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STRATEGIC MARKETING PLAN

FOR VIRGIN

THE COLA PRODUCT LINE

January 1, 2011 to December 31, 2013

Prepared by:

Date:

EXECUTIVE SUMMARY

2

CONTENTS

EXECUTIVE SUMMARY 2

CONTENTS 3

INTRODUCTION – JAYNE TO READ OVER 5

SITUATION ANALYSIS 6

BUSINESS DEFINITION AND SCOPE JESS TO READ OVER 6MISSION STATEMENT(S) 6PRODUCT DEFINITION 6AT THE INDUSTRY LEVEL (TOTAL OF ALL PRODUCT CATEGORIES): 6AT EACH PRODUCT CATEGORY LEVEL 7THE MARKET – CUSTOMERS (END USERS) FOR THE PRODUCT CATEGORIES TARGETED BY OUR ORGANISATION 8SCOPE 8

EXTERNAL ENVIRONMENT: REMOTE ENVIRONMENT 8

ECONOMIC FORCES 8HANNAH: PLEASE COMPLETE (REFER TO PROJECT GUIDELINE). 8IMPLICATIONS: 9SOCIO-CULTURAL FORCES 10SCENARIO: 10IMPLICATIONS: 11SCENARIO: 12IMPLICATIONS: 12TECHNOLOGICAL FORCES 12SCENARIO: 12IMPLICATIONS: 12NATURAL ENVIRONMENT FORCES 13PLEASE INCLUDE THE IMPACT OF WATER AVAILABILITY ON THE INDUSTRY 13SCENARIO: 13IMPLICATIONS: 13

EXTERNAL ENVIRONMENT: NEAR ENVIRONMENT 14

INDUSTRY/MARKET REVIEW 14FORCES 15TYPE OF FORCE 15STRENGTH 15DESCRIPTION: 17IMPLICATIONS: 18COMPETITIVE REVIEW 18DESCRIPTION: 35IMPLICATIONS: 36DISTRIBUTION CHANNELS AND BUYERS (INTERMEDIARY CUSTOMERS) 36DESCRIPTION: 38IMPLICATIONS: 38END-USER CUSTOMERS 38DESCRIPTION: 39IMPLICATIONS: 39

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DESCRIPTION: 40IMPLICATIONS: 40

CRITICAL SUCCESS FACTORS (CSFS) 40

SUMMARY OF OPPORTUNITIES AND THREATS 41

SITUATION ANALYSIS – INTERNAL CAPABILITIES 43

REVIEW: 46IMPLICATIONS: 46

PROBLEMS AND OPPORTUNITIES STATEMENT 46

RECOMMENDATIONS AND RATIONALE 46

MARKETING OBJECTIVES: (SEE EXHIBIT 2.4 FOR EXAMPLES) 46EXAMPLE OF MARKETING STRATEGIES: 47

APPENDIX 49

APPENDIX A 49APPENDIX B 52APPENDIX C 52APPENDIX D 54APPENDIX E 54APPENDIX F 59

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INTRODUCTION – Jayne to read overThe Virgin Group was ‘conceived’ by Sir Richard Branson in 1970 and since has created over 300 brands.

The company in 2009 employed over 50,000 people throughout 30 countries and in 2009 the company’s

global revenue exceeded over $18 billion US1. The Virgin Group is taking on another new business

acquisition expanding its product lines into yet another avenue, planning to enter the carbonated soft

drink market. The Virgin Group Empire is built off founder Sir Richard Branson’s attitude towards life and

his constant desire to seek out the thrills in adventure.

The Virgin Group has nineteen brands within its portfolio, many of which exist in non-related markets.

The Virgin Group has brands in financial services, telephones, air travel, lifestyle, health and now the

beverage market. Virgin values money, quality, innovation, fun and competitive challenge, all of such

qualities are communicated throughout their businesses through management styles and company

corporate culture. These cultures perfectly unite with Richard Branson’s personal image. The Virgin

Group likes to think that their multiple business ventures demonstrate their devotion to picking the right

market at the right time2.

The purpose of this strategic marketing plan is to gain extensive knowledge into the Carbonated Soft

Drink market and establish the fundamental actions, which will carve The Virgin Groups beverage into a

successful business venture. New business acquisitions are built off strong and extensive research, the

Virgin Group views the market from both a business perspective but also from an external perspective;

gaining insight into what Virgin can bring to consumers in which their competitors are not. Throughout

this report, untouched areas of the beverage market will be identified, Virgins capabilities to meet and

exceed these unmet consumer demands measured, and he competitiveness of the market place

evaluated3.

Two market leaders; Coca-Cola and Pepsi currently dominate the Australian beverage market. These

companies together share 33.5% of the global beverage market4. The domestic beverage market rivalry is

just as concentrated with the leading three contenders (Coca-Cola Amitil, Pepsi Co and Asahi Breweries)

holding 54.9% of the total market volume5. The initial launch of Virgin Cola was in the 1990’s and was a

partnership acquisition between The Virgin Group and a Canadian soft drink company Cott & Company.

Virgin Cola was released into the UK market in 1994 and gained initial success through the restaurant

and pub channels, through these outlets Virgin Cola managed to 8%market share, before moving into

1The Virgin Group 2009, ‘About us’ available; http://www.virgin.com/about-us, accessed 02.04.12 2 The Virgin Group 2009, ‘About us’ available; http://www.virgin.com/about-us, accessed 02.04.123 The Virgin Group 2009, ‘About us’ available; http://www.virgin.com/about-us, accessed 02.04.124 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 20115 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011

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decline. In 1997 Virgin Cola lost approximately 5 million pounds on revenues of 30 million pounds. In

1998, The Virgin Group bought out Cotts & Company and launching Virgin Cola with a 25 million backing

investment; the goal here to achieve publicity and resulting in sales. Although massive publicity was

earned, The Virgin Group failed to compute this into sales.

SITUATION ANALYSISBusiness Definition And Scope.Virgin Vision.“To make a credible contribution towards sustainable lifestyles whilst meeting or exceeding the expectations of our staff, customers and other stakeholders”.Virgin is a leading international investment group and one of the world's most recognised and respected brands. Conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow successful businesses in sectors ranging from mobile telephony, travel, financial services, leisure, music, holidays and health & wellness. Across its companies, Virgin employs approximately 50,000 people, in 34 countries and global branded revenues in 2011 were around £13bn ($21bn).Virgin is a brand that heads over 200 privately held business ventures, beginning in 1970s it is involved in many sectors including financial, leisure, music, mobile telephony, health and wellness, and employs approximately 50,000 people internationally.

The Virgin brand stands for value for money, quality, innovation, fun and a sense of competitive challenge.

Virgin excels in creating and taking private business ventures and building them under its extremely well known and

successful brand.

Virgin is undertaking a new venture in soft drinks industry in Australia, it intends to introduce Virgin cola which will

be a healthy soft drink as an alternative to carbonated drinks such as Coca cola, Pepsi and other energy drinks such

as V ,Mother and Red bull.

Virgin has always succeeded in business by offering consumers another way, a better way and being able to fight

their corner, The world has changed a great deal in the 40 years that Virgin has been in business but we

have moved with the times and we have always listened to what people want.In recent years consumers have become more healthy conscious demanding healthy food, drinks and healthy

lifestyle in general. The business is intending to enter this niche market by offering variety of healthy drinks that will

appeal to different demographic but specifically 20-39 year olds. The business intends to use fair trade products

that will satisfy virgin vision for sustainable lifestyle while helping the needy.

ScopeIn Australia the consumers are more cautious about what they spend and where they spend their money, Virgin cola will be a competitive and affordable healthy drink that will not break consumer’s budget. The research and development of this drink will be thorough and aim at ensuring that virgin brings a product that will stand out from its competitors in the carbonated drinks market. The whole process of manufacturing, distribution and supplying of Virgin cola will be in a sustainable environment. Raw materials will be sourced from natural environmental sustainable sources, no artificial or genetically modified plants are to be used, and also the company will ensure there will be no waste in the production line, all materials left over is to be recycled such as recycled bottles.Virgin is intending to distribute and supply Virgin cola using environmental friendly supply chain companies those which use hybrid vehicles and trucks, light packaging boxes and use recycled bottles. The business also will have partnerships with intermediaries such as small retailers, convenience stores, and corner shops to maximise the collection of empty containers, also partnership with packaging suppliers to supply sustainable and recycled containers at reduced price.Although the cost will be relatively higher compared to the competition, Virgin cola will capitalise on the popularity of healthy eating lifestyles of young generation and generate awareness of the new cola product by selling to small retailers and then increase market share by distributing into the big super market shelfs in the health isles.

MISSION STATEMENT(S)“Virgin stands for value for money, quality, innovation, fun and a sense of competitive challenge.”

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HANNAH: Is there an SBU statement?? As per project guideline 'Conclude with a brief statement of what this means in terms of establishing parameters of the product and market scope for the strategic marketing plan.

PRODUCT DEFINITION

AT THE INDUSTRY LEVEL (TOTAL OF ALL PRODUCT CATEGORIES):Virgin Group Ltd. engages in the fields of leisure, travel, tourism, mobile, broadband, TV, radio, music,

finance, and health in Asia, Europe, North America, Africa, and Australia. It engages in the fields of

airlines, rail services, vacation and cruise packages, and passenger motorbike transportation services.

The company also operates gym facilities, racing teams, online casino and slots, and balloon flights;

publishes non-fiction books; provides cord blood stem cell banking, home IT and technical support,

health and lifestyle management, employee health program, and NHS services; and offers corporate gift

vouchers, and online gaming and video games, as well as wines online. In addition, it offers

phone/mobile telecommunication, broadband Internet, and TV services; and film and television

development, packaging, and production services. Further, the company operates music and

entertainment stores, radio stations, and music festivals. Furthermore, it offers financial products and

services, such as credit cards, pension products, insurance products, savings, superannuation, and home

loans, as well as online fundraising solutions; and equity for growth capital, management buyouts,

recapitalizations, and corporate spin-outs for renewable energy and resource efficiency sectors. Virgin

Group Ltd. has a strategic partnership with Tribe Mobile.

HANNAH: as per project guideline: 'It is of critical importance that emerging and declining product

categories are identified.'

AT EACH PRODUCT CATEGORY LEVELThe Virgin Drinks line includes:

o Virgin Cola

o Virgin Lemonade

o Virgin Colours (different coloured and flavoured soft drink)

o Virgin Ice Cool (Iced Tea)

o Virgin Vines (Wine)

o Virgin Ooze (RTD pre-mixed alcoholic beverages)

o Virgin Vodka

o Vmix (small variation of Virgin soft drinks)

o Vjuice (small variation of juice, tomato cocktail and orange)

o Virgin Energy Shot

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Table 1: Product categories targeted by our organisation and our products competing in those categoriesPRODUCT CATEGORY OUR PRODUCTS

Lifestyle Virgin Active Australia

Media and Mobile Virgin Mobile Australia

Money Virgin Money AustraliaInsurance, credit cards, life insurance

Music Virgin Radio International

People and planet Virgin Green fund

Travel Virgin Atlantic Airways, Virgin Atlantic InternationalVirginblue Airlines

Table 2: Competitors and their products competing in these product categories:COMPETITORS COMPETING PRODUCTS

TRAVELQantas United AirlinesEmirates

Qantas Airways, JetstarUnited, American AirlinesEmirates airlines

LIFESTYLEFitnessfirst Fitness first health clubsMONEYWestpacCommonwealthNabANZ

Car insurance, Credit cards, life insurance, Home and content insurance Home loans

MUSICApple MusicJB Hi-Fi

Apple online music storeJB Hi-Fi Now online music store

MEDIA AND MOBILETelstraOptus

Telstra mobile, Telstra internet.Yes Optus mobile, Optus home and internet services.

PEOPLE AND TRAVELBpOrigin energySolahart

BP SolarWind farms, Solar cellsThermosiphon and split system solar. Heat pump water heaters

THE MARKET – CUSTOMERS (END USERS) FOR THE PRODUCT CATEGORIES TARGETED BY OUR ORGANISATION JAYNE TO INSERT SUNDAY: State the demographic, socio-economic and relevant psychographic or lifestyle characteristics of the primary target markets. Define this broadly to encompass all product categories that are to be targeted. (market = consumers/people, industry=companies)

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State what the opportunity is but instead argue through strategic logic backed with evidence from SWOT analysis. WHAT AND WHY. Do business conditions change because of regulation?

SCOPEThis plan outlines the marketing strategies for the Virgin Cola product line in Australia for the three-year

period from 1 December 2012 to December 1 2015.

EXTERNAL ENVIRONMENT: REMOTE ENVIRONMENT

ECONOMIC FORCESThe Australian soft drink market is in a steady position which leaves opportunities for new entrants.

Competition is fierce however, niche markets are still available to introduce new products into.

Scenario:1. The soft drink market is so influenced by the markets top 3 companies’ that any new entrant is

immediately counter attacked.

2. The global financial crisis has had such an effect on the market that consumers’ are more hesitant to

invest in Virgin’s new venture.

3. The global financial crisis has lead consumers to become more spending conscious, reduced spending,

reducing the likelihood of consumers trying a new brand. – reference consumer trends

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Implications:Compared to the dominant competitors, our price point will not be as competitive which could influence

consumer purchasing decisions however compared to other healthy alternatives within the product

category. A slip in consumer confidence as a result of the Global Financial Crisis. This threatens entry into

any market and considering the rise in the cost of living which affects the carbonated soft drink market

as it is a luxury.

OPPORTUNITIES THREATSMARKET VALUE:“The Australian soft drinks market grew by 3.3% in 2010 to reach a value of $10,953 million.”6

The growing market value of the soft drink industry in Australia is an opportunity for new entrants.

The top 3 players in the soft drink market (Coca-Cola, Pepsi and Asahi breweries) hold the largest market share in Australia (54.9%)“Coca-Cola Company, is the leading player in the Australian soft drinks market, generating a 39.4% share of the market’s volume.”7

MARKET VALUE FORECAST:In 2015, the Australian soft drinks market is forecast to have a value of $12,721.8 million, an increase of 16.1% since 2010.”8

The increasing market value forecast for the soft drinks market creates an opportunity for new entrants to enter a market with an increasing value forecast.

“Consumer confidence has slipped in the last quarter with more Australians apprehensive about economic uncertainty, financial security, and rising gas and electricity prices.”9

“The major economic issue facing PepsiCo is the rising input costs of their businesses due to structural inflation. Agricultural, energy, and some metal industries are going through periods of steady inflation.”10

The soft drinks segment recorded revenues of $4, 463.9 million in FY2010, an increase of 10.2% over FY2009.11

A 10.2% increase in revenue in 1 year again illustrates that the soft drinks industry in Australia is a valuable market to enter into.

6 DATAMONITOR. 2011. Soft Drinks in Australia. Available at: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F. [Accessed 05 March 12]7 DATAMONITOR. 2011. Soft Drinks in Australia. [ONLINE] Available at: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F. [Accessed 05 March 12].8 DATAMONITOR. 2011. Soft Drinks in Australia. [ONLINE] Available at: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F. [Accessed 05 March 12].9 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com, 10 https://docs.google.com/viewer?a=v&q=cache:C67SCDV7P8IJ:www.aaronksparks.com/portfolio/mktg360pepsireport.pdf+-+The+major+economic+issue+facing+PepsiCo+and+its+subdivisions+is+the+rising+input+costs+of+their+businesses+due+to+structural+inflation.+Agricultural,+energy,+and+some+metal+industries+are+going+through+periods+of+steady+inflation.&hl=en&gl=au&pid=bl&srcid=ADGEEShaOJyPLjytXxMbioGVhx4wuE4Ag95Fpu9cA2LBhl9OHVV0HDGlt-ajqmPki7zCeQw1NcIB-cOHS2IyMGk8zL13k8pkKErSSbK7SmtE0RJSg8ySkIsd5hgpi61R32k5pFIJaiKR&sig=AHIEtbQPGJ83HM7uJSPWnYyRvsQrecWCuA11 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.11

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SOCIO-CULTURAL FORCESSocio-cultural forces heavily impact the carbonated soft drink market. The Australian populations

expenditure on food and non-alcoholic beverages heavily impacts the carbonated soft drink market.

Socio-cultural trends also have an impact on the market. The ‘health’ trend changes the way that

competitors formulate new products and recreate their existing products.

Socioeconomic trends determines the best way to position of our product and product placement

Scenario:1. The top 3 players each introduce brand new flavours to keep up with the health trend, which

expands the market but makes it harder for new entrants to succeed.

2. The ‘healthy’ trend is moving into the later stages of maturity of the product life cycle and

consumers’ become bored/skeptical of it.

3. A further population increase will expand the market and develop more opportunities for a niche

market to be introduced.

4. An increase in the birth rate will increase the amount of children that are present during the late

growth, early maturity stages of a new product.

Implications:Marketing a carbonated soft drink as a healthy alternative consumers may be sceptical (consider vitamin

water, was marketed as a healthy alternative but is full of sugar.)

OPPORTUNITIES THREATSSince 1994, household spend on food and non-alcoholic beverages have increased by 14%, with the population spending over $16 a week more on these commodities.12

Coke is looking to introduce another product into its line of cola flavoured soft drinks: “Green Tea Coke”. This will appeal to women who are health-conscious and parallels with the increasing market for health products.13

12 Australian Bureau of Statistics. 1999. Household Expenditure Survey, Australia. Available at: http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6535.0/ Accessed 22 February 1213 Global Edge. 2009. Viktoriya Ivanova [ONLINE].. http://globaledge.msu.edu/blog/archive/2009/6. Accessed 20 February 12

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“Meals out and fast foods” (which are both sufficient opportunities to purchase a carbonated beverage such as cola) is the highest-ranking expenditure for households in 1999. 14

POLTICAL AND LEGAL FORCES

The impact that political and legal forces have on the carbonated soft drink market basically relate purely

to the labelling and ingredient content in the products.

Scenario:

1. Labelling laws change forcing companies to recall products and relabel, costing large amounts of

money

2. Drought affects Australia increasing water usage costs even higher than they already are.

Implications:Virgin Cola does not have the money to spend on relabelling or changing the label of their soft drinks,

therefore labelling must abide by the conditions of the ACCC to prevent any issues.

OPPORTUNITIES RATING* THREATS RATING*

The ACCC requires by law that labelling give sugar and kilojoule content. 15

Regulations by the government are costly to abide by. Water usage costs are high after drought.

