CHAPTER 2

INDUSTRY ANALYSIS
2.1. The history of the industry:
Beyond the simple fact that beverages have been an essential element of the human experience
since the birth of civilization, the beverage industry has a fascinating history. Even so, the history
of the industry doesn’t start until much later. It’s hardly unexpected that there have been so many
changes along the road in every facet of the industry given its lengthy existence. The industry
has continuously improved its procedures, whether it be in beverage production, packaging,
marketing or distribution which has contributed to the significant commercial success and
profitability of today present world.
The beverage industry consists of two primary major segments, the alcoholic beverage industry
and the non-alcoholic beverage industry.
Wine, distilled spirits and brewing are all included in the category of alcoholic beverages.
However there are a few subgroups within the non-alcoholic some of which are really very
crucial to the expansion of the entire business these divisions consist of:

 Soft drink and water bottling and canning;

 Soft drink syrup manufacture;
 Fruit juices bottling, canning, and boxing;
 Tea and coffee industry.

(The study is more focused on the non-alcoholic beverage industry (soft drinks)).
The beverage business is highly fragmented when seen as a whole. There are numerous
producers, and each has unique goods, packaging techniques and production processes. The soft
drink industry is the only sector that does not share in this general fragmentation, and it was this
sector that started the process of moving from regional and local businesses to multinational
corporations. The early 1900s swathe beginning of this process, which is still ongoing today.
Economically, according to the Grand view Research projections, the global market for
carbonated soft drinks alone is expected to exceed $605 billion by 2025. Every beverage
category that is thought to be thriving generates billions of dollars in revenue each year. Adding
to this beverage industry also has grown enormously to employ millions of people around the
world.
Scientists and the apothecaries were the first to make soft drinks because they wanted to use
them as medicines. These early seltzers had therapeutic uses. They were referred to as SODA
WATER by 1798, and in the first decade of the 1800s, mass production of fake mineral water
was first patented. In the United States, soda water as soft drinks now was first bottled in 1835.
After seltzer was inv3ented, progress continued, Drink manufacturers soon started exploring for
additional flavors. They began combining wine and flavoring syrups with carbonated water, a
method that gained popularity in the 1830s and became widespread by the 1860s. Seltzer was
available in the variety of flavors, including apple, orange, lemon, pineapple, pear, peach, plum,
apricot, grapes and various berries. Then in 1874, ice cream soda was invented and sold.
The birth of major beverage GIANTS,
With the development of the first sodas, Dr. Pepper, coca cola and Pepsi cola the industry would
be irrevocably altered. In the late 1800s, all three appeared on the scene.
The first and the original was Dr. Pepper, created in Waco, Texas by pharmacist Charles
Andertons. Andertons experimented with soft drinks to create the beverage, which he then
marketed at his soda fountain. Dr. Pepper formula still is a secret but back in the day it was
advertised as energizing brain tonic.
A year later, in 1886, Dr. John Pemberton developed Coca cola using a special blend of African
kola nuts and South American coca leaves. Pemberton was a different Atlanta-based pharmacist.
He independently developed the recipe and began marketing it out of a coke machine at
Atlanta’s Jacob’s pharmacy.
And not so far Pepsi cola jumped in the league, Caleb Brad ham also created Pepsi cola in 1898.
It was originally referred to as Brad’s Drink and included the now-famous kola nut in addition to
sugar, caramel, lemon oil, nutmeg and of course carbonated water. Brad ham gave the beverage
the name Pepsi cola, trademarked it and started marketing it as a digestive aid when it started to
gain popularity at his soda fountain.
In 1923, Pepsi Cola declared bankruptcy as a result of Brad ham’s failed gamble to capitalize on
rising sugar prices. Pepsi was restructured and packaged in nearly twice the size of coca cola in
1930s, earning them a successful advertising campaign with “twice as much for a nickel”. They
survived World War 2 by becoming a well linked beverage among American troops.
The concern of health factor, Even though the business and mass production eventually changed
the intended use of soda drinks, they first served as therapeutic items. When soda fountains first
became popular, most of the components were natural and nutritious, and the syrups used
weren’t extremely sugary. However by the 1990s soda drinks had undergone such a radical
transformation that they hardly included any nutritious elements anymore. There were some
debates linking soda drinks or other sugar sweetened beverages to specific health problems
already in 1942. In 1994, the first research corroborating these skepticisms were published.
Consumer’s protests against industry giants like coca cola and Pepsi were sparked by health
issues like obesity, diabetes and tooth decay.
Soft drinks have lost much of their once favorable public perception and many producers are
now compelled to include health warning labels on their products. This is where the companies
have started taking the initiatives to introduce promising quality products which consist of least
sugar and syrups which are not hazardous to health as these soft drinks have been perceived
lately. The latest inventions by these giants have been recognized as Coke Zero and Diet Pepsi
Cola.
2.2. The size and Statistics of the Beverage Industry:
There is no doubt in the enormous truth that beverage industry is today one of the most leading
prosperous and diverse industry which have established its root so well that it is providing the
economy with a very decent and attractive amount of economic stronghold. The size of the
industry has grown to a huge level in the market both physically and online through ecommerce.
Size and statistics of beverage industry as a whole:
The beverage market worldwide is anticipated to be worth 1813 billion US dollars in 2022 and is
expanding at a compounding annual growth rate of 4 percent. It is anticipated to be worth 1885
billion US dollars in 2023 and by 2024 the beverage sector is supposed to be grown even more
than these figures and will be worth 1961.24 billion US dollars as per the studies of statistics.
These are some of the major factors that adds size to the global beverage industry:
High Disposable income
Rapid Urbanization
Changing Lifestyles
The market size of the Non-alcoholic beverage industry (Major concern of research):
In 2022, the nonalcoholic beverage industry will carry worth of 1337 billion US dollars
worldwide. The predictions have been made that the market will rise and expand at CAGR of
5.5% and the industry is anticipated to the worth 1885 billion US dollars worldwide in 2023 and
1488 billion US dollars in 2024.
Soft drinks are making the largest portion of the nonalcoholic beverage market. Which shows the
global soft drink market size expected to reach 434.50 billion US dollars by the end of 2022.
The market size of the non-alcoholic beverage industry in the APAC region:
This region is the home of majority nonalcoholic beverage users. It is anticipated that this region
is going to dominate the world’s nonalcoholic beverage market in this very upcoming years
because there is high consumption of carbonated soft drinks and nonalcoholic beverages in
countries like India and China. The hot climate is a major factor that drives more sales of
nonalcoholic beverages in Asia Pacific region.
EU region:
In 2022 the Europe beverage industry is anticipated to make 608 billion dollars. The forecast
shows that the market will grow by 5 percent of compounding annual growth rate. There is high
surge and demand seen for nonalcoholic beverages in Europe recently and the predominant
interest can be seen in the Western Europe comparatively to Eastern Europe. The further
expansion in the industry will be 633 billion dollars at the end of 2023.

