beverage industry........................................4
PESTEL analysis................................................................................................................4
Five force analysis..............................................................................................................5
Potential implications of the industry trends on the companies.............................................6
Comparison and contrast of two companies..............................................................................7
PepsiCo strategy (strengths, weakness, opportunity and threats)..............................................7
Coca-Cola strategy (strengths, weakness, opportunity and threats)..........................................9
Conclusion................................................................................................................................10
References................................................................................................................................11
Appendices...............................................................................................................................14

2STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Introduction
There have been various changes in the retail food and beverage industry which has
been impacting the companies to an extent. Apart from the still competition in the prevailing
market scenario, the industry is going through significant changes due to various prevailing
factors such as change in the consumer tastes and preferences, changes in the governmental
regulation and advancements of technology in the market. It has been predicted there are
certain changes in the market trends which has been shaping the food and beverage industry.
The consumers and the government are increasingly focusing on the organic food items and
locally produced food rooted (Laughman, 2019). Moreover, there has been environmentally
concerned group which impacts the smooth functioning of the business organizations for
example the Coca Cola Company and PepsiCo Company. The changes in the market trends
enable this organization to bring forth relevant changes in the products offered to the
consumers (Laughman, 2019). The purpose of this report is to analyze the trends and changes
in the consumer forces of the food and beverage industry which impacts the food and the
beverage industry. It understands the concept of the chosen article and implements theories to
compare and contrast the strategies of the two selected companies. Lastly, it summarizes the
main points of the report and concludes the report.
Discussion
Key concept of the article
As per the article by Casey Laughman (2019), The beverage industry has been
undergoing several changes in the external business environment. The article focuses on the
changes in the trends of the consumers, their tastes and preferences which threats the business
environment of beverage industry (Kemp 2013). There has been a lot of uncertainty in the

3STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
business environment such as changing consumer needs and demands, automation and
advancement of technology, rise in new markets and other regulatory changes. The
challenges of the beverage companies go on and on as mentioned by Casey Laughman
(2019), in the article. Further, the article talks about the level of uncertainty that can faced by
Coca Cola and PepsiCo, the largest companies in the world. The articles points out the
changes and the initiatives taken by the organizations such as building infrastructure which
allows the organizations to face the challenges (Kemp 2013).
The large organizations are taking various initiatives to overcome the challenges int he
highly evolving business environment in the beverage industry. For example, both Coca coal
and PepsiCo have been widening the range of products sold by them to address the changing
needs and demands of the consumers (Martinez 2013). The consumers are highly conscious
about the sugar content in the beverage and its unhealthy nature. Therefore, the companies
are offering healthy drinks option for the consumers (Ramos et al. 2015). Most importantly,
there are regulatory concerns as well along with the environment harm caused by the
industries in the beverage industry. The amount of non-renewable waste generated by the
company affects the whole world. In order to address these issues and challenges the
beverage companies are already taking initiatives. Coca cola aims to reduce the plastics bottle
and its impact on the environment by the year 2020 (Kemp 2013). The company has
announced investments on latest technologies and machinery which allows the companies to
reduce the usage of plastic bottle and to utilize the recycled bottles into more efficient usage
(Laughman, 2019). On the other hand, PepsiCo has been aiming to change the packaging
process of the products. The initiatives taken by the organization will be discussed in detail in
the later part of the assignment (Kemp 2013).

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Analysis of trends and developments in food and beverage industry
PESTEL analysis
Political factors: According to Acosta, Coronado and Ferrándiz (2013), the food and
beverage manufacturers are under the control of the FDA. The companies need to comply
with the measures and standards of the FDA. There are various regulations, laws and policies
of the country in the operating countries. Most importantly, there is an increasing
environmental and health consciousness among the consumers (Kemp 2013). There are
growing regulations and legislations regarding the packaging materials, reusability of the
packaging materials. These changes in the laws and regulations of the government impact the
operations and the activities of the business organizations.
Economic factors: As mentioned by Bommer, O’Neil and Treat (2014), the companies are
exposed to several market risks taken into deliberations. The PepsiCo Company and coca
cola company is bared to significant commodity prices, interest rates and the foreign
exchange rates. The PepsiCo company and Coca cola company operates in the global market
which involves exposure to exchange rate fluctuations, inflation rates and other economic
factors. These variations impact the profitability of the business organization.
Socio-Cultural factors: In the opinion of Chapel, Mariz and Ernest (2015), there is an
increasing trend for healthy food items and organic beverages. This change in the consumer
tastes and preferences affects the operations and profitability of the organizations. The
companies in the organization must change the product offerings as per the tastes and
preferences of the consumers. As per Collis and Rukstad (2008), it has been found there the
soft drinks products cause various health issues and problems. This threats the companies
operating in this industry.

5STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
Technological factors: According to Mahalik and Nambiar (2016), there are various
technological acknowledgement in the market and improvements in technology such as six
sigma and MRP-II. This is an opportunity for the organizations, it might improve the
efficiency of the business organizations and the quality of the products offered to the
consumers. This might help the organization to offer beverages as per the changing needs and
demands of the consumers in the market.
Environmental factors: In the opinion of Mahalik and Nambiar (2016), the government and
the consumers are highly conscious about the impact of the company’s operations on the
environment. Therefore, it needs to consider changing its business operations and activities
which has minimal impact on the environment.
Legal factors: There are strict laws and regulations concerning the environment and the
quality of the beverages offered to the consumers (Martinez 2013). Therefore, the
organizations need to comply with the changes in the laws and regulations of the government.
Five force analysis
Bargaining power of the buyers: The bargaining power of the consumer is medium in the
market. Accoridng to Prahalad and Hamel (1997), the consumer switch brands on the basis
on the price and the expense of the products. The soft drinks offered by the company are not
considered to be an absolute necessity to the consumers (Kemp 2013). Therefore, price plays
an important factor to retain the customers.
Bargaining Power of the suppliers: In the opinion of Roethenbaugh (2015), the major
players in the industry aim to acquire the best raw materials and supplies from the suppliers.
The suppliers in the market do not face any competitive pressures. Therefore, the supplier

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power is high in the industry. It mainly depends on factors such as price of the products and
the way in which the product is delivered to the customers (Kemp 2013).
Threat of new entrants: The investment cost of new start up business in the industry is high.
The presence of dominant players in the industry such as Coca cola and PepsiCo is a barrier
for new entrants. It might take lot of time and investment for the new entrants to reach top
position in the market, due to the presence of dominant players in the market (Roethenbaugh
2015).
Threats of substitutes: As per Morgan (2013), Coca cola faces stiff competition from
PepsiCo. A Price factor is the only reason why people switch from one brand to another. The
name and reputation of the brands play in important role in retaining the consumers.
Rivalry among the existing players: The prevailing competition among the firms in the
industry is high as mentioned by Sun (2013). The companies in the industry undertake
promotional tools and strategies to gain new customers and retain existing customers in the
market.
Potential implications of the industry trends on the companies
According to Vander Wekken et al. (2014), the millennial are one of the major trends in
the industry. As per the analysis, it has been identified that the consumers are highly
conscious about their health and health food and beverage intake. In the opinion of Sloan and
Adams Hutt (2013), the consumer increasingly prefers unique taste and innovations in the
beverage drinks rather than sugary drinks and carbonated drinks. There has been a sheer
growth in the popularity of fermented drinks which contains health benefits (Martinez 2013).
These changes in the consumer tastes and preferences have impacted the operations and the

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activities of the business organization. Moreover, as per Malik, Willett and Hu (2013), the
beverage industry has seen an increase in the availability of new range of products in the
markets, from stress relievers to immune system health. The consumers increasingly prefer
more than hydration. According to Mahalik and Nambiar (2016), there is an increase in the
complex desires of the consumers in the market. The consumers prefer non-alcoholic
beverages which is an opportunity for the companies like Coca Cola and PepsiCo. They are
making an active choice to reduce the consumption of alcohol; hence they are opting for soft
drinks. This is an opportunity for the companies to offer non-alcoholic beverages and
increase the range of beverages offered to the consumers. Furthermore, as mentioned by
Malik, Willett and Hu (2013), sustainability has been considered to be one of the key issues
which impact the development of the beverage companies. The consumer as well the
government are increasingly aware of the impact of the operations and activities of the
organization on the environment. Therefore, as per Mahalik and Nambiar (2016), the
organizations have to reconsider the process of manufacturing the drinks and undertake
process and packaging which has minimal effect on the environment. They have to take
measures and actions to reduce their impact on the environment. Additionally as mentioned
by Porter (1989), the consumers are increasingly consciousness about the number of plastic
bottles and cans in the market. These trends and changes in the external market environment
of the organization might impact the operations of the organization and affect the profitability
of the organizations involved (Martinez 2013).
Comparison and contrast of two companies
PepsiCo strategy (strengths, weakness, opportunity and threats)
According to Acosta, Coronado and Ferrándiz (2013), as the beverage industry is
going through transition with the changes needs and preferences of the consumers as well as