The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

14 Australian Bureau of Statistics. 1999. Household Expenditure Survey, Australia. Available at: http://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6535.0/. Accessed 22 February 1215 Australian Competition and Consumer Commission. 2009. Food Labelling Guide. [ONLINE] Available at: http://www.accc.gov.au/content/item.phtml?itemId=877504&nodeId=857ee6d77362422e3f724e2ad61a0271&fn=Food%20Labelling%20Booklet.pdf. [Accessed 09 March 12].

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TECHNOLOGICAL FORCESTechnological forces have a high impact on the carbonated beverage market in Australia, continuing

technological advancements allow the supply chain of competitors to become faster and faster. The

development of things such as recyclable bottles and new and improved vending machines also adds

another dimension to the carbonated soft drink market.

Scenario:

1. Advanced technology allows companies’ to develop 100% recyclable bottles and cans making

them available to all companies’

Implications:Hannah: please complete (refer to project guideline).

Competitors with economies of scale are able to invest in sustainable cropping techniques (refer to

competitor pespi section)

OPPORTUNITIES THREATS

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New and improved ingredients can be used in Virgin Cola, ingredients that are cheaper can be found and worked with.

Coke have been researching and planning to develop the new “PlantBottle” which is aiming at being 100% recyclable. 16

This technological advancement by Coke is a threat to other soft drink market holders

Technological advancements can result in more efficient supply chain management

Technology impacts this industry less which means less capital investment

NATURAL ENVIRONMENT FORCESPrimary inputs for soft drinks manufacturers include concentrates, a range of natural and synthetic

sweeteners such as corn syrup and refined sugar (sucrose), aspartame, and similar ingredients17.

Scenario:

1. Drought

2. Natural disasters decreasing efficiency of raw material supply, supply chain efficiency

Implications:Companies must take into account the unpredictablility of natural disasters which heavily effect natural

and raw materials.

OPPORTUNITIES THREATS“In the 12 months to 30 June 2010, Australia's

population increased by 377,100 people, reaching

22,342,000. The annual growth rate for the year

Due to Australias unpredictable weather, water

availability in the last decade has been scarce, this

creates rising costs for water usage which will affect the

16 Global Edge. 2000. Coca-Cola Amatil. Available at: http://globaledge.msu.edu/blog/post/562/ge-blog-series--go-green--part-4.2---planting-new-ideas .Accessed 08 February 1217 Datamonitor 2011. Soft Drinks in Australia, Available: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F. Accessed: 05 March 12.

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ended 30 June 2010 (1.7%) was lower than that

recorded for the year ended 30 June 2009

(2.2%).” 18

cost of raw materials to create the product.

EXTERNAL ENVIRONMENT: NEAR ENVIRONMENT

INDUSTRY/MARKET REVIEWThe soft drink market consists of the retail sale of bottled water, coconut water, carbonates,

concentrates, functional drinks (including sports drinks), juices, RTD tea and coffee, flavored milk and

smoothies.

The Australian soft drinks market generated total revenues of $11 billion in 2010, a year that proved the

most lucrative for the Australian soft drinks market.

The Australian soft drinks market value grew by 3.3% in 2010 to reach a value of $10,953 million.

The compound annual growth rate of the market in the period 2006–10 was 3.3% (refer Appendix E.1).

The Australian soft drinks market grew by 2.9% in 2010 to reach a volume of 4,649.7 million litres.

The compound annual growth rate of the market in the period 2006–10 was 3.1% (refer Appendix E.2).

Carbonates are the largest segment of the soft drinks market in Australia, accounting for 59.9% of the

market's total value. Comparatively, the juices segment accounts for a further 15.9% of the market (refer

Appendix E.3)

SUNDAY: prepare a product life-cycle chart showing the size of the total market for each of the main product categories within volume. In analysing the data, review the annual growth rate. Then project the size of the market and each product category for the next 3–5 years which is the time frame of the strategic

18 Australian Bureau of Statistics. 2010. Population by Age and Sex. Available at: http://www.abs.gov.au/ausstats/abs@.nsf/mf/3201.0. Accessed 05 March 12

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marketing plan (Refer to chapter on forecasting techniques). Product life cycle idea is important: level of industry sector, product category and even brand level. Identify if you have a balanced portfolio (diff PLC).

Despite the strong sales growth in the bottled water and functional drinks categories, the Australian soft

drinks market grew at a steady rate during the period 2006-2010 however this is expected to decelerate

in the forthcoming five years due to increasingly health conscious consumers and government

regulations regarding water use and safety of sweeteners. Yet, given the market consumption increase

between 2006 and 2010, market volume is expected to rise over the next five years, deeming it an

attractive market for new business adhering to the new regulations and anticipating changing consumer

trends.

PORTERS FIVE FORCES – INDUSTRY SPECIFIC

FORCES TYPE OF FORCE STRENGTH1 Supermarkets/hypermarket chains

are most significant distribution

channels for soft drinks

Bargaining power

of buyers

5

2 Most inputs are readily available

commodities

Bargaining power

of suppliers

2

3 New brands must contend with the

reach and strengths of established

brands

Threat of new

entrants

2

4 Consumers may chose to drink

coffee, tea, or homemade juices, or

fruit juices

Threat of

substitutes

2

5 Supermarkets and hypermarkets

account for 48.5% of the total market

volume, followed closely by on-trade

retailers at 32.5%

Bargaining power

of buyer

5

6 Consumers in this market are likely to

be strongly influenced by brand

Bargaining power

of buyers

5

7 Retailers are forced to stock brands

popular among consumers

Bargaining power

of buyers

2

16

8 Inputs are available from several

sources although they are subject to

price fluctuations

Bargaining power

of suppliers

4

9 Packaging manufacturers are growing

because of a demand for more

consumer friendly packages

Bargaining power

of suppliers

4

10 Advertising and marketing agencies

play a significant role in the brand

building process in the soft drinks

market

Threat of

substitutes

Supplier power

4

11 Brands try to distinguish their

products by stressing health benefits

Threat of new

entrant

4

12 Setting up a new business would be

fairly capital-intensive

Threat of new

entrants

5

13 Leading firms have diverse product

offerings

Threat of

substitutes

3

14 The Australian soft drinks market is

fairly concentrated and top three

firms have more than 50% volume

Threat of new

entrants

4

5 = strong, 1 = weak

MAREE: I just rated according to the data but would you mind to look over?

FIVE FORCES ANALYSISThe Australian soft drinks market is fairly concentrated, with the top three players holding 54.9% of the

total market volume. The market has the presence of leading players such as The Coca-Cola Company,

Asahi Breweries and PepsiCo. Switching costs for retailers are not prohibitive, which boosts rivalry.

Overall, there is a moderate degree of rivalry in the soft drinks market (refer appendix E.10).

Although major players are fighting for the dominant position, there is scope for growth in niche

categories (refer to appendix E.5).

Leading players tend to have a diverse product offering, which reduces the threat posed by substitutes.

Overall, there is not a great threat imposed by the soft drinks' substitutes except from traditional coffee

and tea or homemade juices, along with the tendency of consumers switching towards the fruit juices

(refer appendix E.9).

Supermarkets and hypermarkets form the most significant distribution channel in the Australian market,

followed closely by on-trade retailers. The presence of big supermarket chains increases buyer power

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however this remains moderate, as consumers in this market are likely to be strongly influenced by

brand and retailers are forced to stock popular brands. Many players have managed to develop strong

brands, which will tend to decrease buyer power, as buyers feel obliged to stock certain products to

meet their customer's preferences. Overall, buyer power in the Australian soft drinks market is moderate

(refer to appendix E.6). Advertising and marketing agencies also play a significant role in the brand

building process in the soft drinks market (refer to appendix E.7).

Supplier power is not great, as most inputs are readily available commodities. Most revenue is generated

from the production of concentrates, which are sold to bottling companies and here the buyer power is

relatively weak. Some of the primary inputs for the soft drinks manufacturer, although available from

several sources, they are subject to price fluctuations. The power of packaging manufacturers is growing

since there is a growing demand for more consumer friendly packages.

Entry to the market will generally be fairly capital-intensive, restricting market entry to players however;

new entrants can exploit niche categories. Overall, there is a moderate likelihood of new entrants (refer

appendix E.8).

Description:

Although the industry is predicted to decline (refer A.2, A.4, A.6), opportunity exists for new entrants

appealing to the changing consumer trends, increasingly conscious of their health and packaging

sustainability. A popular company entering the market would be at an advantage as a new entrant if the

corporate brand value resonates with consumers. Market share would increase, in this otherwise

homogenous product category, as consumers would be drawn to a brand they know, like and delivers on

their evolving values. It is the strongly brand influenced consumers that the new entrant must satisfy as

these consumers dictate buyer purchasing choices. The degree of exposure Australian consumer’s have

to advertising strengthens supplier power to an extent, providing they have the capacity or existing

brand image.

It remains an attractive market for entry despite the predicted decline due cola’s dominance of the CSD

category, despite the availability of alternatives however this must be taken into consideration and new

entrants should provide a range of alternative products if they want to survive. This presents an

opportunity for new business considering the emerging consumer health concerns when planning

strategy, research and development and product innovation. The recent decrease in market share is the

cause of the shift in consumption patterns due to growing health issues such as obesity suggesting

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possible long-term shifts for the market further increasing attractiveness of market as dominate brands

may be viewed as the unhealthy options.19

Maree - Should this be a description of our findings (including the below table?). Should we relate the

threats/opportunities specifically to new entrants into the industry? Should we also make suggestions of

how to overcome implications?

Implications:

A large amount of capital is required to compete in this industry due to the economies of scale enjoyed

by competitors and also the dominance of competitors regarding supply chain and distribution also

presents implications for new entrants. However, this can be overcome by way of acquisitions, strategic

partnerships and utilisation of core competences.

Although the role of advertising can be leveraged to build consumer awareness of a new entrant, the

advertising capabilities of competitors are great enough to attack new entrant efforts to the market.

Although supplier power is not great this could be an advantage rather than an implication for a new

entrant, providing an opportunity to gain market share despite the size and dominance of the key

competitors.

OPPORTUNITIES RATING* THREATS RATING*Switching costs for retailers are not

prohibitive

4/5 - na

Supplier power is not great

5/5 – 5/5

Scope for growth in niche

categories

5/5 – 5/5 Primary inputs for the soft drinks

manufacturer are subject to price

fluctuations

5/5 – 4/5

Advertising plays significant role 4/5 – 4/5 Increasing packaging power 5/5 – 5/5

Established brands may be

regarded as unhealthy options,

5/5 – 3/5 Strong, established competitor

brands

5/5 – 5/5

Retailers are forced to stock brands

popular among consumers

5/5 – 4/5

The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

19 Yoffie D. & Kim R. 2011, ‘Cola Wars Continue: Coke and Pepsi in 2010 ‘,Harvard Business School, 9-7-11-46, pp. 1 - 22

19

COMPETITIVE REVIEWThe Coca-Cola Company holds the largest market share and is the leading player in the Australian soft

drinks market, generating a 39.4% share of the market's volume.

Asahi Breweries, Ltd. accounts for a further 8.1% of the market (refer to Appendix E.4).

COCA-COLA AMATIL (CCA)

The company is headquartered in Sydney and manufactures, distributes and markets carbonated soft

drinks, still and mineral waters, fruit juices, coffee and other alcohol-free beverages. The company also

distributes alcohol-based beverages through its joint venture company Pacific Beverages. It is also

involved in the processing and marketing of fruits, vegetables and other food products.

The beverage business consists of non-alcoholic and alcoholic businesses. The company, through its non-

alcoholic beverage business, manufactures, distributes and markets carbonated soft drinks.20

The company ‘strives to refresh the world, inspire moments of optimism and happiness, create value and

make a difference’.21

Major products and services include alcoholic beverages and food as well as logistics business and

restaurants. Non- alcoholic beverages include: coffee, carbonated beverages, tea-based drinks, water,

fruit and vegetable drinks, chilled beverages. 22 Brands offered within the CSD category include Coca-

Cola, Diet Coke, Coca-Cola Zero, Sprite, Sprite Zero, Fanta, Lift, Deep Spring Natural Mineral Water,

Appletiser, Grapetiser, Kirks, and Bisleri. The company enjoys the continued growth of Coke Zero which

now holds over 40% share of the diet cola category in the immediate consumption channel. Mother

energy drink grew volume by 6% as a result of new flavour and pack variants and now has 24% of the

total energy drink market.23

The business recovered cost of goods sold through a pricing and mix strategy and CCA’s beverage market

leadership position continues to dominant volume and value share across all channels despite more

aggressive competitor pricing. 24

20 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.521 The Coca-Cola Company, ‘Our Company’, available at: http://www.thecoca-colacompany.com/ourcompany/index.html accessed: 2nd March 201222 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.923 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.1824 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17

20

The synergies enjoyed are the exceptional capacity and capabilities throughout the by the company span

entire supply chain and distribution. CCA’s major capital investment program reduced operating costs

and delivered effective customer service 25 however the company continues to focus on efficiency,

service and revenue gains right across the business. This will be achieved through the effective balancing

of pricing, volume growth and market share. Competitive position will be further strengthened via

capacity expansion, increased operational efficiency and introduction of cold drink coolers, as well as

successful new product and package innovation.26

The competitive intent of the company is to increase capability and capacity expansion, diversifying

business ventures with the rollout of cold drink coolers. CCA will continue to focus on executing its

organic growth strategy in conjunction with the acquisition of Fijian brewery, spirits and soft-drinks

assets, creating synergies from CSD sector, which includes brands such as Fiji Water, Cascade and Hi-C.

Other possible strategies include a distribution deal with Adelaide-based family-owned Coopers

Brewery.27

Resources, similar to growth strategies, include acquisitions such as Neverfail Springwater. Such an

acquisition considerably strengthens the company's core competencies and competitive position. CCA

also owns an established plant at Richlands in Brisbane, Australia and automated materials handling

facility in Mentone, Victoria, Crusta Fruit Juices and its subsidiary, Quenchy Crusta Sales, a cold chain

distribution company, Quirk's Refrigeration28 and the Northern Territory soft drink sales, distribution and

production assets. The company dominance throughout the entire supply chain positions the company in

an extremely sustainably competitive position. This engagement of major supply chain partners is part of

CCA’s strategy to strengthen their competitive position, which they have done so through the

development of collaborative capabilities and engaging supply chain partners.29

However the company's source of competitive advantage extends further to innovative packaging and

advertising, the coke trademark (patent?), the three-year agreement with the National Rugby League

Partnership (NRL) from March 2010 and Project Zero. 30

STRENGTHS

Supply chain, market and natural resources dominance

25 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.1926 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.1727 Ferguson, A 2012, ‘Fiji drinks deal only sets first round on the bar for Coke growth strategy’, The Age, Melbourne, available at: Australia/New Zealand Reference Centre28 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.629 Dunne, AJ 2008 ‘The impact of an organization's collaborative capacity on its ability to engage its supply chain partners’, British Food Journal, Volume 110, Issue 4/5, pp. 361 - 37530 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.7

21

Well known, market leading brand

Innovative advertising, branding and packaging

WEAKNESSES

Consumer perception of Coke and the associated health risks

Limited product innovation

Limited growth options

THREATS

Major competitors: National Beverage Corp. PepsiCo, Inc. Just Water International Limited31

Changing consumer habits

Industry decline

Additional notes:

Coca-Cola: JayneCompany website: CCA’s product portfolio consists of: Coca-Cola, diet Coke, Coke Zero , Fanta , Sprite, Powerade, Glacéau and Pump, as well as other trademark beverages of The Coca-Cola Company. CCA bottles and distributes these brands in its territories under license from The Coca-Cola Company.32

Beverage brands owned, manufactured and distributed by CCA including Mount Franklin, Deep Spring and Kirks.33

The premium spirits portfolio of Beam Global Spirits & Wines including Jim Beam, Canadian Club, Makers Mark and The Famous Grouse.34

Coca-Cola Amatil Australia uses water from metropolitan supplies from natural groundwater sources.35

Their Environmental Management System continues to improve efficiency in water production facilities while maintaining open dialogue with governments, non-government organizations and local communities regarding water resource management.36

Coca-Cola Amatil (CCA) is one of the largest bottlers of non-alcoholic ready-to-drink beverages in the Asia-Pacific region and one of the major Coca-Cola bottlers in the world.37

CCA’s diversified product portfolio includes carbonated soft drinks, water, sports and energy drinks, fruit juice, coffee, flavored milk and ready-to-eat fruit and vegetable products and snack foods.38 Pacific Beverages, CCA’s 50/50 joint venture with SABMiller, manufactures and markets a range of premium beers in Australia and New Zealand and sells and distributes premium spirits. CCA has access to over 270 million consumers through over 600,000 active customers.39

31 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.1632 Coca-Cola Amatil, viewed 10 March 2012, <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>33 Coca-Cola Amatil, viewed 10 March 2012, <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>34 Coca-Cola Amatil, viewed 10 March 2012, <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>35 White, W 2006, Coca-Cola Amatil, Water Policy – Australia, http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D36 White, W 2006, Coca-Cola Amatil, Water Policy – Australia, http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D37 Coca-Cola Amatil 2010, Factbook, accessed: http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D, p.2

38 Coca-Cola Amatil 2010, Factbook, accessed: http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D, p.239 Coca-Cola Amatil 2010, Factbook, accessed: http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D, p.2

22

40

41

42

To improve its portfolio in the noncarbonated drinks segment, Coca-Cola acquired Mad River Traders (tea, juices, and sodas) and Odwalla (juices and smoothies) in 2001. Also signed a licensing deal with Danone to promote Evian brand in the US.43

40 Coca-Cola Amatil 2010, Factbook, accessed: http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D, p.541 Coca-Cola Amatil 2010, Factbook, accessed: http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D, p.742 Coca-Cola Company Financials 2010, accessed: 9 March 2012, <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>43 The Coca-Cola Company, History, Datamonitor, p.7, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>

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Coca-Cola introduced new products, such as Coca-Cola C2, in Japan and the US during 2004. In the UK and 19 other countries, the company began selling its Dasani bottled water.44

In 2005, Coca-Cola introduced a new product called 'Coca-Cola with Lime' in the US.45 Coca-Cola replaced Pepsi as the primary beverage served on University of Arizona campus, as part of the exclusive 10-year deal products from Coca-Cola would be offered in every vending machine and fountain outlet across every University-operated dining location on the University of Arizona's main campus.46 In the same year, Coca-Cola entered into a partnership agreement with six US restaurant chains owned by affiliates of Sun Capital Partners to promote its products in more than 1,750 restaurant locations across 28 states.47