US region:
In 2022, the zero alcoholic beverage market of US is expected to be worth 225 billion US dollars
the expansion in the market is taking place by 3.8% CAGR. The worth is expected to reach 234
billion in 2023 and 236 billion in 2024. A well linked and contributed sector of carbonated soft
drinks in shrinking in size and decline is sales of the stated segment is seen recently in US
region.
Specifically Coca cola has a market size of worth 270.84 billion US dollars as of November
2022. And since 2004, Coca cola has been the market dominator and leader when it comes on
carbonated soft drinks as per the industry statistics. North America is the largest market of coca
cola with approximately 320 million consumers and it solely holds the retail value of
approximately 228 billion USD. With all these specifications and statistics Coca Cola is the
World’s largest nonalcoholic Beverage Company.

2.3. Evolution of beverage industry:

An invention that lacks evolution often is trapped with numerous factors that causes its failure to
avoid the failure evolution is an important aspect which has to be taken in to consideration and
kept prior top of the list. As the nonalcoholic beverage industry developed appeared on the scene
and started producing demand. A very interesting new development was made which was a key
initiator in carbonated soft drinks miles journey.
Soda Fountains, after the first soda fountain was patented by Samuel Fahnestock in 1819, almost
every pharmacy had one by 1900. Pharmacy soda counters first appeared in the 1840s. As
gathering spots where people could enjoy carbonated water and its health benefits, soda
fountains gained popularity over time. But that only marked the start of the beverage industry’s
journey.
As the soft drinks gained popularity and started traveling forward, Soda fountains eventually
disappeared because it was now an old fashioned tactic and the industry was more concerned to
shift its emphasis to bottled goods. To put such an idea to reality in 1860 there were 123 soft
drink bottling facilities in the United States. In ten years, it increased to 387. By 1900 there were
2,673 bottling facilities in 1900 this is how the industry evolved from the Soda fountains to a
handy bottled soft drink. Along with the evolution made the reason behind this speedy expansion
was the very impeccable image of soft drinks in the market. Further several industrial evolutions
were carried which forwarded the manufacturing and distribution process in a very efficient
manner. Such as replacing horse-drawn carriages with gas-motored trucks.
These industry giants have never stopped the evolution and have also taken initiatives in
developing the companies more since the time they began with the idea of carbonated soft
drinks. Appeal of advertising was also a major evolution factor and the market giants were not
behind from each other. While Candler oversaw Coca cola’s aggressive advertising operations
Pepsi wasn’t far behind. Pepsi was the first one stepped in capitalizing the popularity of
celebrities with its brand when they chose Barney Oldfield, a well-known race car driver, to
serve as their brand spokesperson in 1913.
Because of how swiftly the industry was developing and technology evolved, mass production
could begin as early as the first decade of 20th century. One million liters of Coca cola were sold
each year in 1904. Nevertheless, there were challenges that the sector had to overcome,
particularly during the major world wars. But yet the industry didn’t stop to develop and advance
in packaging and bottling procedures. The very first aluminum soft drink cans appeared in 1957.
The first canned soft drink arrived in vending machines in 1965. Additionally plastic soft drink
packaging was introduced in the 1970s specifically polythene terephthalate was used to make
these bottles. This was supposed to be the worst environmental impact created by the beverage
industry.
As advancements and evolutions have been made in the packaging, distribution procedures the
companies have never compromised on the taste and new products in its portfolio. The evolution
in the taste and the flavors is still the ongoing process the company follows as per the needs and
the desires of the markets new flavors and products are still produced the best example when we
comprise health factor is the Coke zero and Diet Pepsi cola in the present date.

2.4. The trend where beverage industry is expected to be in 5 or 10 years:

The attitude of the consumers in the food and beverage industry is that they demand clean and
healthy products they believe that healthy ingredients are both good for your health and
environment. The fact is that consumers are increasingly opting and looking for healthier
products and adjusting their consumption habits in favor of clean label items in part because of
the epidemic, the epidemic has been a very crucial time that has played a major role in altering
the demand of the consumers for the future.
Little or no sugar: Consumers demand less sugar and the producers of liquid meals nad
beverages oblige. The Great Britain (15%), Germany (13%) and France were the top three
nations for the introduction of products with reduced sugar and sugar free beverages during the
past 5 years and similar implications are supposed to be made for the future sugar will be
reduced as much possible in these foods and drinks. France and Germany are two of the five
European nations with the most patents aimed at lowering sugar content.
Little to no Alcohol: In the past two years, there has been a noticeable increase in the demand for
"NOLO" beverages (no and low alcohol). For instance, a survey of the British market found that
during the first lockdown in2020, NOLO beverage consumption increased by 32.5%. The NOLO
beverage consumption and production is supposed to be increased in the upcoming years as these
trends are followed and are anticipated to be followed in the upcoming years as per the demand
of the market.
More Juices and Smoothies: The factual statistics about more juices and smoothies, Juice-based
products obviously have possibilities in this situation as well. The "Other juice, juice mixes, and
smoothies" market will generate approximately €38 billion in global sales in2022, predicts
Statista. By2026, a market volume of €45 billion is anticipated, representing a 4.41 percent
annual growth rate. The market volume is expected to reach 16 billion liters in 2026 in terms of
volume. The U.S. market is particularly intriguing because, in2022, sales of €5 billion are
anticipated there.