8STRATEGY AND THE GLOBAL COMPETITIVE ENVIRONMENT
technological changes, it has been affecting the business of the company. In order to address
the changes in the trends of the consumers and the other necessary changes, the company
has undertaken strategies to focus on digitalization, sustainability and marketing. As
mentioned by Bommer, O’Neil and Treat (2014), iot has undertaken performance with
purpose agency 2025 to follow in the near future. With the increase in the level of
competition among the firms in the industry, PepsiCo has increased the choices of the
products offered; it has added more healthy and nutritious choices in the product portfolio.
The company has been investing heavily in the marketing and research and development of
the company in order to meet the growing needs and preferences of the consumers.
According to Acosta, Coronado and Ferrándiz (2013), PepsiCo tactfully uses its strengths
to overcome the threats and take advantage of the prevailing opportunity in the market. The
biggest strength of the company is strong brand image. However, Coca Cola being the
biggest competitor in the market, it challenges the strength of the organization. With the
strong brand image and positive reputation of the company it has managed to face
competitive pressures. With the CSR sustainability of the organization is has been able to
retain the trust and confidence of the consumers. The only weakness of the company is it
dependence on the US market. Accordiing to Prahalad and Hamel (1997), the company earns
majority of its revenue from the US market. The fluctuations in the exchange rate highly
affect the market. However, as per Morgan (2013), with the emergence of new advanced
technology in the market, the company is able to invest in R&D. This is an opportunity for
the company. The legal and regulatory changes by the government threat the company.
Coca-Cola strategy (strengths, weakness, opportunity and threats)
According to Vander Wekken et al. (2014), in order to address the trends and market
changes of beverage industry, Coca-Cola developed its global marketing campaign to support

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the entire range of products offered to the consumers. It has widened the range of drinks
offered to the consumers such as Diet coke, No sugar coke, Coke Zero and Coca-Cola life in
order to address the growing trend of health consciousness among the consumers. The
company has invested in marketing campaigns and increased its online presence on the social
media platforms such as “Taste the Feeling” (Welsh, Lundeen and Stein 2013). This
campaign emphasizes on uplift, taste, refreshments and other personal connections. Coca-
According to Chapel, Mariz and Ernest (2015), Cola promotes the product offering with
emphasising on fewer calories without alcohol, without caffeine and no calories on the
drinks. The company seized the opportunity of technological advancements and evolving
preferences of the consumers by taking steps to reshape the business. It has identified the
need for faster, efficient and smarter operation systems. Coca-Cola has reconsidered the core
business model. It has expanded its portfolio of products into more than 500 brands such as
tea energy drinks, juices and other beverages. As per Chapel, Mariz and Ernest (2015), The
company has launched range of alcohol free sparkling drinks and free fizzy wines. Further, it
has produced soft drinks bottles with 100% recyclable material to address the growing
cautiousness among the consumers about the environmental impact.
According to Malik, Willett and Hu (2013), Coca-Cola uses its incredible brand
identity to retain the customers in the market. The major weakness of the company is that it is
a major producer of carbonated drinks, they have not addressed to the healthy solution to it.
This influences the health complications. The advancement of technology and the changes
the consumer preferences are an opportunity for the company. The legal and governmental
regulations along with the standards of FDA threat the profitability of the organization.
Therefore, it needs to take measures to overcome the threats and challenges.

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Conclusion
Therefore, from the above analysis, it has been identified that the trends of the
beverage industry is changing at a rapid rate. The change in the external market environment
poses to be a threat and challenges the smooth functioning of the business operating in the
industry. The report has identified the changes and trends in the food and beverage industry.
It has been identified that the consumers are highly conscious about the healthy food intake;
there are technological advances and changes in the governmental laws and policies as well
as environmental concerns. However, the PepsiCo and Coca-Cola have been taking various
actions and steps to overcome the issues and challenges in the external environment. The
report has analyzed the potential implications of the industries and its impact on the two
companies. It has analyzed the current strategies implemented by the companies to overcome
the threats and challenges of the organization and the competitive advantages of the
companies.

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References