Coca-Cola Company and H.J. Heinz Company announced a strategic partnership in February 2011 that enables Heinz to produce its ketchup bottles using Coca-Cola's PlantBottle packaging.48

49

The company’s products are made available to consumers throughout the world through a network of bottling partners, distributors, wholesalers and retailers - the world’s largest beverage distribution system. The company’s vast distribution network spans the globe and allows the company to sell products in some of the most remote markets in the world. This distribution model is costly for competitors to replicate, and has acted as a sturdy barrier to entry in the industry.50

The company's large scale of operation allows it to cater to demands in upcoming markets with relative ease and enhances its revenue generation capacity.51 Growing nonalcoholic ready-to-drink (NARTD) beverage industry.52

Globally the nonalcoholic ready-to-drink (NARTD) market is growing at a significant pace. The NARTD beverage industry is expected to continue growing retail sales approximately 6% per year for the next 12 years (2008-20).53 This projected growth is being fueled by increase in middle-class consumers and fast-growing urban societies expected to form in the future. These trends indicate that there will be more people with more disposable income

44 The Coca-Cola Company, History, Datamonitor, p.7, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>

45 The Coca-Cola Company, History, Datamonitor, p.7, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>

46 The Coca-Cola Company, History, Datamonitor, p.8, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 47 The Coca-Cola Company, History, Datamonitor, p.9, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 48 The Coca-Cola Company, History, Datamonitor, p.10, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 49 The Coca-Cola Company, History, Datamonitor, p.22, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 50 The Coca-Cola Company, History, Datamonitor, p.22, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 51 The Coca-Cola Company, History, Datamonitor, p.23, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 52 The Coca-Cola Company, History, Datamonitor, p.25, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 53 The Coca-Cola Company, History, Datamonitor, p.25, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>

24

who potentially will tap into refreshment and convenience. This growth opens up a new world of opportunity for Coca-Cola. The company can capture this growth with innovative products and targeted go-to-market strategies, which will continue to drive its global beverage leadership.54

Threats - Evolving consumer preferencesIncreasing concern among consumers, public health professionals and government agencies of the potential health problems associated with obesity and inactive lifestyles represents a significant challenge to Coca-Cola’s industry. In addition, some researchers, health advocates and dietary guidelines are encouraging consumers to reduce consumption of sugar-sweetened beverages, including those sweetened with high fructose corn syrup (HFCS), a form of sugar, or other nutritive sweeteners. Furthermore, there has been an increase in the number of regulations regarding carbonated soft drinks in the US in response to the heightened desire for healthy food consumption. Many state public school systems banned the sale of soft drinks on their campuses. The Center for Science and Public Interest proposed that a warning label be placed on all beverages containing more than 13g of sugar per 12-oz serving. This proposal would affect all non-diet, full calorie drinks produced by the company. These factors have driven a shift in consumption away from carbonated soft drinks to healthier alternatives, such as tea, juices, and water. An increased consumer preference for healthier drinks has resulted in slowing growth rates for sales of carbonated soft drinks, which constitutes 77% of company’s sales. Although Coca-Cola responded to the changing preferences by developing a range of diet and light beverages, evolving customer preferences will adversely impact the sales of its carbonated beverages which will in turn impact its overall profitability.55

Water scarcity and poor quality would impact production costs and capacityWater is the main ingredient in substantially all of Coca-Cola’s products. Rapid population growth and continued pollution of existing freshwater sources have created water shortages in nearly every country. Global consumption of water is doubling every 20 years, more than twice the rate of human population growth. According to the UN, more than one billion people already lack access to fresh drink water. By 2025, the demand for freshwater is expected to rise by 56% from the amount that is currently available. As a result, Coca-Cola may incur increasing production costs or face capacity constraints which could adversely affect its profitability in the long run.56

The Australian beverage business delivered a solid result with earnings before interest and tax (EBIt) increasing by 3.0% to $281.0 million. The business has had to deal with the impact on volumes and a short-term increase in costs caused by the destructive floods in Queensland and Victoria and Cyclone yasi which occurred during the peak summer trading season.57 As well, the generally softer consumer spending environment experienced in 2010 continued into 2011, limiting category growth.58 Notwithstanding the difficult conditions, mix improvements, Project Zero efficiency gains and cost out initiatives underpinned the growth in margins from 19.9% to 20.2%. The business has maintained its strong market share position despite a high level of competitor discounting activity in the grocery channel during May and June. New product development for the half was focused on the rollout of new packages and flavor extensions. The frozen beverage portfolio continues to grow strongly with volume growth of over 20% as a result of the expansion of the customer base combined with the introduction of new flavors.59

The successful execution of our infrastructure programs in expanding manufacturing capacity and improving operational efficiency has again delivered a reduction in operating costs and further improvements in our customer servicing capability. Combined with the restructuring of the spc ardmona (spca) business, I believe these initiatives will continue to widen the operating capability lead on our competitors.60

Looking forward, cca will continue to focus on executing its organic growth strategy.61

There have been an unprecedented number of natural disasters across our major markets over the last six months. The floods in Queensland, Victoria and NSW, Cyclone Yasi and the Christchurch Earthquakes.62

54 The Coca-Cola Company, History, Datamonitor, p.25, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 55 The Coca-Cola Company, History, Datamonitor, p.26, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 56 The Coca-Cola Company, History, Datamonitor, p.26, Accessed: 8 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D> 57 Coca-Cola Amatil 2011, Shareholder News- Interim Reports, http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf58 Coca-Cola Amatil 2011, Shareholder News- Interim Reports, http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf59 Coca-Cola Amatil 2011, Shareholder News- Interim Reports, http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf60 Coca-Cola Amatil 2011, Shareholder News- Interim Reports, http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf61 Coca-Cola Amatil 2011, Shareholder News- Interim Reports, http://ccamatil.com/InvestorRelations/AnnualReports/2011/2011%20CCA%20Shareholder%20News%20-%20Interim%20Report.pdf62 Coca-cola Amatil limited 2010, annual report , accessed http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf

25

CCA has deployed teams to provide assistance to those affected and provided customers with extended terms and special offers for re- stocking CCA product. In addition, CCA has donated beverage and food products to communities and emergency services in need and we are matching all employee donations to the flood relief program.63

Dividends up 11.5% in 201064

Improve our profitability and market position.65

Weaker consumer demand66

Cadbury has entered into a conditional agreement to sell its Schweppes beverages business in Australia to Asahi Breweries for a total cash consideration of approximately GBP550 million.67

m P&N Beverages Australia Pty., Ltd., a manufacturer and distributor of non-alcoholic and non-dairy beverage products. Both the companies are based in Australia.68

Coca-Cola Amatil Ltd. (CCA), a beverage and food company, has discontinued discussions with Golden Circle Limited (GCL), a grower-owned fruit and vegetable processing company, in relation to the planned acquisition of GCL after its AUD195 million ($173 million) offer was rejected in favour of a private equity deal.69

Coca-Cola engages in the manufacture, distribution and marketing of non-alcoholic beverages, concentrates and syrups. Coca-cola (TCCC) markets 4 of the worklds top 5 non-alcoholic sparkling brands (Diet coke, fanta and sprite) The companies finished beveraged is sold in more then 200 countries and the TCCC is headquartered in Atlanta, US and employs around 139,600 people. Most of TCCC products are manufactured and sold by bottling partners. Coca-Cola is the biggest selling product of TCCC other popular drinks include Beat, Canada Dry, Cherry Coke, Diet Coke, Fanta, Sprite etc. In 2011 (January) Coca-Cola Amatil (AUS) launched Nestea range of ice tea in pear and honey variety. Asahi Breweries primarily is focused on beer rewing. PAB division accounted for 35.3% of total revenues in FY2010. Revenues from PAB division reached $20.4 billion in FY2010, as compared to 10.1 billion FY2009. Top 3 players in the AUS market – Coca-Cola, Asahi Brewery and PepsiCo. These 3 hold 54.9% of the total soft drink market. 70

(23) Coca-Cola is dominant in the carbonated soft drinks market in Australia, the product, Coca-Cola alone accounted for more than 75% of the sales value in 2001. PepsiCo is the second most successful company in the Australian carbonated drinks market. PepsiCo experienced a faintly rise of 0.5% for the year 2001 in its share value. However, it is a long way from PepsiCo, commanding only one-tenth of the carbonated market. Cadbury Schweppes also makes a notable impact on the market with their Schweppes lemonade. Solo control only small sections of the market. Leading companies: Coca-Cola, PepsiCo, Cadbury Schweppes, Solo.Australia - Carbonated Soft Drinks, Market Profile, www.datamonitor.com

63 Coca-cola Amatil limited 2010, annual report , accessed http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf64 Coca-cola Amatil limited 2010, annual report , accessed http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf

65 Coca-cola Amatil limited 2010, annual report , accessed http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf66 Coca-cola Amatil limited 2010, annual report , accessed http://ccamatil.com/investorrelations/annualreports/2010/2010%20Annual%20Report.pdf67 Cadbury sells Australian Schweppes business to Asahi Breweries 2009, Financial Datamonitor, accessed: 21 March 2012 <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>68 Tru Blu Beverages acquires carbonated soft drinks and cordial businesses from P&N Beverages 2011,Financial Deal Datamonitor, Accessed: 21 March 2012, accessed <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>

69 Coca-Cola Amatil not to acquire Golden Circle 2007,Datamonitor, accessed: 21 March 2012, Available <http://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D>

70 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011,

26

ASAHI GROUP HOLDINGS (SCHWEPPES AUSTRALIA)

Asahi Group are engaged in beer brewing but also produces and markets soft drinks.71

The four segments the company operates through include alcoholic beverages, soft drinks, food and

others. Asahi acquired Australian beverage business owned and operated by Cadbury (Schweeps

Australia) later entering into a binding share purchase agreement to acquire 100% of the issued shares of

P&N Beverages Australia, the third largest soft drink company by volume in Australia. 72The company

enjoys a powerful position in the beverage market through a strong product portfolio and dominates a

significant share of the market in the snack and beverage industry with worldwide brands.

The company's mission is:

“Asahi aims to satisfy its customers with the highest levels of quality and integrity, while contributing to

the promotion of healthy living and the enrichment of society worldwide.”73

Major products and services include alcoholic beverages and food as well as logistics business and

restaurants. Non- alcoholic beverages include: coffee, carbonated beverages, tea-based drinks, water,

fruit and vegetable drinks, chilled beverages. Schweppes Australia (under license) manufactures and

distributes Pepsi, Pepsi Max, Pepsi Light and Pepsi Light Caffeine Free within Australia.74

The company has ownership interest in food manufacturing, processing and bottling plants75 with the

successful launch of product extensions creating additional revenue streams and growth avenues.76

Company resources include the strategic acquisitions two large bottlers and the relationship shared with

large retail and wholesalers through a customer warehouse channel that delivers products directly from

manufacturing plants/warehouses to customer warehouses/retail stores.77

71

? Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.472 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.773 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012, <http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto> 74 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012, <http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto> 75 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.676 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.2677 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26

27

The soft drink segment enjoys the operation and technology synergies of Asahi Soft Drinks Company,

which also manufactures and distributes coffee, carbonated beverages, tea-based drinks, water, fruit and

vegetable drinks, and chilled beverages.78 Due to the manufacturing and selling of leading snack foods

including Lay’s, Doritos, Cheetos the company owns snack manufacturing and processing plants in

Australia.79 The established presence of the company allows the expansion of its markets through the

related synergies of expanded operations, also reducing business risk.80 The complimentary combination

of snack and beverage business imparts unique competitive advantages enabling leverage and efficiency

within an existing distribution system, providing a barrier to entry for new entrants. Such a model is

considered a core competency of the company as such a encompasses diverse Strategic Business Units

(SBUs) and would be costly, timely and difficult for competitors to replicate81 Furthermore, the

diversified product base, multi-channel distribution system and investment in emerging markets act as a

sustainable competitive advantage, protect the company from a downturn specific to a market or

business line or distribution network, and reduce business volatility.82

Current strategies incorporate environmental sustainability with recent consideration in sustainable crop

farming technology. Current strategies also include the evolving health conscious consumer trends with

investment in coconut water and the decision to ensure the portfolio become more ‘natural ingredient

based’. 83 The formation of joint ventures with complimentary businesses such as Lipton and Sakata

further strengthen the company's competitive position.84

The strengthen such competencies the company heavily invests in corporate social responsibility,

resource and development, brand building, and sustainable growth85 with a particular focus also on

good-for-you portfolio of products.86

Maree: Should i expand further on

GENERIC LEVEL BUSINESS/COMPETITIVE STRATEGY

CURRENT GROWTH STRATEGIES

CURRENT COMPETITIVE POSITION

STRENGTHS

Supply chain management efficiency87

Distribution influence78 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.579 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.680 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.2681 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.2682 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.2683 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.1084 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.785 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.3286 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.3687 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.14

28

Large scale operation units

Established brand name

Economies of scale

WEAKNESSES

Late entry into markets where Coke already had established distributor and consumer space.

PepsiCo also lagged behind in the potential growth market of low or no sugar-based beverages.88

OPPORTUNITIES

An opportunity for the Asahi Group Holding Ltd is the strategic acquisitions to expand business 89

Power to negotiate exclusive supply contracts90

THREATS

Main competitor, Coca-Cola has strong brand recognition across the globe with key brands and

widespread popularity.

THREAT TO VIRGIN

The company launched eco-friendly, recyclable and compostable cups in the US.91

Threat to industry or Virgin??

PepsiCo Inc:PepsiCo, Inc, is a global snack and beverage company. 92It manufacturers, markets and sells a variety of salty, sweet and grain-based snacks as well as carbonated and non-carbonated beverages.93 The company has 19 brands in in its portfolio, which generate over $1,000 million each in annual retail sales. Some of these include Pepsi-Cola, mountain dew, diet pepsi, Gatorade, Lay’s and Tropicana. The company recorded revenue of $57, 838 million during the financial year ending Dec 201094

PepsiCo operates in over 200 countries and has large-scale operations in North America (Canada and the US), Mexico and the UK.95A segment of the PepsiCo business unit; FLNA, uses its own as well as third party manufacturing facilities to produce its snack products (including Lay’s potato chips, Dorito’s etc) which are then sold to independent distributors and retailers.96 Schweppes Australia was formed on 3 April 2009, when we became a wholly-owned subsidiary of Asahi Group Holdings, Ltd.97 Under license, Schweppes Australia manufactures and distributes Pepsi, Pepsi Max, Pepsi Light and Pepsi Light Caffeine Free within Australia.98

88 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.2989 Asahi Group Holdings, Ltd, Datamonitor, 26 Aug 2011, p.1490 Cadbury Schweppes: sour grapes or genuine fear? 2001, Datamonitor 360, accessed 14 March 2012, p. 291 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.1192 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.593 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.494 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.495 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.596 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.597 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012, <http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto> 98 Schweppes Australia 2012, Schweppes Australia, Viewed 14 March 2012, <http://www.schweppesaustralia.com.au/Home.aspx#.T2BzAZztrlw.mailto>

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The company has ownership interest in food manufacturing, processing and bottling plants. 99 The AMEA segment manufacturers and sells a number of leading snack foods including Lay’s, Doritos, Cheetos with snack manufacturing and processing plants in Australia.100

PepsiCo introduced the first caffeine-free colas in 1982 and was later restructured to focus on soft drinks, snack foods and restaurants.101 The company went global through joint ventures and later merged with Quaker Oats to create a $25 billion food and beverage company.102 The move not only expanded PepsiCo's position in the market but enhanced its distribution influence, giving it greater power to negotiate exclusive supply contracts.103 Cadbury Schweppes, the UK's chocolate and soft drinks group, has kept a low profile, but it voiced its concern when required to comment by the FTC.104

The company also formed a joint venture with Lipton to expand the marketing and distribution of Lipton’s range in select markets.105 Key acquisitions include Sakata, the Australian rice snacks manufacturer.106

2006: PepsiCo and the National Hockey League (NHL) signed a multiyear deal, under which PepsiCo was given exclusive North American rights, as well as select marketing and promotional rights in the beverage, sports beverage, bottled water and snack categories. PepsiCo replaced Coca-Cola, which had a similar deal with the NHL for 17 years. As part of the deal, Gatorade became the official sports drink of the NHL, replacing Coke’s Powerade, and Aquafina became the bottled water.107

The joint venture between PepsiCo and starbucks allowed Starbucks access to PepsiCo’s established distribution channels.108

2006 PepsiCo Australia acquired Bluebird Foods, New Zealand’s snack maker for NZ$245 million.109 Brand of PepsiCo; Aquafina launched a low calorie, vitimin enhanced water beverage in different flavour combinations. 110 PepsiCo made official plan to invest $1 billion in China as part of the company’s strategy to expand in emerging markets and broaden its portfolio of locally-relevant products. 111 2010: PepsiCo completed the strategic acquisitions of its two largest bottlers and invested heavily in CSR and R&D. 112 The company begins to consider the environment with sustainable crop farming technology, and the health conscious consumer with investment in coconut water and decision to ensure their portfolio become more ‘natural ingredient based’. 113

2011: PepsiCo and Burger King signed multi-year agreement ensuring PepsiCo is the exclusive soft drink supplier.114 The company also launched eco-friendly, recyclable and compostable cups in the US.115 Beverages include: bottled water, carbonated soft drinks, chilled juices and juice drinks, powder drinks, ready-to-use tea, sports drinks.116

Brands include: Alegro, Amp Energy, Aquatina, Aunt Jemima, Cheetos, Cracker Jack, Pepsi, Doritos, Duyvis, Frito-Lay, Fritos, Fruktovy Sad, Frustyle, Gamesa, Gatorade, Izze, Lay’s, Life, Mirinda, Mountain Dew, Mug, Near East, Pasta Roni, Propel, Quaker, Rice-A-Roni, Rold Gold, Ruffles, Sabritas, Sakata, Sierra Mist, Simba, Smith’s, Snack a Jacks, SoBe, Sonric’s, Stacy’s, SunChips, Tonus, Tostitos, Tropicana, V Water, Walkers, Ya. 117

The company recorded revenues of $57, 838 million during financial year ended Dec 2010, an increase of 33.8% over 2009.118All other countries (including Australia) accounted for 27.4% of total revenues in FY2010. Revenues from these countries totalled $15, 830 million, an increase of 24.2% over 2009.119 PepsiCo holds significant market share in the snack and beverage industry with worldwide brands. The complimentary combination of snack and beverage business imparts unique competitive advantages to PepsiCo. However, the carbonated drinks market in the US has witnessed a slow but steady switching trend to low sugar and sodium products, thereby signalling a negative growth trend of carbonated soft drinks product.120

99 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.6100 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.6101 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7102 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7103 Cadbury Schweppes: sour grapes or genuine fear? 2001, Datamonitor 360, accessed 14 March 2012, p. 2104 Cadbury Schweppes: sour grapes or genuine fear? 2001, Datamonitor 360, accessed 14 March 2012, p. 2105 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7106 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.7107 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.8108 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.9109 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.8110 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.8111 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.9112 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.10113 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.10114 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.11115 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.11116 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.21117 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.22118 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.23119 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.24120 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.25

30

SWOT121

Strengths:1. 2. Combination imparts unique competitive advantage allowing PepsiCo to leverage existing distribution system with the size of its infrastructure providing a barrier to entry for new entrants and competitors since such a model is costly to replicate122

3. Successful launch of product extensions creating additional revenue streams and growth avenues123

4. Reaches bigger retail and wholesalers through customer warehouse channel by delivering its products directly from manufacturing plants and warehouses to customer warehouses/retail stores.124 The diversified product base and multi-channel distribution system protect it from a downturn specific to a market or business line or distribution network, thus reducing business volatility.125

5. PepsiCo has established presence in both developed and emerging markets, internationally and domestic. Large international presence allows the company to expand its markets to high growth economies, derive the related synergies of expanded operations and also reduce the business risk.126

OpportunitiesAcquisitions broaden the company portfolio and also strengthen its geographical reach with international expansion likely to provide long term growth opportunities.127

Datamonitor estimates, the soft drinks market in Asia-Pacific grew by 4.1% in 2010 reaching a value of $111, 023.6 million. In 2015 the Asia Pacific soft drinks market is forecast to have a value of $143, 597.2 million, an increase of 29.3% since 2010.128

ThreatsCoca-Cola has strong brand recognition across the globe with key brands such as Diet Coke, Sprite and Fanta. Coke has a wide geographical reach and widespread popularity. One of the contributing factors for PepsiCo’s decline in beverage industry post 90’s has been its late entry in international markets where Coke already had established distributor and consumer space. PepsiCo also lagged behind in the potential growth market of low or no sugar based beverages.129 Company focus on brand building, increasing global presence, R&D, emerging markets infrastructure, sustainable growth.130 Focus also on good-for-you portfolio of products.131

Company operates through 4 business divisions: alcoholic beverags, soft drinks, food and pharmacetucals and others.