2.5. The Key players in the Beverage Industry:

The beverage industry consists of a huge number of key companies that have a significant impact
on the beverage industry as a whole. But shrinking it to the non-beverage industry and
carbonated soft drink Key players in the beverage Industry we have the two known and
enormous giants and players of the market known who share similar portfolio as competition The
Coca Cola Company and PepsiCo.
Coca cola is the leading market giant but PepsiCo is also not far behind it is a very strong
competitor when it comes on the CSD market.
If we consider the very recent trend based on health by the both market giants and key players of
beverage industry Coca Cola has launched the Coke Zero with a promising statement of Zero
sugar in their carbonated soft drink which boosts the health concern of the individual who have
been backing off from consuming soft drinks considering their health as a major concern as a
rival the diet Pepsi also exists in the market which has the same agenda of providing the soft
drink with minimum sugar both the market contenders at some point provide very similar
product portfolio which makes them both the very strong market rivals and competition.
The Atlanta based company Coca Cola offers a portfolio of drinks which consist of Soft drinks,
Water, Sport drinks, Juice/Juice Drinks, RTD Tea/Coffee, Liquid concentrates, and Dairy based
drinks and has made sales of 38,655 million US dollars in 2021.
Comparatively PepsiCo offers a portfolio of Soft Drinks, Water, Sports Drinks, Juice/ Juice
Drinks, RTD Tea/Coffee, Liquid Concentrates, Dairy-based Drinks and has made sales of 35,763
million US dollars in 2021 which is not comparatively much less than Coca Cola which clearly
shows the competency between two key market players offering the most similar product
portfolio.
For clear and current significance of both rival companies in present markets these facts and
figures shows the significance and key involvement of these two giants in the market.
Coca Cola Atlanta announced that it has fully acquired BODYARMOR, a range of sports
performance and hydration drinks that is a complement to the Coca-Cola beverage lineup and
has tremendous long-term growth potential. A 15% investment in BODYARMOR was initially
purchased by Coca-Cola in 2018 with a path to full ownership depending on a predetermined
discount. Coca-Cola is purchasing the remaining 85% of the business for $5.6 billion in cash.
BODYARMOR will continue to be headquartered in New York and run as a standalone business
inside Coca-North Cola's America operating division. They are dedicated to carrying out the
2022 plan for BODYARMOR and developing the vision and strategy for 2023 and beyond. "Ten
years ago, we began out with a mission to develop a better-for-you sports beverage with the
objective of becoming the No. 1 worldwide sports beverage," Repole said.
Pepsi on the other hand as market player,
In order to sell Tropicana, Naked, and other select juice brands across North America and an
irrevocable option to sell certain juice businesses in Europe, PepsiCo Inc., Purchase, New York,
has entered into an agreement with PAI Partners (PAI). This will net PepsiCo Inc. combined pre-
tax cash proceeds of about $3.3 billion while maintaining a 39% non-controlling interest in a
newly formed joint venture. Ramon Laguarta, chairman and CEO of PepsiCo, said in a
statement, "This joint venture with PAI enables us to achieve considerable upfront value, while
providing the focus and resources necessary to create more long-term growth for these valued
brands."
2.6. Competition Strength and Weaknesses:
While we talk about Coca Cola the direct rival that comes in the mind of every individual is
Pepsi.
Strengths of PepsiCo:
Best global brand: With a brand value of $18.8 billion, PepsiCo is the 29th most valuable brand
in Forbes' 2019 ranking. According to Forbes' Global2000, PepsiCo was the 87th largest
corporation in the world in 2020.
Power of one Strategy: PepsiCo is a stronger and more diverse company since it sells "Food &
Snacks" (Frito Lays, Cheetos, Doritos, and Kurkure) and "Beverages" (Pepsi, Gatorade,
Tropicana) under one brand. 54% of its revenue came from the food industry, and 46% from the
beverage industry.
Strong global presence: By participating in more than 200 nations throughout the world, PepsiCo
