A General Overview of the US Beverage Manufacturing and Bottling Industry - Paper Example

Introduction

The industry focuses on the production and distribution of soft drinks to both the local and the international market. However, the production and the geographical operation of these brands depend on the particular product therein. Over the years, this industry has faced various challenges including the economic recession that saw the downfall of most of the companies operating within the American market. Also, the industry is experiencing various obstacle die to different upcoming policies especially relating to the health concerns on their target market. For instance, most of the soft drinks and made of a high sugar composition. In some of the market segments, some of the consumers have restrained from consuming beverages and carbonated drinks that tend to have a high sugar intake. This has created a decrease in demand for some of these products especially in North America and Europe among other consumers. The US beverage and bottling industry encompasses a wide range of companies including Coca-Cola, PepsiCo, Nestle, Starbucks, Dasani, Fiji, Aquafina, and Dr. Pepper Snapple Group among others. However, the main competitors include Coca-Cola and PepsiCo. Comparing the two largest competitors in the American market, Coca-Cola holds approximately 22% of the market shares while PepsiCo holds 19% of the US market.

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The PESTEL Analysis

This section focuses on the political, economic, social-cultural, technological, environmental, and the legal issues affecting Dr. Pepper Snapple Group as at 2011.

The Political Factors

It includes the situation where the government imposed a sugar tax policy that aims at monitoring the health and safety attributed to their products. It also faced the challenge f the trade regulations and tariffs imposed on consumer goods. In

The Economic Factors

The tax imposed by the government tends to discourage the consumer from developing markets to purchase these products. More importantly, the economic systems may differ in the various countries it operates which creates a challenge to develop strategies that help to adapt as a way to enhance productivity.

The Social-Cultural Factors

The most significant aspect of the social, cultural factors is the different societal attitudes regarding soft drinks. While some societies acknowledge these products, others have a negative attitude such that they consider high sugar intake as harmful to their health. In this case, they limit their consumption and demand of the soft drinks.

The Technological Factors

It relates to the recent technological advancements that are changing how businesses operate. They affect the business model, the cost structure, and the value chain. For instance, competitors such as PepsiCo and Coca-Cola introduced the digital marketing aspect making the company to adopt the strategy as a way to create a competitive advantage.

The Environmental Factors

It involves the situation where the manufacture of these products may have a negative impact on the ecological aspects. For this reason, there are environmental regulations that regulate the manufacturing of soft drinks to avoid any possible damage to the climate, weather, and other related elements.

The Legal Factors

Lastly, the legal issues related to the fact that the company is bound to operate in conformity to various laws including the employment law, the health and safety laws, and they also have to maintain the policies governing the intellectual property such as the copyright.

Porter's Five Forces Analysis

Porter's five forces help to analyze the competitive position of a particular company in a given industry. It utilizes the five forces including the bargaining power of consumers, the bargaining power of suppliers, the threat of new entrants, the threat of substitute products, and the rivalry among the competitors.

Bargaining Power of Buyers

Dr. Pepper Snapple Group majorly focuses on selling the products to distributors' including the fast food store and groceries. More often, the buyers are concentrated making their bargaining power higher. In this case, the company sells its products at a lower price so that they can also sell to the end consumers at a fair price to ensure that they repurchase the soft drinks in the future. In the long run, it affects Dr. Pepper Snapple Group profitability.

Bargaining Power of Suppliers

The company faces a low bargaining power of suppliers since it has a wide range of sources where it acquires its raw material. Furthermore, Dr. Pepper Snapple Group has created a constant contract to obtain its raw material from its loyal suppliers. Therefore, the power of the suppliers creates a minimal effect on the bottom-line of the company.

The Threat of New Entrants

Due to the emerging technological advancements, Dr. Pepper Snapple Group face the risk of new competition as the existing companies tend to be very innovative. Through innovation, these companies are providing new and better products that limit Dr. Pepper Snapple's Group competitive edge.

The Threat of Substitute Products

With the changing consumer needs and preferences, Dr. Pepper Snapple Group faces the risk of substitute products. For instance, PepsiCo and Coca-Cola are providing other products such as bottled water, fruit juice, tea, and coffee. These products tend to be more preferred as consumers are seeking products options that have minimal or no any health effects.

The Rivalry among the Competitors

The competition in the American market is powerful which in turn makes the company have minimal chances to enjoy the available opportunities in the market. For instance, the major rivals hold more than a half of the American market share which limits Dr. Pepper Snapple Group from capturing potential customers.

Analysis of the Industry Attractiveness

From the table above, it is evident that Dr. Pepper Snapple Group showed positive growth from 2006 to 2011. It is exhibited form the increase in profitability, Earnings per Share (EPS), Return on Assets (ROA), and Return on Equity (ROE). Nonetheless, in 2008 the company's performance decreased signifcantly where it recorded a negative profit.

The Key Success Factors (KSF)

In my opinion, the most critical factors that led to the success of the Dr. Pepper Snapple Group were acquisitions and good management. In the case study, it is evident that the Corporation has a history of significant acquisitions that contributed significantly to the growth of its market share in the American Market. It began as a small entity but later added other significant acquisitions including Schweppes, Duffy-Mott Company, Canada Dry, Crush, Sun Drop, A&W, and Sunkist. In 2000, the company acquired Snapple which contributed significantly to raising the customer base in the US. It is also evident that the Corporation has an efficient management team that consisted of highly qualified personnel who have adequate knowledge and skills concerning the food and beverage industry. The team thus has a concrete experience that helps the corporation to create strategies that assist in creating a competitive edge in the highly competitive industry. Despite the strong competition, Dr. Pepper Snapple Group was successful in capturing and retaining some customers. This was necessitated by the attractive promotional message that saw the corporation boost its sales growth and the profitability as well.

The Major Strategic Challenges and the Possible Solutions

The major strategic challenge facing Dr. Pepper Snapple Group is high competition in the US food and beverage industry. As discussed above, although the corporation has made a step forward in capturing more customers, they are still lagging as compared to the large competitors; Coca-Cola and PepsiCo. By looking closely, the competition is becoming strong because these two competitors actively incorporate innovation in their strategic operations. Therefore, adopting innovative strategies can help Dr. Pepper Snapple Group to overcome the challenge of the increasing competitive forces in the industry. With innovation, the company can develop new products or enhance its products to match the changing consumer needs and preference in the market.