121 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.25122 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26123 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26124 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26125 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26126 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.26127 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.28128 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.28129 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.29130 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.32131 PepsiCo, Inc. Datamonitor, 11 Jul 2011, p.36

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Soft drinks division manufactures and sells various drinks such as PepsiCo – one of world leading global beverage,

snack and food companies. Pepsi operates through business units (same as mentioned in doc1). PAB sells beverage

concentrates, pepsi, Gatorade, Tropicana pure premium, lipton, sierra mist, Tropicana juice, naked juice, etc. PAB

also manufacturers or contracts manufacturers to sell ready-to-drink tea, coffee and water products through

Unilever (under the lipton brand name) and Starbucks.

Data Data from datamonitor360:(Already included in research document [diagrams and tables etc]).ßPepsiCo, Inc.Company ProfilePublication Date: 11 Jul 2011www.datamonitor.comCOMPANY:Has 19 brands in its portfolio, which generate over a million each in annual retail sales.The company’s headquaters employs 294,000 people.

The company recorded revenues of $57,838 million during the financial year ended December 2010(FY2010), an increase of 33.8% over 2009. The operating profit of the company was $8,332 millionin FY2010, an increase of 3.6% over 2009. The net profit was $6,320 million in FY2010, an increaseof 6.3% over 2009. Chairman and Chief Executive Officer: Indra K. Nooyi (executive board)

Data from google scholar: most of the data on scholar needed to be bought however the International Marketing Exemplar Firm Report was one I thought would be good.Pepsi has 41 brand namesIs constantly struggling with there leading competitior Coke-colaEpsi holds a 37.5% share in the carbonated drinks market (Coke 42.9%)Founded as a bottling company in the 1800’s.PepsiCo’s long-term success has been attributed to their domination of the market and superior reputation for being a stable, quality brand name.Advertising efforts first marketed Pepsi-Cola as a bargain brandAfter changing hands four times and declaring bankruptcy twice in the first part of the 20th century, Pepsi shifted its focus from bargain brand promotions to advertising geared toward young people—this is where the “Pepsi Generation” marketing plan originated from.PEST ANALYSISPOLITICAL:New regulatory pressures regarding health concerns and other global concerns have forced companies in the food/beverage industry to take on new challenges and reevaluate their products to meet new consumer demands,PepsiCo has developed a Blue Ribbon Advisory Board, made up of leading health and wellness experts and third-party advisors from across the globe in order to help the corporation face these newly strengthened consumer demands. Furthermore, PepsiCo has recently worked alongside the Clinton Foundation, American Heart Association, and the North American beverage industry in order to set policies regarding placement of the correct products in the correct areas.ECONOMIC: The major economic issue facing PepsiCo and its subdivisions is the rising input costs of their businesses due to structural inflation. Agricultural, energy, and some metal industries are going through periods of steady inflation.Because PepsiCo relies on these industries, inflation costs must be factored into their cost equations. The corporation acknowledges its fortunate ability to navigate through tough economic times in the past.SOCIAL: Social environment of food service markets are changing significantly. A new demand for healthy food and beverages coupled with a push towards green operations and environmentally-friendly company management has changed the social playing field within most markets. PepsiCo and PBNA have successfully adopted new goals and produced new products in order to follow these growing trends. Not only has PBNA recently began to offer new products such as Diet Pepsi Max, a cola with zero calories, sugars, carbohydrates, or Total Fat, but it has also added new lines of product in order to meet this more health-conscious market.TECHNOLOGY:PepsiCo and its subdivisions utilize technology in order to sustain company growth, keep up with the demands of its sustained growth, and perform efficiently.

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PepsiCo’s delivery systems provide a strong competitive advantage. In particular, their most powerful distribution system, Directstore-delivery (DSD) allows them to supply all of their retailers and customerdistributors with up-to-date stock. “Directstore-delivery allows us to create maximum appeal and visibility for our brands and support in-store promotions. DSD works well for popular 7 products we restock often, because it allows us to distribute new products quickly. Our DSD system reaches hundreds of thousands of retail outlets this way, from neighborhood convenience stores to large-format supermarkets” (Annual Report, 11).

Data from Data monitor: think the same as Data Monitor360

Data from PepsiCo.com/Annual Report 2012http://www.pepsico.com/Company/Our-Mission-and-Vision.htmlAt PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to do for our business.Our Mission

Our mission is to be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.Our Vision"PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic - creating a better tomorrow than today."Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company. Data from PepsiCo.com/Annual Report 2012http://www.pepsico.com/Company/Our-Mission-and-Vision.html

Performance with PurposeAt PepsiCo, we're committed to achieving business and financial success while leaving a positive imprint on society - delivering what we call Performance with Purpose.Our approach to superior financial performance is straightforward - drive shareholder value. By addressing social and environmental issues, we also deliver on our purpose agenda, which consists of human, environmental, and talent sustainability.Learn more about PerforData from annual reports:http://www.pepsico.com/Download/PepsiCo_Annual_Report_2010_Full_Annual_Report.pdf“Good for all… is good for business” At PepsiCo, Performance with Purpose means delivering sustainable growth by investing in a healthier future for people and our planet. As a global food and beverage company with brands that stand for quality and are respected household names — Pepsi-Cola, Lay’s, Quaker Oats, Tropicana and Gatorade, to name but a few — we will continue to build a portfolio of enjoyable and healthier foods and beverages, find innovative ways to reduce the use of energy, water and packaging, and provide a great workplace for our associates. Additionally, we respect, support and invest in the local communities where we operate, by hiring local people, creating products designed for local tastes and partnering with local farmers, governments and community groups. Because a healthier future for all people and our planet means a more successful future for PepsiCo. This is our promise.

=

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Values of PepsiCo include:Human SustainabilitySome performance targets include: increase the amount of whole grains, fruits, vegetables, nuts, seeds and low-fat dairy in our global product portfolio,display calorie count and key nutrients on our food and beverage packaging by 2012.

Some performance targets include:sustain and improve brand equity scores for PepsiCo’s 19 billin-dollar brands in the top 10 markets, rank in the top two suppliers in customer (retail partner)surveys where third party measures exist, continue to expand division operating margins, increase cash flow in proportion to net income growth over three-year windows. Environmental sustainabilitySome key performance targets include: to improve our their water use efficiency, increase CSRWork to eliminate all solid waste to landfills from our production facilities. Encourage our associates to lead healthier lives by offering workplace wellness programs globally.Our CustomersOur primary customers include wholesale distributors, grocery stores, convenience stores, mass merchandisers, member- ship stores, authorized independent bottlers and foodservice distributors, including hotels and restaurants. We normally grant our independent bottlers exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographic area. These arrangements provide us with the right to charge our independent bottlers for con- centrate, finished goods and Aquafina royalties and specify the manufacturing process required for product quality.

34

Our Distribution NetworkOur products are brought to market through DSD, customer warehouse and foodservice and vending distribution networks. The distribution system used depends on customer needs, prod- uct characteristics and local trade practices.Our CompetitionOur businesses operate in highly competitive markets. We compete against global, regional, local and private label manu- facturers on the basis of price, quality, product variety and distribution. In U.S. measured channels, our chief beverage competitor, The Coca-Cola Company, has a larger share of CSD consumption, while we have a larger share of liquid refreshment beverages consumption. In addition, The Coca-Cola Company has a significant CSD share advantage in many markets outside the United States. Further, our snack brands hold significant leadership positions in the snack industry worldwide. Our snack brands face local, regional and private label competitors, as well as national and global snack competitors, and compete on the basis of price, quality, product variety and distribution. Success in this competitive environment is dependent on effective pro- motion of existing products, the introduction of new products and the effectiveness of our advertising campaigns, marketing programs and product packaging. We believe that the strength of our brands, innovation and marketing, coupled with the quality of our products and flexibility of our distribution network, allow us to compete effectively.Other RelationshipsCertain members of our Board of Directors also serve on the boards of certain vendors and customers. Those Board members do not participate in our vendor selection and negotiations nor in our customer negotiations. Our transactions with these vendors and customers are in the normal course of business and are con- sistent with terms negotiated with other vendors and customers. In addition, certain of our employees serve on the boards of PBV and other affiliated companies and do not receive incremental compensation for their Board services.Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation. The conduct of our businesses, and the production, distribu- tion, sale, advertising, labeling, safety, transportation and use of many of our products, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as to foreign laws and regulations administered by government entities and agencies in marketsin which we operate. These laws and regulations and interpre- tations thereof may change, sometimes dramatically, as a result of political, economic or social events. Such regulatory envi- ronment changes may include changes in: food and drug laws; laws related to advertising and deceptive marketing practices; accounting standards; taxation requirements, including taxes specifically targeting the consumption of our products; competi- tion laws; privacy laws; and environmental laws, including laws relating to the regulation of water rights and treatment. Changes in laws, regulations or governmental policy and the related interpretations may alter the environment in which we do busi- ness and, therefore, may impact our results or increase our costs or liabilities.Governmental entities or agencies in jurisdictions where we operate may also impose new labeling, product or production requirements, or other restrictions. For example, studies are underway by various regulatory authorities and others to assess the effect on humans due to acrylamide in the diet. Acrylamide is a chemical compound naturally formed in a wide variety of foods when they are cooked (whether commercially or at home), including french fries, potato chips, cereal, bread and coffee.It is believed that acrylamide may cause cancer in laboratory animals when consumed in significant amounts. Studies are also underway by third parties to assess the health implications of carbonated soft drink consumption. If consumer concerns about acrylamide or carbonated soft drinks increase as a result of these studies, other new scientific evidence, or for any other reason, whether or not valid, demand for our products coulddecline and we could be subject to lawsuits or new regulations that could affect sales of our products, any of which could have an adverse effect on our business, financial condition or results of operations.We are also subject to Proposition 65 in California, a law which requires that a specific warning appear on any product sold in California that contains a substance listed by that State as having been found to cause cancer or birth defects. If we were required to add warning labels to any of our products or place warnings in certain locations where our products are sold, sales of those products could suffer not only in those locations but elsewhere.In many jurisdictions, compliance with competition laws is of special importance to us due to our competitive position in those jurisdictions. Regulatory authorities under whose laws we operate may also have enforcement powers that can subject us to actions such as product recall, seizure of products or other sanc- tions, which could have an adverse effect on our sales or damage our reputation.In addition, we and our subsidiaries are party to a variety of legal and environmental remediation obligations arising in the normal course of business, as well as environmental remedia- tion, product liability, toxic tort and related indemnification proceedings in connection with certain historical activities and contractual obligations of businesses acquired by our subsidiar- ies. Due to regulatory complexities, uncertainties inherent in litigation and the risk of unidentified contaminants on current and former properties of ours and our subsidiaries, the potential

35

exists for remediation, liability and indemnification costs to differ materially from the costs we have estimated. We cannot assure you that our costs in relation to these matters will not exceed our established liabilities or otherwise have an adverse effect on our results of operations.

Maree: should I include competitive strategies (e.g. Low cost defender’s for both) in this section

accompanied with brief description (p.68)?

MINOR COMPETITORS Bickford's (includes juices, sodas, teas, sparkling water with fruit flavor, energy drinks, bottled

water)

Bundaberg (includes diet varieties, flavored CSD includes lemon lime bitters and ginger beer)

Cascade (includes fruit juices, ginger beer, flavored CSD including sparkling apple juice and

sparkling blackcurrant)

Golden Circle Company (includes fruit juices, cordials and CSD)

Kirks (line of sodas marketed by Coca-Cola Amatil) marketing core competency

LA Ice Cola (includes cola available in four varieties including sugar free and diet variety)

Leed (includes carbonated lemonade) – distributed by coke

Lido (includes lemonade)

Leed (includes carbonated lemonade) Kirks (line of sodas marketed by Coca-Cola Amatil)

Description:

The key competitors in the Australian CSD industry are extremely efficient and dominant throughout the

supply chain. While consumers determine retailer purchases, it is the key competitors that have formed

strategic partnerships, own plants and warehouses, determine the degree of new entrant access to raw

materials and solely contract bottlers.

Implications:

These players have the resources, capabilities and budgets to defend their market position and employ

attack strategies if required.

OPPORTUNITIES RATING* THREATS RATING*Changing consumer trends 4/5 – 5/5

Competitor dominance

5/5 – 5/5

Limited product innovation 5/5 – 1/5 Competitor synergies in supply & 4/5 – 4/5

36

distribution channels

The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

DISTRIBUTION CHANNELS AND BUYERS (INTERMEDIARY CUSTOMERS)Supermarkets / hypermarkets form the leading distribution channel in the Australian soft drinks market,

accounting for a 48.5% share of the total market's volume. On-trade accounts for a further 32.5% of the

market.

Analysis of distribution structure (number and type of distributors serving the total market including a

break down of sales by the various intermediary types)

Historical trends and future development for distribution channels

The power base of the buyers

Trends concerning physical distribution

MOST importantly info concerning the wants/needs of the intermediaries in particular the margins

applied by the various intermediaries, promotional requirements, policies concerning new line fees,

stock delivery and inventory management requirements

THE KEY PLAYERS IN THE DISTRIBUTION CHAIN:

Coca-Cola

Pepsi Co

Asahi Breweries

DISTRIBUTION STRUCTURE

In Australia Major Chain retailers have large national store networks covering all inner city, suburban and

regional centres. Smaller chains or independent banner groups have less comprehensive coverage of the

market.

The distribution of Soft drinks in Australia embedded in the food distribution channels. The key feature

of the channel structure is the means by which retailers manage direct supply logistics on national or

regional bases through national (NDC) and regional distribution centres (RDC).

37

STRUCTURE OF INDEPENDENT AND CONVENIENCE RETAIL CHANNELS

Independent grocery and convenience store channels have a minority share of retail sales in most food

and beverages categories and offer a limited range of products based on servicing the convenience

needs of passing consumers. This channel includes specialist discount food stores, which offer a limited

range of food and drinks at often deeply discounted prices to attract shoppers.

SPECIALTY RETAIL CHANNELS

This channel encompasses a range of specialist retailers that focus on single or limited fresh food or

otherwise niche food category. These outlets are typically independently owned and, accordingly, unable

to avail themselves of group buying or distribution arrangements.

QUICK SERVICE RESTAURANT CHANNELS

This channel encompasses large integrated chains of quick service restaurants (QSR) or takeaway food

outlets. It represents a significant share in the takeaway retail food market, across burgers, chicken, pizza

and salad meals. These outlets are typically franchised, and their meal and product ingredients are

centrally purchased and supplied, according to tight specifications, through sophisticated logistics

management practices.

INDEPENDENT TAKE AWAY CHANNELS

This channel encompasses many independent takeaway food outlets covering different food groups or

offerings, or both. These outlets are typically independently owned and accordingly unable to avail

themselves of group buying or distribution arrangements.

DINING OUT CHANNELS

This channel encompasses many independent dining and function venues. The outlets are typically

independently owned and accordingly serviced by specialist fresh product and food service wholesalers

and distributors offering services to meet the frequency, cold-chain and specification requirements of

these retailers.

EVENTS AND LEISURE CHANNELS

This channel encompasses many sporting and major event venues, and involves a large range

Of meal formats and price/value. Travel catering includes the food and drinks supply to airline

Companies and to a large percentage of food outlets located in airport terminals.

INSTITUTIONAL HEALTHCARE CHANNELS

38

This channel encompasses the supply of meals to many government and independent healthcare

institutions, which provide beds.

OTHER INSTITUTIONAL FOOD CHANNELS

This channel generally encompasses contract catering services to kitchen and dining venues.

Commercial caterers are the largest provider of meal and kitchen management solutions to this segment,

with the service package varying according to industrial practices, cost constraints and the size and

location of the institution

Description:

Jerome: please complete (refer to project guideline).