has taken advantage of the advantages of having a significant global footprint. The
overwhelming presence of PepsiCo in markets throughout the world has increased customer
awareness and brand recognition on a worldwide scale. One of its advantages has allowed
PepsiCo to compete directly with companies like Coca-Cola.
Iconic youthful brand: The younger generation has always been Pepsi's target market. Pepsi has
cultivated its reputation as a beloved youth brand. In the past, many famous commercials
featured entertaining elements like sports, music, etc. that were aimed at pre-teens and teens.
Marketing through Sports: Partnerships with sports clubs and organizations offer a priceless
chance to market to consumers directly in sporting venues.
As an illustration, Pepsi and the Tampa Bay Lightning and AMALIE Arena signed a 7-year
championship-level cooperation agreement.
Customer Loyalty: Particularly among the younger generation, who adore the recognizable
flavor of the company's soft drinks, PepsiCo has a very devoted client base.
Pepsi just introduced "Pep Coin," the company's first-ever pay back loyalty program, to reward
its devoted customers with cash rewards for matching their preferred soft drink and food.
Weaknesses of PepsiCo:
Overdependence on Food and Beverages: Over dependency on carbonated soft drinks and
packaged foods undermine companies’ flexibility and agility in case of turmoil in that segment.
PepsiCo decided to go against the wise men by putting its eggs in one basket – food and
beverages. The company should diversify to avoid the possibility of losing everything.
Products Perceived as Unhealthy: Perception is everything when it comes to consumer products
such as soft drinks and snacks. Most of PepsiCo’s carbonated soft drinks contain high sugar
concentrates while its snacks are excessively salted with chemical additives and flavors. This a
major weakness, particularly in the current health-conscious consumer markets.
Effects of Failed Products: Failure in any venture is a weakness. PepsiCo’s failed products such
as Crystal Pepsi (Colorless Cola), Pepsi Blue, etc. demoralized employees and portrayed them as
incompetent in the public sphere giving room for the competition to grow.
Controversial Advertisements: Companies are required to use their elevated position to advance
society’s common good. Unfortunately, in 2017, PepsiCo’s advert featuring Kendall Jenner was
criticized for trivializing the Black Lives Matter movement. The ad was pulled after one day.
Poor Environmental Record: PepsiCo was named one of the world’s top three plastic polluters by
Break Free from Plastic. The company has failed to adopt meaningful measures to increase the
recycling of its bottles.
Racially-Insensitive Products: The national debate over racial inequality in the US brought
attention to PepsiCo’s racially-insensitive products. The company was forced to change the name
and brand image of its Aunt Jemima after it was singled out as racist by Black Lives Matter
protesters. PepsiCo is also considering changing other products like Uncle Ben’s.
Source of Strengths and weaknesses: https://bstrategyhub.com/pepsico-swot-analysis/
2.7. Target Market:
Beverage industry is an enormous industry and it offers series and numerous categories of
products. Different products have their different target audience and market.
But concisely Children, adolescents and young adults in particular are the most attractive and
exciting target group for the beverage industry. Because preferences are formed at a young and
very early age so beverage brands try forming bonds with their targeted audience and this
preference frequently persist into adulthood, where they become consumption habits, beverage
brands profit from forging relationships with consumers early on.
The target market varies as the product varies:
Sport beverages like Gatorade or g-fuel are preferred by athletes who need a drink to restore their
electrolytes and stay hydrated.
Those who want to feel stimulated and stay alert they prefer energy drinks like Power.
Those who are concerned about their safety with tap water they consider bottled water as a good
option.
Non-alcoholic craft beer might be a tempting option for individuals seeking for a non-alcoholic
celebration beverage.

