STRATEGIC MANAGEMENT 1

In the mid-2000s, the alternative beverages industry was growing rapidly. It experienced

high-profit margins and premium prices. However, the industry was hit hard by the economic

downturn in 2008 and 2009. Sales declined by almost 12.5% during these years. As a result, the

industry decreased by 2.1% in 2008 and by 2009 it fell by 3.1%. Because of this downturn, the

beverage industry launched new products to expand itself. Energy and health drinks were

criticized for the health risks they brought with themselves. High caffeine content may be one of

the forces that affected the beverage industry mainly. The drinks contained alcohol and harmful

ingredients kava and melatonin. However, the demand for new types of drinks increased when

the producers entered the geographic markets. Energy drinks and sports drinks became an

essential segment of the industry in 2010 with the change in the preferences of the consumers.

High price points of such beverages made them an attractive option for established companies

like coca cola and new entrants as well. In 2008-09, only ready to drink tea and energy drink

industry experienced a significant amount of growth.

One of the essential factors that determine the success of a company is its ability to bring

about innovation in the products. The alternative beverages have created a benchmark as it is

different from the traditional drinks like fruit juice or carbonated drinks. Brand loyalty is a

crucial factor and is dependent upon the image of the brand, its taste, ingredients, health effects,

and energy boosting properties. The kind of endorsement, packaging, and sponsorships a

company engages itself in determines brand recognition. These brands must also have an

efficient distribution system to convince buyers and distribute itself. Market share, volume, and

distribution are some of the key factors which drive the success of a company. Also, brand

building skills are one of the most important things that determine the success of a brand.

STRATEGIC MANAGEMENT 2

One of the most important factors for the growth of the beverage industry is the

emergence of energy shots in-store counters. Energy drinks focused on teenagers, but the two-

ounce energy shots were meant for adults and office goers. These drinks boasted of boosting
energy on a demanding day. Moreover, the caffeine content was not regulated. Hence, such

drinks can contain as much caffeine as was considered appropriate by the producers. This would

pose an adverse impact on the health of people, especially children. Large doses of these energy

drinks may lead to diseases like insomnia and heart arrhythmia. Moreover, an individual may

develop gall bladder stone if energy drinks are taken in high doses. These health factors posed a

negative impact on the beverage industry. The success of companies like PepsiCo, Coca Cola,

Red Bull, Hansen Natural Corporation and others thus depended on the above-stated factors.