Implications:

Jerome: please complete (refer to project guideline).

*

OPPORTUNITIES RATING* THREATS RATING*

The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

END-USER CUSTOMERSJerome: please complete summary for this section (refer project guideline)

Health conscious

Retailers (buyers) users (customers) customers influence retailers

Supply and buyer relatively low compared to that of consumers

Initiators’ are well known Australian sports people who can comment and influence

Gyms, health foods stores, health supplement stores (GNC, ASN)

There are unmet needs in the product category total natural, low carb and low sugar ingredients free of

artificial sweeteners.

Description:

Jerome: please complete (refer to project guideline).

39

Implications:

Jerome: please complete (refer to project guideline).

*

OPPORTUNITIES RATING* THREATS RATING*

The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

SUPPLYSome bottlers are independent, while others are owned by the big-name manufacturers described

usually as 'partners' and 'customers'. The bottlers are licensed to convert purchased raw materials into

packaged soft drinks with the manufacturers' branding, and distribute the ready for sale commodities to

buyers within a particular sales territory. Although the majority of bottlers are free to make their own

business decisions, the close ties between manufacturers and bottlers’ means that food & beverage

retailers are arguably the more significant buyers from the point of view of market players132.

Industry level supply is important to strategic marketing planning. Shortage or excess can have industry

wide effect in supplies of raw materials, for example crop failures, diseases labour disputes. In order for

manufactures and distributes to maintain competitive advantage they need to ensure supply of their raw

materials and also maintain excess.

Soft drink Industry has a very intense competitive rivalry, a slight increase of in capacity of supplies can

trigger price wars, hence reduction in profitability.

Porters competitive forces identifies areas that could potential affect supply at the industry level and

marketing planners need to be aware of the following:

Description:Jerome: please complete (refer to project guideline).

Implications:

Jerome: please complete (refer to project guideline).

*

OPPORTUNITIES RATING* THREATS RATING*Utilisation of existing supply

channels for different product

categories

Competitor dominance in the supply

chain

132 Datamonitor 2011. Soft Drinks in Australia, Available: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-

8BD7-4FD8C32C0B1F. Accessed: 05 March 12.

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The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

CRITICAL SUCCESS FACTORS (CSFS)Would you mind checking these Maree? Thank you

For successful operation in the Australian CSD industry, the following factors are critical for success:

PRODUCT ATTRIBUTES INCLUDING A POPULAR BRAND, WITH CONSISTENT QUALITY AND

PACKAGING

Consumers have greater influencing power than that of suppliers or buyers, ultimately dictating

market share. Therefore, a brand wishing to compete in this industry must resonate among

consumers, by delivering on their desires and at competitive prices. Furthermore, consumers are

strongly and often influenced by brand so a favourable brand is critical in this competitive market.

As the product category is relatively homogenous it is product packaging that differentiates brands.

(Hannah/Jess: please comment of the strength and value of the virgin brand and cross reference

with your section)

RESOURCES INCLUDING DISTRIBUTION CAPABILITIES AND ACCESS TO INPUTS

Due to the high capital required for entry to such a market it is imperative that companies wishing to

compete in such an industry have prior knowledge or affiliations organisations with not only

experience with the distribution channels for beverages in Australia, but relationships with retailers,

distributors and bottlers. Furthermore, it is critical that new entrants have access to the raw

materials required for production as these are limited in Australia (Hannah: do you reference water

restrictions in your section? Please add here once you do)

COMPETENCIES INCLUDE PRODUCT & PACKAGING INNOVATION, SUPPLY CHAIN EFFICIENCY AND

DISTRIBUTION MANAGEMENT

As industry decline is predicted, those wishing to compete must be innovative with product offerings

and packaging as to appeal to the evolving consumer trends, which are causing market decline.

Additionally, successful companies in this industry are extremely efficient in the extremely complex

and costly supply chains. To secure a strong and sustainable competitive position in the market, new

entrants must have a wide distribution reach, be able to be secure favourable space on retailer

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shelves and be in available in convenient locations thus deeming distribution management a critical

factor of success.

SUMMARY OF OPPORTUNITIES AND THREATS Jess to amend according to Maree notes

Virgin Cola exits in a highly competitive market, not only against direct competitors such as Pepsi Co.,

Coca-Cola Amatil and Asahi but also against their competitors brand extensions and their substitutes

such as bottled water, sports drinks and juices.

The carbonated soft drink market is hostile with the three big players occupying XX% of the overall

market share.

Social trends prompted by obesity concerns also add the ‘health factor’ aspect opening another

competitive platform for carbonated soft drink product offerings to meet consumer expectations and

attain their market share.

Virgin Cola faces many opportunities and threats as both a brand and a product offering in the day-to-

day competitive consumer environment.

OPPORTUNITY

HIGH LOW

HIGH OPPORTUNITY: To take advantage of the health

conscious social trend and expand product line into low calorie or healthier substitute SFD goods (Retail world, AC Nielsen Special report, 19th July 2010, p.20).

Strengthen geographical reach with international expansion (if they aren’t launching internationally) – growth could provide long-term growth opportunities.

* To produce mimic brand extensions like Virgin Cherry Cola and Virgin Vanilla Cola for a competitive price.

LOW OPPORTUNITY:Take advantage of GFC and rocky economic conditions with the use of coupons and discount vouchers.

*Branching into the ‘organic’ sector in response to heath trends.

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* Horizontal axis = significance of opportunity, Vertical axis = probability of occurrence

THREAT

HIGH LOWHIGH COMPETITORS:

ASAHI GROUP HOLDINGS (Schweppes Aus), PepsiCo, Coca-Cola – High competitive environment against already established companies, who already offer line extensions appealing to social trends. Coke has a strong international brand presence.

THREAT: Majority of consumers curbing their household expenditure (saving on gas, electricity, TA meals and new clothes), need to make CSD as a market offering be perceived as a necessity rather then a luxury or specialty good.

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LOW THREAT:Sluggish growth performance in the grocery channel overall in AUS.MINOR COMPETITORS:

Bickford's (includes juices, sodas, teas, sparkling water with fruit flavor, energy drinks, bottled water)

Bundaberg (includes diet varieties, flavored CSD includes lemon lime bitters and ginger beer)

Cascade (includes fruit juices, ginger beer, flavored CSD including sparkling apple juice and sparkling blackcurrant)

Golden Circle Company (includes fruit juices, cordials and CSD)

Kirks (line of sodas marketed by Coca-Cola Amatil)

LA Ice Cola (includes cola available in four varieties including sugar free and diet variety)

Leed (includes carbonated lemonade)

Lido (includes lemonade)

* Problematic distribution channels as retailers ma not want to take the risk of carrying a new product

*Alcoholic substitutes in the beverage industry, this threat is scaled reasonably low as alcoholic beverages are un-attainable for consumers under the age of 18 and for those of the legal drinking age contributing factors such as RBT and social standards

*Horizontal axis = significance of threat, Vertical axis = probability of threat

SITUATION ANALYSIS – INTERNAL CAPABILITIESJayne to read over

Virgin Cola has decided to brand its carbonated soft drink as an Organic Soft Drink to be distributed

through specialty stores such as Thomas Dux, Harris Farm, Fratelli Fresh and other niche delicatessen

styled stores. This branding strategy will help distinguish Virgin Cola as a brand, giving it a point-of-

difference and setting it aside from the major players Pepsi and Coca-Cola.

The Virgin Group’s on a company level is one of great power as its products range across several industry

sectors. The Virgin Group’s brand name is one of its biggest assets, this is partly due to the strong

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association the brand has with Director, Sir Richard Branson. Sir Richard Branson acts as an unofficial

endorsee for the company’s brand, values and business approach. The Virgin Group has products in

Lifestyle, Media and Mobile, Money, Music, People and Planet as well as travel; this diverse portfolio

strengthens the overall brand recognition of the company as the company is exposed to a plethora of

consumers across these different segments.

The re-launch of Virgin Cola in Australia will align with the Virgin Groups pre-existing values and cultures

established through the brands other product lines. The carbonated soft drink beverage is going to align

especially with the People/Planet values of the company. Virgin Pepsi is going to be an organic cola

produced with fair trade ingredients and the product will be bottled in recycled materials. These aspects

of the product not only reinforce the Virgin Groups mission and culture but it also acts as a point-of-

difference and aligns with current trends stimulating an influx in health concern and societal search for

healthier substitutes for the household goods in which consumers love.

In order for Virgin Group to name Virgin Cola as a ‘Fair Trade’ product, it needs to meet certain

requirements set out by the Fair Trade Body. These requirements include:

Pay a price to producers that aim to cover the costs of sustainable production: the Fair Trade

Minimum Price133.

Pay an additional sum that producers can invest in development: the Fair Trade Premium134.

Partially pay in advance, when producers ask for it135.

Sign contracts that allow for long-term planning and sustainable production practices136.

The meeting of these requirements and the attainment of the Fair Trade title/logo not only will be a

distinguishing factor which can be used in advertising but it will also enforce the ethics of the company

behind it (The Virgin Group). This will give Virgin Cola a competitive advantage over the market leaders

Pepsi and Coca-Cola as they do not attain such certification and because movements like Fair Trade are

becoming increasingly popular in today’s societal environment. This movement into Fair Trade will earn

Virgin Cola first mover advantage and will lead to Virgin Cola being a market leader in the

environmentally sustainable products for carbonated soft drinks.

On a competitive scale, the marketing of the Virgin Cola as being a product with superior environmental

sustainability status will stimulate attention from major competition Coca-Cola. Virgins positioning

strategy to publicizing the brand Virgin will trigger this focus and it’s product as being a market leader for

environmental sustainability innovation. This is because Coca-Cola is currently in the stages of

133 http://www.fairtrade.net/generic_trade_standards00.html134 http://www.fairtrade.net/generic_trade_standards00.html135 http://www.fairtrade.net/generic_trade_standards00.html136 http://www.fairtrade.net/generic_trade_standards00.html

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developing a ‘PlantBottle’ of it’s own with a similar branding strategy. Coca-Cola is a global brand that

also draws from its strong brand recognition as a main driver in the competitive dominance in the

marketplace. Coca-Cola as a brand as an extremely high level of consumer recognition with branding

strategies aimed at evoking fun ‘summer-time’ memories and experience with friends. This branding

strategy is successful because it appeals to consumer’s emotive stimuli, evoking memories of fun and

then associating Coca-Cola as a brand to such memories.

Coca-Cola’s ‘PlantBottle’ will be made of a material known as PET plastic, the bottle will contain 30%

materials from Brazilian sugar cane and molasses. The goal is to make the PlantBottle 100% recyclable137.

Virgin Cola’s market entry will beat Coca-Cola into the market and therefore enjoy the first mover

advantage and access to economies of sale. However this move does bear some risk, Coca-Cola is now

given the opportunity to watch Virgin Cola and analyze the overall consumer response to the product,

and build features into their ‘PlantBottle’ which will better satisfy unmet consumer expectations and to

build/learn off Virgins mistakes.

A the main capability in which this branding strategy gives The Virgin Group to other competitors is it

separates them from immediately competing against the markets larger players Coca-Cola and Pepsi,

placing it in a sub-category niche within the carbonated soft drink category. This niche provides a less

volatile market place, which will be easier to dominate off the brand name alone. Once the niche market

is dominated by Virgin Cola the company can then decide to start defusing the beverage out into the

mass-market.

Another capability in which The Virgin Group will enjoy includes tax concessions, these concessions can

be granted to make up for loss of potential income incurred through adopting sustainable production

methods and avoiding mass production. Partnerships or alliances set up with recycling companies will

also grant the Virgin Group additional capabilities as distribution of raw materials and finished goods will

be maintained at little or no cost.

Apart from the production capabilities in which The Virgin Group will enjoy on the production side of

operations, the sales/retail side will also inherit capabilities vital to growing market share. The ‘natural’

and organic attribute of the product will enable the beverage to move across product lines and allow it to

be kept in the consideration group for healthier substitutes such as performance drinks, juices and

bottled water. Another capability on Virgins sales side of the business is that the Virgin Cola beverage will

be competition in a much less volatile market. Avoiding in the first instance direct competition with both

Coca-Cola and Pepsi.

137 Global Edge. 2000. Coca-Cola Amatil. [ONLINE] Available at: http://globaledge.msu.edu/blog/post/562/ge-blog-series--go-green--part-4.2---planting-new-ideas [Accessed 08 February 12].

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Jess: I did not have time to thoroughly read through this section so please have someone do it before

Sunday for errors etc.

Review:

Jess: please complete (refer to project guideline).

Implications:

Jess: please complete (refer to project guideline).

*

OPPORTUNITIES RATING* THREATS RATING*

The rating is based on a double-digit 5-point scale for the degree of significance and for probability of occurrence.

The first number/5 represents the degree of significance rating out of 5, 5= extremely significant and 1 = not very

significant. The second number/5 represents the probability of occurrence, 5= extremely likely and 1 = low

probability.

PROBLEMS AND OPPORTUNITIES STATEMENT

Jess: If you are unable to do this tomorrow I can do it either with you or myself on Sunday. The delay with the final document and CSFs was due to formatting, email communication, inserting others work and cross referencing with the project guideline. I also needed to complete the summary for the presentation so Hannah was able to get started on slides.

1. THE BUSINESS UNIT’S CAPABILITIES COMPARED TO CRITICAL SUCCESS FACTORSCSF Our capabilities/competencies

2. OPPORTUNITIES FOR THE BUSINESS UNIT TO EXPLOIT WITH EXISTING CAPABILITIES3. OPPORTUNITIES FOR THE BUSINESS UNIT TO EXPLOIT WITH IMPROVED CAPABILITIES 4. THREATS THAT MUST BE ADDRESSED

RECOMMENDATIONS AND RATIONALE

MARKETING OBJECTIVES: (See Exhibit 2.4 for examples)PRODUCT-MARKET GROWTH STRATEGIES YEAR 1

OBJECTIVES YEAR 2

OBJECTIVESYEAR 3

OBJECTIVES

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Existing products in existing markets (Market penetration)

Existing products in new markets (Market development)

New products in existing markets(NPD)

EXAMPLE OF MARKETING STRATEGIES: MARKET SEGMENT 1 MARKET SEGMENT 2 MARKET SEGMENT 3Segment description Segment description Segment description

Products/brands serving this segment

Products/brands serving this segment

Products/brands serving this segment

Product/Brand positioning Brand positioning Brand positioning

Product strategy Product strategy Product strategy

Pricing strategy Pricing strategy Pricing strategy

Distribution strategy Distribution strategy Distribution strategy

IMC strategy* IMC strategy* IMC strategy*

Team needs to discus and include the below:

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What are the critical success factors in this industry ?

Do the firm’s internal capabilities fit with or stretch the firm in a realistic way ?

EXAMPLES OF STRATEGIES FOR EACH FORCE. Is there a blue ocean strategy in any element of any force ?

1: Reducing the Bargaining Power of SuppliersPartneringSupply chain managementSupply chain training Increase dependency Build knowledge of supplier costs and methods Take over a supplier

2: Reducing the Bargaining Power of CustomersPartneringSupply chain managementIncrease loyaltyIncrease incentives and value addedMove purchase decision away from priceCut put powerful intermediaries (go directly to customer)

3: Reducing the Treat of New EntrantsIncrease minimum efficient scales of operationsCreate a marketing / brand image (loyalty as a barrier)Patents, protection of intellectual propertyAlliances with linked products / servicesTie up with suppliersTie up with distributorsRetaliation tactics

4: Reducing the Threat of SubstitutesLegal actionsIncrease switching costsAlliancesCustomer surveys to learn about their preferencesEnter substitute market and influence from withinAccentuate differences (real or perceived)

5: Reducing the Competitive Rivalry between Existing PlayersAvoid price competitionDifferentiate your productBuy out competitionReduce industry over-capacityFocus on different segmentsCommunicate with competitors

APPENDIX

APPENDIX AYoffie D. & Kim R. 2011, Cola Wars Continue: Coke and Pepsi in 2010Harvard Business School, 9-7-11-46, pp. 1 - 22A.1For more then a centaury Coca-Cola and Pepsi vied for ‘throat share’ of the worlds beverage market. A.2Most competitive time spanned from 1975 – mid 1990’s, and was fought over the $74 billion carbonated soft drink (CSD) industry. Both coke and Pepsi achieved average annual revenue growth of around 10%, as both US and worldwide consumption rose steadily year after year.A.3

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The competition between Pepsi and Coke fed each companies success, the more successful coke was the sharper Pepsi had to be and visa versa.A.4Competitive relationship started to fray in 2000s, however as the US consumption started to decline by 2009 the average American drank 46gallos of CSD a year (lowest CSD consumption since 1989)A.5Heading into 21st centaury coke and Pepsi faced new challenges:Could they boost CSD salesCould they compete against non-CSD beverages that demanded different bottling, pricing and brand strategies?A.6ECONOMICS OF THE US CSD INSUSTRYAmericans consumed 23 gallons of CSDs annually in 1970, and consumption grew by an average of 3% a year over the net three decades. Fuelling this growth inc. increased availability of CSD and the introduction of flavoured and diet varietiesAlternatives to CSDs including beer, milk, bottled water, juice, tea, powdered drinks, wine, sports drinks, distilled spirits and tap water. Within the CSD category the cola segment maintained its dominance, although its market share dropped from 71% in 1990 to 55% in 2009.A.7CONCENTRATE PRODUCERSConcentrate producers blend the raw ingredients, package the mixture in plastic canisters and ship canisters to be to the bottler.Most significant costs of the concentrate producers Inc: advertising, promotion, market research and bottler support.A.8BOTTLERSPurchase the concentrate, add carbonated water and high fructose corn syrup bottle or can the CSD product and delivers it to consumer accounts.Franchise agreements both coke and Pepsi allow bottler to handle non-cola brands of other concentrate producers. Bottlers could choose whether to market new beverages introduced by a concentrate producer.Bottlers couldn’t carry directly competing brands A.9RETAIL CHANNELSIn 2009 the distribution of CSD in the United States took place through supermarkets (29%), fountain outlets (23.1%), vending machines (12.5%), mass merchandise (16.7%), convince stores and gas stations (10%) and other outlets (7.8%). Costs and profitability in each channel varied by delivery method and frequency, drop size advertising and marketing. CSDs accounted for $12 billion or 4% total store sales in the US and were also a big traffic draw for supermarkets. Historically Pepsi dominated sales through retail outlets, while coke commanded the lead in retail sales.In the 1990s competition for fountain accounts = intense, in 1999 burger king franchises believed to pay $6.20 per gallon of coke syrup (received substantial rebate on each gallon).After Pepsi entered the fast food restaurant business acquiring Pizza Hut (1978), Taco Bell (1986) and KFC (1986), coke perused competing chains such as Wendy’s and Burger King to switch to cokeIn the vending channel bottlers took charge of buying, installing and servicing machines (also negotiating contracts with the property owners typically received a sales commission in exchange for accommodating their machine)A.10THE EVOLUTION OF US SDI (SOFT DRINK INDUSTRY)Coke was formulated in 1886, Pepsi invented in 1893.The cola war begins1950 Alfred Steele, former Coke marketing executive became the CEO of Pepsi and made “beat coke” his motto. Pepsi growth began to follow the post-war growth in a number of supermarkets and convenience stores in the united states: there was about 10,000 supermarkets in 1945, 15,000 in 1955 and 32,000 in 1962 at the peak of its growth curve. The Pepsi Challenge1974 Pepsi launched “the Pepsi challenge” in Dallas, Texas. Coke was the dominant branding that city and Pepsi ran a distant third behind Dr Pepper. Blind taste tests which where conducted by Pepsi’s small bottler, the company tried to demonstrate how consumers liked the taste of Pepsi better then that of Coke; after this it rolled out Nation wide.