2.8. Major Characteristic of the target market:

Coca Cola: Age, the company mainly focuses on young individuals aging from 10-35. They use
influencers and celebrities in their commercials to draw people towards their product they also
organize campaigns in universities, colleges and schools. They also offer Diet coke and coke
zero to middle aged and older persons who are diabetic or concerned about their nutrition.
PepsiCo: Teenagers, young adults, and customers in the early middle years of adulthood are the
target markets for Pepsi in the US and abroad.
Characteristics included for both:

Geographic Region Domestic/international

Density Urban/rural
Demographi Age 15-45
c Gender Males & Females
Life- Bachelor Stage young, single people
cycle not living at home
stage Newly Married Couples young, no
children

Full Nest I youngest child under six

Full Nest II youngest child six or

over
Income Average, above average and high
earners
Occupati Students, employees, professionals
on
Behavioral Degree ‘Hard core loyal’ and ‘Soft core loyal’
of loyalty
Benefits Refreshment, enjoying good taste,
sought satisfaction of a habit, spending time
Personal Easygoing/determined/ambitious
ity
User Regular users
status
Psychograp Social Working class, middle class and
hic class upper class
Lifestyle Aspirer, Succeeded, Explorer

2.9. Expected target market growth for the next 5-10 years:
The functional beverage market size was valued at 110,148.9 million US dollars in 2020 and is
anticipated to reach 200,080.3 million by 2030, registering a compounding annual growth rate of
5.9% from 2021 to 2030.