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Coke countered with rebates, retail price cuts and a series of advertisements questioning the tests reliability/validity.Pepsi challenge successfully eroded the cokes market share, in 1994 Pepsi past coke in food store sales for the first time, opening up a 1.4 share lead.Cola war heats up1985 coke announced it was changing its 99-year old formula, the radical break with tradition cited a sharp depreciation in the value of coca-cola as a brand/trademark. On that day Pepsi declared a holiday for its employees.Three months later the company brought back the original formula under the name of coca-cola classic.New CSD products proliferated in the 1980s; coke introduced 11 new products including caffeine free and cherry coke. Pepsi introduced 13 producers inc. lemon line slice and canine free Pepsi cola.1980s the growth of Pepsi and coke put the squeeze on smaller concentrate prodycers as their shelf space declined, smaller products where shuffled from one owner to another.ADAPTING WITH THE TIMESStarting late 1990s the soft drink industry (STI) encountered new challenges suggested possible long-term shift in the market place.Americans still drank CSDs (more then any other beverage) at US consumption started to fizzle that stood contrast to annual growth rates of 3% to 7% during the 1980s and early 1990s.The shift in consumption patterns evolved the linkage to growing health issues such as obesity. A.11THE QUEST FOR ALTERNATIVES:Expanding the product mix offered other avenues for growth diet sodas rose to capture 30% of the CSD market in 2009 compared to 24% a decade ago. Coke zero became a successful new product.Both coke and Pepsi intensified their efforts to use alternative sweeteners. Despite some success of diet drinks, coke and Pepsi realised that growth lied in ‘non crabs’, this category included juices, sport drinks, energy drinks and tea based drinks also bottled water.Initially Pepsi was more aggressive in shifting into non-CSD products that outsold cokes rival products in several key categories including Lipton iced tea and Gatorade sports drink.In 2007 77% of Pepsi’s new products released in the US where non carb, compared to Coke 56%A.12EVOLVING STRUCTURES AND STRATEGIESIncreasing popularity of CSD alternatives was brewing complications for CSD maker’s tradition production and distribution practices.Concentrate companies become more directly involved with the manufacturing of non-CSD beverages such as Gatorade and Lipton iced tea. These finished goods required a smaller but specialized production process that was challenging for the bottlers to accommodate with the existing infrastructure. Bottlers were becoming frustrated that they where not fully participating in the new growth businesses. Pepsi and Coke sold the finished goods to their bottlers, who distributed them alongside their own bottled products at a parentage mark-up.In addition, coke and Pepsi distributed some non-CSD directly to retailer warehouses bypassing bottlers.All CSD companies faced the challenge of achieving pricing power in the take-home channels. In particular the rapid growth of the mass-merchandisers, led by wall mart and other club stores which posed a threat to the profitability of Coke and Pepsi.In addition bottlers had to manage an ever-rising number of stock-keeping units (SKU). Many non-CSD sold at a relatively low volume leading to an increase use of split pallets.Bottlers incurred higher distribution and sales costs; some of Cokes biggest bottlers saw their costs of goods sold (inc operating expenses) reach 90% of their sales.Not surprisingly bottlers complained over Coke’s charging a flat rate for its concentrate in the US market, cokes profits were tied to volume growth whilst the bottlers profits were drive by package types and where the drinks were sold.

A.13FUTURE OF COLA WARSDeclining CSD sales, declining cola sales, rapid emergence of non-carbonated drinks appeared to be changing the game.

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APPENDIX BS. Vignali, Virgin Cola, Manchester, UK, pp: 133-143.Available: http://www.emerald-library.com/ftGlobal position of Virgin Cola within soft drinks industryVirgin brand successful for virgin cold regarding competitorsService divisions operate autonomously Brand is emotional association, with Branson as the brand’s most effective PR weaponVirgin cola adopted strategy to culturally suit different marketsSoft drinks industry = promotion, brand image, packaging (even more so than actual product particularly in USA and UK) promo type depends on target market, package for differentiationLeading brands hold onto market via promo strategies and product diversification, innovation and brand imageDisadvantage = 2 market leaders (Pepsi and coke) decrease market share and increase market growth = new product (requires increased funding through promo to increase market)Launch of existing product in existing market requires increased recognition of brand and improved productivityConstantly innovate to remain competitive (?)Virgin cola must be competitively priced. Media and selling through distribution channels = virgin cola promo. Difficult to secure retail outletsAdvertising: coke focuses on product, Pepsi focuses on user, virgin focus on….???Consumers are interested in brand name and image portrayed by drinking a brand. Pepsi and coke have merged to other snack food industries enabling them to achieve economies of scale in advertising, marketing and distributionImportant to continuously establish/implement strategic changes as means of creating competitive advantage in such a competitive industryProduct is less important compared to the importance of advertising/brand recognition. Create promo technique that appeals to the global consumerMerge with complimentary business (diversify into new products in existing markets ) = cost saving/synergyCoke and Pepsi have strong distribution (overcome by merging with a well established branded product) = ENABLE PRICE DISCOUNTINGStrengths = Virgin is branding and quality Brand, promo, innovative image and packaging. Product, package and tastes the same across competitors, it is brand recognition that is significant = virgin advantage with established brandWeakness = global brand recognition and appeal to older generations (Richard as a brand), placing too much emphasis on brand name as promo weapon however he is a unique world wide image. WANT= image that a brand brings to consumer, quality and competitive priceBrand name dependence, incongruence between strategic/tactical levels, too reliant on to few distribution channelsOpportunities = diversification of range, increase soft drink consumption, ability to gain more marketThreats = intense competition, saturated market failure = domino effect

APPENDIX CDatamonitor 2011. Soft Drinks in AustraliaAvailable: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F. Accessed: 05 March 12.

MARKET VALUEThe Australian Soft drink market grew by 3.3% in 2010 to reach a valye of $10,953 millionMarket value forecast

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In 2015, the Australian soft drinks market is forecast to have a value of $12,721.8 million, an increase of 16.1% since 2010MARKET SHARECoke is the leading player in the Australian soft drinks market, generating a 39.4% share of the markets volumeFIVE FORCES ANALYSIS The soft drinks market will be analyzed taking manufacturers of soft drinks as player. The key buys will be taken as distributors and retailers of soft drinks, and producers of packaging, soft drinks ingredients and other raw materials as the key suppliers.The top 3 players (Pepsi Co., Coca-Cola company and Asahi breweries) hold 54.9% of the total market volume. The buyer power of retailers in this market is moderate. Supplier power is not great, as most inputs are readily available commodities. New entrants must contend with the reach and strong brands of incumbents, although niche catergories such as smoothes present opportunities to new entrants. Not a great threat imposed by the soft drink substitues except from traditional coffee and tea or homemade juices, along with the tendancy of consumers switching towards the fruit juices. Although major players are fighting for the dominant position, the rivalty level is moderate and there is scope for growth in niche catergories. Buyer power: in Aus, the main distribution channels for the soft drinks market are supermarkets, which account for 48.5% of the total market volume, followed closely by on-trade retailers (32.5%) the leading players generate most of their revenue from the production of concentrates, which are sold to bottling companies. New entrants: players in the Australian soft drinks market try to distinguish their products to some extent by stressing their health benefits and taste. Although it would be difficult for a new entrant to compete with the brand strength and reach of existing players it may be possible to achieve small-scale success stressing a unique production method or nutritional benefits. However, niche catergories can be exploited by new entrants. COCA-COLAThe Coca-Cola Company (TCCC) engages in the manufacture, distribution and marketing of non- alcoholic beverage concentrates and syrups. The company owns the world’s most valuable brand: Coca- Cola. Furthermore, TCCC markets four of the world's top five non-alcoholic sparkling brands, including Diet Coke, Fanta and Sprite. The company's finished beverage products are sold in more than 200 countries worldwide. TCCC is headquartered in Atlanta, US and employs around 139,600 people.Most of TCCC's products are manufactured and sold by bottling partners, who convert them into finished packaged products for sale to distributors and other customers. The company sells the concentrates and syrups for bottled and canned beverages to authorized bottling and canning operations. Authorized bottlers and canners either combine syrups with sparkling water or combine concentrates with sweeteners (depending on the product), still water and sparkling water to produce finished sparkling beverages. These sparkling beverages are packaged in cans, glass and plastic bottles, and sold to wholesalers and retailers.Coca-Cola is the biggest-selling soft drink of TCCC. Other popular soft drinks brands marketed by the company includes Beat, Canada Dry, Canning’s, Cheers, Cherry Coke, Citra, Diet Barq’s, Diet Coke, Fanta, Limca, Sprite and Vault. In addition, TCCC produces, distributes and markets a broad portfolio of energy drinks and sports drinks across the globe. Its energy drinks are marketed under brands such as Burn, Buzz, Full Throttle, Full Throttle Blue Demon, Full Throttle Fury, Full Throttle Sugar Free, glaceau vitaminenergy, Powerplay, Rehab, Samurai and TaB energy. TCCC’s sports drinks portfolio include brands such as Aquana, Aquarius, Aquarius Active Diet, Aquarius Freestyle, Powerade, Powerade aqua+, Powerade balance, Powerade Option and Powerade Zero.KEY METRICSThe Coca-Cola Company generated revenues of $35.1 billion in the financial year (FY) ended December 2010, an increase of 13.3% over 2009. The company's net income totaled $11.8 billion in FY2010, an increase of 73.1% over FY2009.PEPSICO.PepsiCo is one of the leading global beverage, snack and food companies. It manufactures, markets, and sells a variety of salty, sweet and grain-based snacks; and carbonated and non-carbonated beverages in approximately 200 countries across the world. The company has its largest operation in North America (the US and Canada), Mexico and the UK.PepsiCo operates through four business units: PepsiCo Americas Foods (PAF); PepsiCo Americas Beverages (PAB); PepsiCo Europe, which includes all beverage, food and snack businesses in Europe; and PepsiCo Asia, Middle East and Africa (AMEA), which includes all beverage, food and snack businesses in AMEA. The company's four business units are further divided into six reportable segments: Frito-Lay North America (FLNA), Quaker Foods North America (QFNA), Latin America Foods (LAF), PepsiCo Americas Beverages (PAB), Europe, and Asia, Middle East and Africa (AMEA).PepsiCo AMEA manufactures and markets salty and sweet snack brands including Lay's, Kurkure, Chipsy, Red Rock Deli, Cheetos, Doritos, Ruffles and Smith’s. The division also manufactures, markets, and sells beverage concentrates, fountain syrups and finished goods under the brands Pepsi, 7UP, Mirinda and Mountain Dew. These brands are sold to authorized bottlers, independent distributors and retailers. PepsiCo AMEA owns or leases

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approximately 80 plants and 1,175 warehouses, distribution centers and offices. It also utilizes approximately 40 properties owned by contract manufacturers or co- packers.KEY METRICSPepsiCo generated revenues of $57.8 billion in the financial year (FY) ended December 2010, an increase of 33.8% as compared to 2009. The company's net income totaled $6.3 billion in FY2010, an increase of 6.3% over 2009.

MARKET DISTRIBUTIONSupermarkets / hypermarkets form the leading distribution channel in the Australian soft drinks market, accounting for a 48.5% share of the total market's volume.On-trade accounts for a further 32.5% of the market.MARKET FORECASTSMARKET VALUE FORECASTIn 2015, the Australian soft drinks market is forecast to have a value of $12,721.8 million, an increase of 16.1% since 2010.The compound annual growth rate of the market in the period 2010–15 is predicted to be 3%.MARKET VOLUME FORECASTIn 2015, the Australian soft drinks market is forecast to have a volume of 5,308.1 million liters, an increase of 14.2% since 2010. The compound annual growth rate of the market in the period 2010–15 is predicted to be 2.7%.

APPENDIX D

APPENDIX EDatamonitor 2011. Soft Drinks in AustraliaAvailable: http://360.datamonitor.com.ipacez.nd.edu.au/Product?pid=889413C8-178F-43C0-8BD7-4FD8C32C0B1F. Accessed: 05 March 12.

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APPENDIX F

CONSUMERS Typical buyers within this industry are large retailers who hold a great amount of financial muscle which allows them to make large purchases and enter into long term contracts with market players. The loss of one retailer could significantly impact upon a manufacturer’s revenue and switching costs are usually low. This boosts buyer power somewhat. Industry consumption volumes; increased with a CAGR of 2.2% between 2006 and 2010, to reach a total of 245.2 billion Kg in 2010. The industry's volume is expected to rise to 262.3 billion Kg by the end of 2015, representing a CAGR of 1.4% for the 2010-2015 period138.

138 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,

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The age demographic of Ready To Drinks (RTDs) such as Breezers, UDLs and Cruisers has matured139. (Might mean that this segment reduces the amount of Cola products purchased as a ‘mixer’ as they consume pre-mixed drinks).

The presence of big supermarket chains increase buyer power140

Consumer confidence has slipped in the last quarter with more Australians apprehensive about economic uncertainty, financial security, and rising gas and electricity prices. The latest results for the Nielsen Global Online Consumer Survey undertaken in June, shows that Australian consumer confidence has slipped three points to 108 in the second quarter of 2010 compared to the previous three months; with 36 per cent of consumers having a pessimistic view of the state of their personal finances over the next 12 months (up six points from Quarter 1); and only half (50 per cent) saying the next 12 months is a good/excellent time to buy what they want and need – the lowest this score has been over the past four quarters.Increasing utility bills was by far the biggest concern among Australian consumers, with 30 per cent citing it as a major concern over the next six months – up 10 per cent compared to a year ago. In addition, two-in-three consumers (65 per cent) said they had already taken action to try and save on gas and electricity over the past year, and even when economic conditions improve, saving on gas and electricity was the number one action cited to reduce household spending141.

Shoppers are increasingly using coupons and visiting more stores during their shopping trips as they search for the best value.This behaviour has been observed in Australia with shoppers increasing their store repertoire. Furthermore, 30 per cent of Australian shoppers claim ‘they will still look for cheaper grocery brands even though the GFC is over’ (Nielsen Global Consumer Confidence Survey, June 2010)142.

Rising confidence in Australia in 2010 defied the trend of other developed markets and reflected the strongest outlook Australia has had in more than two years for job prospects, personal finances, and the ability to buy things over the next 12 months. Australia was the third most confident market globally, boasting a Consumer Confidence Index score of 115 which was 25 points above the global average of 90. An over- whelming 74% of Australians said their perception of local job prospects over the next 12 months was excellent or good; 70% believed that the state of their personal finances was positive; and 59% (the highest score globally) claimed the next 12 months was an excellent or good time to buy the things they wanted and needed. Despite the positive outlook among Australians, we are still seeing evidence of cautionary behaviour, with almost half of all consumers channelling their spare cash into savings (47%), and 40% using surplus cash to pay off debts, credit cards and loans. Plus, the majority of consumers are curbing their house-hold expenditure by trying to save on gas and electricity; cut- ting back on take-away meals, new clothes purchases and out-of-home entertainment, and making the switch to cheaper grocery brands143.A strong labour market and perceived financial position may be driving up our confidence, but in reality, while we are also seeing a return in business confidence among grocery manufacturers – it has been tempered somewhat by the sluggish growth performance of the grocery channel overall (value sales growth for total grocery excluding tobacco dropped from a healthy 7.8% for the Moving Annual Total (MAT) 16 August 2009, to just 3.6% for the same period this year).This was driven by a combination of continued deep discounting by the retailers, a 5% fall in value for grocery baskets compared to a year ago, and the rise of the savvier shopper who is continuously on the hunt for “value for money”. Private label perception in the eyes of the shopper has come a long way over the past five years, with many seeing the benefits it can offer in terms of “value for money”, and as a good quality alternative to name brands144.Online Shopping: As Australians demand better deals on everything they purchase, online trading is also playing a larger role in the shopping channel mix, with the key drivers being the availability of a broader range of products and services and the ability to get products and services at a cheaper price than they are available through

139 Research in Focus - Ready To Drink Finally Comes of Agehttp://blackboard.nd.edu.au/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2Fwebapps%2Fblackboard%2Fexecute%2Flauncher%3Ftype%3DCourse%26id%3D_3155_1%26url%3D&140 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011141 NIELSEN SPECIAL REPORT– JULY 2010, Insights into the shopper of today and the future; Economic concern and rising utility costs keeping aussies up at night. By Chris Per cy142 NIELSEN SPECIAL REPORT– JULY 2010, Insights into the shopper of today and the future; Economic concern and rising utility costs keeping aussies up at night; When Promotions ain’t promotions. By Richard Reeves.143 AdNews 14 January 2011, 2010 review144 AdNews 14 January 2011, 2010 review

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traditional retail channels. Among Australia’s internet population, the vast majority (96%) have made an online purchase145.

Australian Soft drinks market. Australian soft drinks market value between 1996 – 2001 has grown by $128.9 Mn

CONSUMER TRENDS.The latest results for the Nielsen Global Online Consumer Survey undertaken in June, shows that Australian consumer confidence has slipped three points to 108 in the second quarter of 2010 compared to the previous three months; with 36 per cent of consumers having a pessimistic view of the state of their personal finances over the next 12 months (up six points from Quarter 1); and only half 50 per cent) saying the next 12 months is a good/excellent time to buy what they want and need – the lowest this score has been over the past four quarters. Increasing utility bills was by far the biggest concern among Australian consumers, with 30 per cent citing it as a major concern over the next six months – up 10 per cent compared to a year ago. In addition, two-in-three consumers (65 per cent) said they had already taken action to try and save on gas and electricity over the past year, and even when economic conditions improve.146 Saving on gas and electricity was the number one action cited to reduce household spending. The economy was ranked the second biggest major concern with 21 per cent of respondents – up four points in just three months – a reflection of the widespread voter dissatisfaction we have seen over the past few months. Not surprisingly, restraint and vigilance continues to be a key theme among Aussie consumers with around two-in five channelling their spare cash into savings (41 per cent), and 38 per cent of consumers channelling any surplus cash into paying off debts, credit cards and loans.147

Furthermore, more than half of Australian consumers cited they were actively cutting down on take-away meals, out-of-home entertainment, and new clothes.148

The key to success of retail sector lies in responding to needs of the shopper of today and the future.149

Population.Australian population will embark in significant changes including cultural diversity,ageing population and general population growth, understanding the impact of these changes will have on shoppers and their purchasing behaviour is critical in capitalising opportunities these trends will offer to retail sector.150

The Shopper.Global financial crisis(GFC) caused the shoppers to reassess how they spend and shop. There has been a fundamental shift in shopper sentiment from the spend thrift ,debt driven early noughties to a greater sense of caution and restraint post GFC.151

The shopper has become savvyThe shopper buys private labels in one category and premium price brand in another Private label products have been launched successfully into more and more categories . Shoppers stick with brands as long as they perceived to be good enough. 152

The confident yet Cautious consumerRising confidence in Australia in 2010 defied the trend of other developed markets and reflected the strongest outlook Australia has had in more than two years for job prospects, personal finances, and the ability to buy things over the next 12 months. Australia was the third most confident market globally, boasting a Consumer Confidence Index score of 115 which was 25 points above the global average of 90. An overwhelming 74% of Australians said their perception of local job prospects over the next 12 months was excellent or good; 70% believed that the state of their personal finances was positive; and 59% (the highest score globally) claimed the next 12 months was an excellent or good time to buy the things they wanted and needed.The results are consistent, with the continued rise in Australia’s employment growth fuelling a strong labour market and underpinning household income. Our economy also benefited from expansion over the first half of 2010 with

145 AdNews 14 January 2011, 2010 review146 Retail world, Ac Nielsen Special report, 19th July 2010. P.20147 Retail world, Ac Nielsen Special report, 19th July 2010. P.20148 Retail world, Ac Nielsen Special report, 19th July 2010. P.20 149 Retail world, Ac Nielsen Special report, 19th July 2010. P.20

150 Retail world, Ac Nielsen Special report, 19th July 2010. P.23 151 2010 Review,Ac Nielsen adNews,14th January 2011. p.14152 2010 Review,Ac Nielsen adNews,14th January 2011. p.15

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Gross Domestic Product (GDP) growth forecast to be around 3.25% for the year – a result of rising commodity prices, increased public investment and a growing population.153

The Demanding Consumer“Hard times have a way of transforming consumers and the past couple of years have been harder than most. While the Australian economy emerged in 2010 relatively unscathed from the GFC, the downturn has left an indelible impression on consumers’ attitudes and purchasing behaviours.During the economic downturn, consumers shopped around for specials to cut costs, and this has created a new, savvy consumer who is more demanding than ever. Despite the positive outlook among Australians, we are still seeing evidence of cautionary behaviour, with almost half of all consumers channelling their spare cash into savings (47%), and 40% using surplus cash to pay off debts, credit cards and loans.

Plus, the majority of consumers are curbing their household expenditure by trying to save on gas and electricity; cutting back on take-away meals, new clothes purchases and out-of-home entertainment, and making the switch to cheaper grocery brands. A strong labour market and perceived financial position may be driving up our confidence, but in reality, while we are also seeing a return in business confidence among grocery manufacturers – it has been tempered somewhat by the sluggish growth performance of the grocery channel overall (value sales growth for total grocery excluding tobacco dropped from a healthy 7.8% for the Moving Annual Total (MAT) 16 August 2009, to just 3.6% for the same period this year). This was driven by a combination of continued deep discounting by the retailers, a 5% fall in value for grocery baskets compared to a year ago, and the rise of the savvier shopper who is continuously on the hunt for “value for money”.Australian shoppers are prepared to shop around for the best deal. The average shopper repertoire now includes about four different stores in a week. In fact, it’s estimated that more than 30% of all Australian grocery purchases are made on promotion. Aside from heavy retailer promotional activity, we are seeing a decline in the amount spent per shopping trip – from $49.80 in 2009 to $48.40 this year; and each of these trips have become more rational with a 5% increase in the purchase of items costing less than $5, while the purchase of items priced between $10-15 has declined by 4%.”154

Private label perception in the eyes of the shopper has come a long way over the past five years, with many seeing the benefits it can offer in terms of “value for money”, and as a good quality alternative to name brands. Private label continues to steadily gain traction with its representation in all of the major grocery retailers, recording an increase in value share for the quarter to 2 October 2010, to just under a quarter (23.9%) of total supermarket sales. Nielsen Homescan indicates that everybody buys private label products (100% household penetration), with the average household spend reaching over $200 for the first time ever in the latest quarter – up $3.48 on the previous quarter.

Online Shopping“As Australians demand better deals on everything they purchase, online trading is also playing a larger role in the shopping channel mix, with the key drivers being the availability of a broader range of products and services and the ability to get products and services at a cheaper price than they are available through traditional retail channels. Among Australia’s internet population, the vast majority (96%) have made an online purchase.”155

The diversifying consumer“Cultural diversity from changing immigration, population growth and ageing consumers is set to impact Australian retailing in the next four decades. Key insights from the 2010 Nielsen Shopper Trends Report reveal that the Australian shopper is evolving, and to succeed in the future, retailers and manufacturers will need to develop strategies that accommodate growing ethnicity, population increases and an ageing society. Nielsen research shows that among Australian households in 2010, Thai cuisine was the second most popular eaten out-of-home (after traditional Australian); followed by Italian, Chinese and Japanese. Asian food items in Australian family pantries has grown by 268,000 households since 2007. This represents an opportunity for grocery marketers to provide simple and convenient Asian meal solutions. From a marketers perspective, it is important to understand how ethnicity impacts on how people shop and demand for products and brands – which products and brands consumers are looking for and where they expect to find them.Over the past 50 years Australian households have been adopting Mediterranean cuisine as part of their everyday menu, with ingredients available in both supermarkets and specialist retailers. Now, as migrant ion shifts from

153 2010 Review,Ac Nielsen adNews,14th January 2011. p.15

154 2010 Review,Ac Nielsen adNews,14th January 2011. p.14 PRIVATE LABEL155 2010 Review,Ac Nielsen adNews,14th January 2011. p.14

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European count rise towards Asian countries, there is a need to understand how these influences will change the way Australians shop, what they buy, where they buy it from and what they eat.”156

Australian Population“In the 12 months to 30 June 2010, Australia's population increased by 377,100 people, reaching 22,342,000. The annual growth rate for the year ended 30 June 2010 (1.7%) was lower than that recorded for the year ended 30 June 2009 (2.2%).”157

Table: 1

Median Age“At June 2010, the median age of the Australian population (the age at which half the population is older, and half is younger) was 36.9 years, up from 36.5 years in 2005. The median age of males increased from 35.7 to 36.0 years and the median age of females increased from 37.3 to 37.8 years over this period.

The median age of all states and territories increased between 2005 and 2010. In 2005, South Australia and Tasmania had the equal oldest median age, both at 38.6 years. However, between 2005 and 2010, the median age of Tasmania increased more than any other to become the oldest state or territory at 39.9 years in 2010. The Northern Territory remained the youngest state or territory with a median age of 31.2 years, up from 30.7 in 2005.The SD with the lowest median age at June 2010 was Northern Territory - Bal (29.4 years), followed by North West in Queensland (29.9) and Kimberley in Western Australia (30.7). The highest median ages were recorded in Yorke and Lower North in South Australia (46.5 years), Mid-North Coast in New South Wales (44.6) and Southern in Tasmania (44.2).”158

Working Age Population (AGED 15-64 YEARS)“At June 2010, there were 15.09 million people of working age (15 to 64 years), an increase of 1.36 million or 9.9% since June 2005. The proportion of the total population in this age group increased marginally from 67.3% to 67.6% over this five-year period. The Northern Territory had the highest proportion of people of working age at June 2010 (71.4%), overtaking the Australian Capital Territory (71.2%) for the first time in over 20 years. Tasmania continued to have the lowest proportion (65.2%).Between June 2005 and June 2010, Victoria had the largest growth of people aged 15 to 64 years (361,000), followed by Queensland (350,900) and New South Wales (339,300). Western Australia had the fastest growth of people of working age (14.1% over this five-year period), followed by Queensland (13.0%).The SDs with the highest proportions of working age people at June 2010 were Pilbara in Western Australia (72.7%), Darwin (72.7%) and Canberra (71.2%). The SDs with the lowest proportions were Yorke and Lower North in South Australia (61.0%), Mid-North Coast in New South Wales (61.5%) and Wimmera in Victoria (61.9%).”2

Adults aged 19 years and overFood intakeNon-alcoholic and alcoholic beverages accounted for over 60% of total food and beverage intake, by weight, for adult Australians (2,460 g for men and 2,020 g for women). The contribution of beverages to the total weight of food and beverage intake may have been influenced by climate and was highest in the Northern Territory (74% for

156 2010 Review,Ac Nielsen adNews,14th January 2011. p.14157 Australian Bureau of Statistics. 2010. Population by Age and Sex. [ONLINE] Available at: http://www.abs.gov.au/ausstats/abs@.nsf/mf/3201.0. [Accessed 05 March 12].

158Australian Bureau of Statistics. 2010. Population by Age and Sex, Regions of Australia. [ONLINE] Available at: http://www.abs.gov.au/ausstats/abs@.nsf/Products/3235.0~2010~Main+Features~Main+Features?OpenDocument#PARALINK12. [Accessed 05 March 12].

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men) and one of the lowest in Tasmania (59% for men). The contribution of alcoholic beverages to food and beverage intake was higher for men (10%) than women (3%) (see tables 2 and 3) 159

Coca-Cola Amatil:Coca-Cola Amatil (CCA) manufactures, distributes and markets carbonated soft drinks, still and mineral waters, fruit juices, coffee and other alcohol-free beverages. The company also distributes alcohol-based beverages through its joint venture company Pacific Beverages. It is also involved in processing and marketing of fruits, vegetables and other food products. The company operates in Australia, New Zealand, Fiji, Indonesia and Papua New Guinea. It is headquartered in Sydney.160

The beverage business consists of non-alcoholic and alcoholic businesses. The company, through its non-alcoholic beverage business, manufactures, distributes and markets carbonated soft drinks.161

The company’s sparkling beverages brands include: Coca-Cola, Diet Coke, Coca-Cola Zero, Sprite, Sprite Zero, Fanta, Lift, Deep Spring Natural Mineral Water, Appletiser, Grapetiser, Kirks, and Bisleri. Its still beverages brands include: Mount Frankling Lightly Sparkling Water, Pump, Pumped, Vitamin water, PowerAde Light, PowerAde Isotonic, Nestea, Neverfail Spring Water, Goulburn Valley, Goulburn Valley dairy co., Goulburn Valley fruity drink, Fruitbox, Grinders, and Peats Ridge Springs. The company's alcoholic beverages brands are Peroni Italy, Bluetongue, Miller, Russian standard vodka, Grolsch, Pisner Urgwell, Peroni Leggera, The Macallan, Canadian Club, Maker’s Mark, The Famous Grouse, Souza, Highland Park, Bols Amsterdam, Cockburns, Harveys Bristol cream, Basil Haydens, Oldcrow, Galliano, Bbakers, Millerchill, Bookers, and Tamdhu. Its food (SPC Ardmona) brands include: SPC, Goulburn valley, Ardmona, IXL, and Taylors.162

The company recorded revenues of A$4,609.4 million (approximately $4,240.4 million) in the fiscal year ended December 2010, an increase of 1.1% over 2009. The company's operating profit was A$844.9 million (approximately $777.3 million) in fiscal 2010, an increase of 7.3% over 2009. Its net profit was A$497.3 million (approximately $457.5 million) in fiscal 2010, an increase of 10.8% over 2009.163

Coca-Cola was introduced to Australia in the 1930s. In 1964, British Tobacco Company (Australia) purchased a controlling interest in Coca-Cola Bottlers (Perth).164

AMATIL changed its name to Coca-Cola Amatil (CCA) in 1989, and the Coca-Cola Company became CCA's major shareholder.165

CCA expanded in South East Asia with the formation of joint ventures with the Indonesian Tirtalina Group and the Indonesian Pan Java Group in 1991. In the following year, the company sold its Snack Foods Division to United Biscuits of the UK. The company opened its new plant at Richlands in Brisbane, Australia in 1994.166

159Australian Bureau of Statistics. 2008. ABS. [ONLINE]. http://www.abs.gov.au/ausstats/abs@.nsf/mf/4802.0. [Accessed 08 Feburary 12]

160 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.4161 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.5162 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.5163 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.4164 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6165 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6166 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6

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CCA acquired Rio Beverages in New Zealand in order to increase its exposure to the juice and lifestyle beverages segments in New Zealand and Australia, in 2002. In the same year, the company acquired Pacific Beverages; and CCA sold its PET manufacturing assets for approximately $157 million.167

In 2003, CCA acquired Neverfail Springwater, a specialist in the delivery of bulk water to Australian homes and offices; and Peats Ridge Springs.168

CCA opened an automated materials handling facility in Mentone, Victoria and also purchased Crusta Fruit Juices in Australia along with its subsidiary, Quenchy Crusta Sales, a cold chain distribution company, in 2004. In the same year, CCA acquired Quirk's Refrigeration.169

The company purchased the Northern Territory soft drink sales, distribution and production assets from Parmalat Australia in 2005. This acquisition made CCA the sole licensee of Coca-Cola products in Australia.170

The company signed a new three-year agreement with the National Rugby League Partnership (NRL) in March 2010.171

Brands - Sparkling beverages: Coca-Cola Diet Coke Coca-Cola Zero Sprite, Sprite Zero, Fanta Lift Deep Spring Natural Mineral Water Appletiser, Grapetiser Bisleri172

Still beverages - Mount Frankling Lightly Sparkling Water Pump Pumped Vitamin water, PowerAde Light PowerAde Isotonic Nestea Neverfail Spring Water Goulburn Valley, Goulburn Valley Dairy Goulburn Valley fruity drink Fruitbox Grinders Peats Ridge Springs173

Major competitors of Coca-Cola Amatil Ltd: National Beverage Corp. PepsiCo, Inc. Just Water International Limited174

According to Group Managing Director statement the Coca-Cola Amatil Ltd is focused on: effectively balancing pricing, volume growth and market share to improve our profitability and market position as well as infrastructure programs in expanding capacity, operational efficiency and cold drink coolers, as well as successful new product and package innovation.175

CCA will continue to focus on executing its organic growth strategy. Company focus will be on efficiency, service and revenue gains right across the business. Investment in capacity and capability improvements, capacity expansion and the accelerated rollout of cold drink coolers. CCA’s major capital investment program continued to reduce operating costs and materially improve customer service levels in 2010, leading to higher returns for CCA’s shareholders.176

CCA’s beverage market leadership position continued to strengthen in 2010 with increases in both volume and value share across all channels despite more aggressive competitor pricing in the second half. The business also fully recovered cost of goods sold increases through a combination of pricing and mix management.177

Continued growth of Coke Zero which grew volumes by 7%. Coke Zero now holds over 40% share of the diet cola category in the immediate consumption channel, a 3% share gain over the past 12 months. Mother energy drink grew volume by 6% as a result of new flavour and pack variants and now has 24% of the total energy drink market.178

CCA has been successfully executing an organic growth strategy for a number of years and will continue to do so in 2011. The key strategic focus for the business will be to:Continue to grow the core Australasian business through further new product and package innovation, acceleration of our cooler placement programme and delivery of efficiency gains from Project Zero; Accelerate the growth of our Indonesian business with increased investment in one-way-pack production capacity and rollout of cold drink coolers into the market place; and continue to grow our share of the alcoholic beverages market in Australia and New Zealand.179

167 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6168 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6169 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.6170 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.7171 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.7172 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.14173 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.14174 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.16175 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17176 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.19177 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.17178 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.18179 Coca-Cola Amatil Ltd, Company Profile 2011, Datamonitor, p.19 - 20

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Strengths:current strategies:SCA:Intent:10) MARKET DEFINITION: global beverages industry consists of total revenue generated through sales of beers, ciders, winesflavoured alcohol food beverages and spirits and also softdrinks. Market value(11) Beverage manufacturers usually differentiate their products, meaning they can occupy different areas of the beverage industry at the same time, reducing their reliance on revenues from one product.INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,

Company Profile – PepsiCo: global snack and beverage company (carbonated/non carbonated, swwet, salty, wholegrain). PepsiCo operates in 200 countries and has large scale operations in north America, mexico and the UK. PepsiCo operates through business units; PAF, PAB, PI, the business units are further divided into six reportable segments FLNA, QFNA, LAF, PAB, Europe and Asia and AMEA (p 26-7).Coke-Cola Company engages in the manufacturing, distribution and marketing of non-alcoholic beverages consentrates and syrups. The company okwns the worlds most valuable brand: Coke Cola. Coke Cola primarily produces sparkling beverages. Most of the products are manufacturered and sold by bottling partners (convert them into finished packaged products). Coka-cola bottles beverages either in plastic, glss or cans. (P 30 -4). ANHEUSER-BUSCH INBEV – engaged I the production, distribution and sale of beer and soft drinks. Company sells lagers, premium beers ad specialty brews in over 23 countries, The companies offer a portfolio of over 200 brands, that includes global flagship brands Budwiser, Stella Artois and Becks180.

Top 3 players in the AUS market – Coca-Cola, Asahi Brewery and PepsiCo. These 3 hold 54.9% of the total soft drink market Companies may choose one of two distribution channels; (1) intergrated buiness approach – selling reaty-tooncume drinks to retailers or adopt a business model where they sell raw materials to a network of bottling companies181. Australia’s resources boom boosted advertising spend- ing in 2010 to the pre-GFC levels of 2008. The strenght- ened economy helped Australia out-do markets globally and a market boom in August, with significant ad spend- ing during the federal election, ensured the Australian media market was surging182.Compared to 2009, the media market last year ampli- fied by an estimated 13% and remained strong, albeit at lowering percentage increases after mid-year.Improved performances was key as the market started lifting in the second half and particularly in the last quar- ter of 2009183.On a year-to-date basis to November 2010 - adjusted to reflect equal numbers of weeks to 2009 - only five of the 39 major categories decreased184.Among the top 20, which combined represented 89% of all media ad spending, only the Media category recorded a marginal 1% decline185

COMPANY Strengths:current strategies:SCA:Intent:

INDUSTRY It is imperative for manufacturers to shorten the time to market so they can build their initial market share. Redbull's stranglehold in energy drinks is a prominent example of the benefits of first mover advantages. In the drinks industry, it is often the early bird that catches the worm.186

180 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,

181 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011, 182 AdNews 14 January 2011, 2010 review183 AdNews 14 January 2011, 2010 review184 AdNews 14 January 2011, 2010 review185 AdNews 14 January 2011, 2010 review186 Pepsi: adding flavor to the cola war, 2003, Datamonitor, p.2

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Traditional cola was the baby-boomers' drink of choice when they were young. As obesity and other health concerns become more of an issue among aging boomers, manufacturers are racing to court and understand today's youth.187

…a number of manufacturers have introduced new stevia products, including Coca Cola and PepsiCo.188

[INTERNATIONAL/GLOBAL MARKET] The global beverages industry grew by 15% in 2010 to reach a value of $1,749,350.9 million. In 2015 the global beverages industry is forecast to have a value of $1,909,008.8mil. The compound annual growth rate of the industry period 2010-15 is forecast to be 1.8%. Market volume The global beverages industry grew by 13% in 2010 to reach a volume of 245,177.3 million Kg189. The compound annual growth rate of the industry in the period 2006–10 was 2.2%. Market volume forecast In 2015, the global beverages industry is forecast to have a volume of 262,286.5 million Kg, an increase of 7% since 2010. Market segmentation I - Beer, cider & FABs is the largest segment of the global beverages industry, accounting for 33.5% of the industry's total value190.Market segmentation II - Europe accounts for 46% of the global beverages industry value. Industry Performance; The performance of the industry is forecast to decelerate, with an anticipated CAGR of 1.8% for the five- year period 2010-2015, which is expected to drive the industry to a value of $1,909 billion by the end of 2015191.Since the economic downturn, manufacturers have sought cost-effective packaging, which also helps differentiate products. There has been expansion in the use of newer substrates (such as RPET, PLA and other biodegradable plastics, barrier films and pouches). Innovative packaging shapes and designs are aimed at specific target consumers. Value added functional features have been introduced (i.e. re-closable can ends and pouches designed for vending applications), which are used to attract more customers192. Entrance to the industry could prove problematic when the large scale of leading incumbents and brand loyalty is taken into account, however substitutes are cheaper and just as popular with consumers, providing new entrants with an avenue to entrance. All of these factors increase rivalry between players. Entrance to this industry can be achieved by starting up a new company, an existing company diversifying operations or by the acquisition of an existing company. There is growing opportunity to enter the industry on a small scale by occupying a niche. In order to compete with leading incumbents, new entrants must operate on a large scale. This requires significant capital outlay, which poses a barrier to entry for some. Furthermore, leading incumbents have strong brands already present within the industry. Brand loyalty is key in this industry and can therefore provide increased competition193.SWITCHING COSTS aren’t high, leading companies such as Nestle have diversified operationse e.g Nestle producing tea and coffee as well as soft drink. Overall there is a moderate threat from alternatives! Industry Competition: The global beverage industry is fragmented with leading incumbents such as Coca-Cola, Pepsi Co, Nestle and Anheuser Busch holding. Moderate industry growth over recent years does little to reduce the level of rivalry, however developing markets in the middle east provide market players with viable expansion opportunities. Overall, there is a moderate degree of rivalry in this industry. 35.1% of the total industry value. The large number of industry players serves to increase rivalry. The main substitutes to soft drinks and alcoholic beverages are other beverages such as tea, coffee or milk. Products are easily differentiated with brand loyalty having key influence194.Market share - The Coca-Cola Company is the leading player in the global beverages industry, generating a 16.3% share of the industry's value195.Market rivalryThe global beverage industry is highly fragmented. The presence leading incumbents and lare numbers of market players boosts rivalry.

The global beverage industry is characterized by the presence of large companies such as PepsiCo and Coca-Cola. Market Growth: The global beverages industry is forecasted to experience decelerated revenue and volumes growth during 2010-2015. Industry Growth and Decline; In comparison, the European industry declined with a compound annual rate of change (CARC) of less than 0.1%, and the Asia-Pacific industry increased with a CAGR of 6.1%, over the same period, to reach respective values of $805.5 billion and $400.7 billion in 2010196.Aus softdrinks generated tot revenues of $11 billion in 2010 representing compound annual growth rate (CAGR) of 3.3% for the period spanning 2006 – 2010. Carbonate sales are the most lucrative for the Australian soft drinks

187 Pepsi: colourful soda, 2002, ‘Best Practices in Drinks 2002’, Datamonitor, p.2188

New drinks review: stevia gaining ground as the new sweetener of choice, 2009, Datamonitor, p.2189 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011190 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011191 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011192 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011193 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011194 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011195 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011196 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011

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market in 2010 – generating total revenues of 6.6billion, equivilent to 59.9% of the overall market value. To reduce the threat of substitutes, big players offen have diverse product offerings e.g PepsiCo offers breakfast cereals and a range of soft drinks. Overall there is a moderate threat for substitutes197.Market Value The Australian Carbonated Soft Drinks market grew by 3.7% in 2001, to reach a value of $1,446 million. The compound annual growth rate of the market in the period 1996-2002 was 3.8%. The strongest growth was in 1997, when the market grew by 6.9%.The largest fall in the market was recorded in 2000, when the market shrank by (1.1%).Market Segmentation I Cola is the largest sector of the Australian Carbonated Soft Drinks market, representing 72.3% of the market in value terms. Mixers is the smallest sector of the Australian Carbonated Soft Drinks market, representing 4.8% of the market in value terms. Market Share I Coca-Cola products account for the largest share of the Australian Carbonated Soft Drinks market, with 41.2% of the market in value terms. The top three brands in the Australian Carbonated Soft Drinks market (Coca-Cola, Diet Coke, Diet Pepsi) account for 64.7% of the market between them198.Market Distribution Off-trade accounts for the largest share of distribution in the Australian Carbonated Soft Drinks market, with 56.2% of the market in volume terms. Market Forecast In 2006 the Australian Carbonated Soft Drinks market is forecast to reach a value of $1,703 million, an increase of 13.8% since 2002. The compound annual growth rate of the market in the period 2002-2006 is predicted to be 3.3%199.MACROAUS BEVERAGE MARKET:In Brief: Market value in Aus soft drinks grew by 3.3% in 2010 to reach value of $10,953 million. Market value forecast: In 2015 Aus soft drinks forecasted to vale $12,721.8mil. Market Volume: Aus soft drink market grew by 2.9% in 2010 to reach a volume of 4,649.7 million litres. Market volume forecast n 2015 for the Aus market = volume of 5,308.1 litres (increase of 14.2% since 2010). Market segmentation: carbonates is the largest segment of the soft drinks market in Aus accounting for 59.9% of the markets total value. Aus counts for 85% of the Asia Pacific soft drinks market value. Market Share: Coca-Cola Company is the leading player in the Australian soft drinks market, generating 39.4% share of the markets volume. Market Rivalry: Aus soft drink market = concentrated, top 3 players holding 54.9% of the total market volume. The market has the presence of leading players such as the coca-cola company, Asahi Breweries and PepsiCo200.

While Australia continues to be one of the most optimistic developed markets globally; there is still pessimism clouding the year ahead as we juggle the good with rising interest rates, escalating debt levels, increasing utility costs and economic uncertainty with the recent change in leadership so close to the upcoming Federal Election201.ENVIRO FORCES Threats to the industry may be reduced consumer spending in natural disaster states??Commentators, including Princeton University’s Alan Blinder, estimate 40 million jobs could be at risk of being offshored over the next 20 years and suggest American workers should specialize in services that can be delivered face-to-face. In contrast, Jensen and Kletzer expect the process of globalization in services will proceed much as it has in manufacturing: They estimate only 15–20 million jobs are at risk of being offshored to low-wage, labor-abundant countries; approximately 40 percent of these jobs will be in the manufacturing sector, long considered “at risk”?202.http://www.iie.com/publications/interstitial.cfm?ResearchID=880

LEGAL

TECHNICALPepsi has announced plans to produce its own vanilla-flavored cola, following the success of Coca-Cola's Vanilla Coke. Copycat competition is coming from own brand colas as well. Soft drinks makers need to shorten the time it takes to get new products to market so they can make the most of any first mover advantage. Pepsi is launching a vanilla-flavored cola drink to challenge Coca-Cola's rival product. The two companies are renowned for going head 197 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011198 Australia - Carbonated Soft Drinks, Market Profile, www.datamonitor.com199 Australia - Carbonated Soft Drinks, Market Profile, www.datamonitor.com200 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011, 201 NIELSEN SPECIAL REPORT– JULY 2010, Insights into the shopper of today and the future; Economic concern and rising utility costs keeping aussies up at night. By Chris Per cy202 Policy Brief 08-1"Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Services by J. Bradford Jensen, Peterson Institute for International Economicsand Lori G. Kletzer, Peterson Institute for International Economics, January 2008

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to head in the cola drink market where product imitations are commonplace and competition is aggressive. Coca-Cola launched Vanilla Coke in May last year. The product has proved successful - it has sold over 90 million cases in the US. These new developments in the soft drink market highlight the increasing threat of own label brands taking market share.203 Marketing practitioners are now faced with growing demands to show greater awareness and speed in planning product launches to reduce the threat of being pre-empted.204

“Coca-Cola is a brand that is recognized world wide. It is sold in over 200 countries and has been a leader in globalization. In the past few months Coke has made strides toward the production of their new ‘PlantBottle’. The PlantBottle will be made of PET plastic. This bottle will also contain 30% materials from Brazilian sugar cane and molasses. The goal is to make the PlantBottle 100% recyclable. The first bottles will be introduced in Denmark, then Vancouver (for the winter Olympics) and the US, with eventual launches in Japan, Mexico and Brazil as well. Coke is certainly not the first company to attempt to achieve a fully recyclable container. Starbucks slaved for 10 years to produce their fully recyclable cup. In 2008 they saved over 100,000 trees simply by putting their delicious drinks in these recyclable cups. If all companies would make such strides, the environment would certainly benefit. But it is not just companies that need to help out the environment. Even if every beverage container used was 100% recyclable, still thousands of pounds of plastic end up in landfills every year. Everyone needs to do their part to ensure that the PlantBottle, and other products like it, achieve its green goals.”205

Macro/Technical In result of inadequate programs new technological advancements and efforts to expand economic liberalization are receiving significant political backlash206.

New entrants need to access distribution channels, such as retailers. This can prove problematic as retailers are likely to stock brands popular with consumers, thus may be less willing to give any shelf space to new products until they are well established207.

Supermarkets and Hypermarkets (48.5%) are the most significant distribution channel in the AUS market. Followed closely by on-trade retailers (32.5%) .The buyer power of retailers is moderate. Supplier power isn’t great, as most inputs are readily available commodities. Would be difficult for new entrant to compete with brand strength and reach existing players – may be possible to achieve small scale success stressing unique production method or nutritional benefits. Even if new entrants opted for business model employing use of bottoling partners (eliminating much of the production process) there is still need to invest in manufacturing capacity in order to produce the concentrates208.

SOCIAL…advertainment is very costly and for smaller companies there are cheaper alternatives with proven success rates such as guerilla marketing.209

“For decades, Coca-Cola’s main competitor has been Pepsi. However, in recent years Coca-Cola has faced increasing competition from non-carbonated drinks such as tea, coffee, and fruit juices. This has been especially true in Japan. In response to this growing trend, Coca-Cola has developed a new product – green tea-flavored Coke. The product targets mainly health concious women in their 20s and 30s. In response to this product, Pepsi is planning on launching basil-flvaored Pepsi. As of right now these new products are going to be sold in Japan only, however if Coca-Cola’s new bevarage is met well by customers, it will be marketed in other countries such as the United States and countries in Western Europe.Is it possible that the global bevarage market could see a major shift in the next decade? More consumers are becoming concious about the health threats that some carbonated drinks pose, and about the benefits from drinks such as green tea. Coca-Cola and Pepsi are taking steps to make some of their carbonated products more appealing

203 Pepsi: adding flavor to the cola war, 2003, Datamonitor, p.2

204 Pepsi: adding flavor to the cola war, 2003, Datamonitor, p.2205 Global Edge. 2000. Coca-Cola Amatil. [ONLINE] Available at: http://globaledge.msu.edu/blog/post/562/ge-blog-series--go-green--part-4.2---planting-new-ideas [Accessed 08 February 12].

206 Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics Testimony before the Subcommittee on Investigation and Oversight House Science and Technology CommitteeJune 24, 2008 207 ) INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011,

208 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011209 Pepsi: that’s advertainment, 2003, Soft Drinks in the USA to 2006, Datamonitor, (DMCM0237), p.2

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to this segment of consumers. But will this trend be concentrated mostly in Asia, or will it be a truly global phenomenon?”210

(5) Costs to workers, families, firms and communities are exacerbated by the lack of national comprehensive strategy to deal with these economic disruptions. The collection of out-of-date/ inadequate programs provide too little assistance for those in need. Workers are the first to feel negative consequences of economic restructuring due to increased domestic and international competition.Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics Testimony before the Subcommittee on Investigation (pto) and Oversight House Science and Technology CommitteeJune 24, 2008 http://www.iie.com/publications/testimony/t(16) There has been increased demand for organic products, including organic wines, spirits and beers. These specialty products can often be sold at a higher price.INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, www.datamonitor.com,

(19) Players in the Australian soft drink market need to distinguish their products to some extent by stressing the health benefits (esp’ juices and functional drinks) as well as taste.Trend moving away from soft drinks and moving towards healthier healthier fruit juice and bottled water.INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011,

(29) Key insights from the 2010 Nielsen ShopperTrendsReport reveal that the profile of the Australian shopperis evolving, and in order to succeed in the future, retailers and manufacturers will need to develop strategies that accommodate growing ethnicity, population increases and an ageing society. “From both a supplier and retailer point of view, it is important to understand how ethnicity impacts shopping patterns.”

ECONOMICCosts to workers, families, firms and communities are exacerbated by the lack of national comprehensive strategy to deal with these economic disruptions. The collection of out-of-date/ inadequate programs provide too little assistance for those in need. Workers are the first to feel negative consequences of economic restructuring due to increased domestic and international competition211.There has been increased demand for organic products, including organic wines, spirits and beers. These specialty products can often be sold at a higher price212.Players in the Australian soft drink market need to distinguish their products to some extent by stressing the health benefits (esp’ juices and functional drinks) as well as taste.Trend moving away from soft drinks and moving towards healthier healthier fruit juice and bottled water213.Key insights from the 2010 Nielsen ShopperTrendsReport reveal that the profile of the Australian shopperis evolving, and in order to succeed in the future, retailers and manufacturers will need to develop strategies that accommodate growing ethnicity, population increases and an ageing society. “From both a supplier and retailer point of view, it is important to understand how ethnicity impacts shopping patterns.”214

ECONOMICThe Peterson Institute calculates that the US economy is approximately $1 trillion richer each year owing to past globalization—the payoff both from technological innovation and from policy liberalization—and could gain another $500 billion annually from future liberalization (Bradford, Grieco, and Hufbauer 2005 [pdf])215.

210 80 Global Edge. 2009. Viktoriya Ivanova [ONLINE].. http://globaledge.msu.edu/blog/archive/2009/6.[Accessed 08 Feburary 12].

211 Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics Testimony before the Subcommittee on Investigation (pto) and Oversight House Science and Technology CommitteeJune 24, 2008 212 INDUSTRY PROFILE, Global Beverages, Reference Code: 0199-2014 Publication Date: May 2011, 213 INDUSTRY PROFILE, Soft Drinks in Australia, Reference Code: 0125-0802, Publication Date: May 2011214 "Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Services by J. Bradford Jensen, Peterson Institute for International Economicsand Lori G. Kletzer, Peterson Institute for International Economics, January 2008

215 Speeches and Papers, Answering the Critiques: Why Large American Gains from Globalization Are Plausible by Gary Clyde Hufbauer, Peterson Institute for International Economics, May 2008, © Peterson Institute for International Economics. P.3

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Speeches and Papers, Answering the Critics: Why Large American Gains from Globalization Are They expect these losses to be offset by job gains in high-wage activities from services exporting. The United States will retain its comparative advantage in high-skill, high-wage production and increase these activities in tradable service industries as trade barriers diminish. While the loss of low-wage activities that are offshored and the gain from high-wage service exports will cause dislocation, the globalization of services production is likely to have productivity-enhancing effects similar to the impact of globalization in the manufacturing sector, offering significant potential to improve living standards in the United States and around the world216

Competitors/Economic - US Economy faces intense competition both domestically and internationally. Increased competition may benefit the economy though access to more, less expensive and better products and services it also places significant costs on American workers and their families, firms and communities217. (4) Trade Adjustment Assistance (TAA) - TAA provides workers 78 weeks of income maintenance payments, in addition to the traditional 26 weeks of UI, for as long as they participate in training. In addition, the program includes a 65 percent HCTC, a limited wage insurance program, and job search and relocation assistance. Under wage insurance, otherwise known as Alternative Trade Adjustment Assistance (ATAA), workers above the age of 50, earning less than $50,000, can receive half of the difference between their old and new wages, for up to 2 years, subject to a maximum of $10,000. This program is designed to assist the large number of workers who experience earnings losses after reemployment. In order to be eligible for TAA, workers must have been laid off from a plant for which at least one of the following 3 criteria "contributed importantly" to its decline in employment and sales: - an increase in imports - aid off from an upstream or downstream producer a shift in production to another country218

The 2009 update of TAA addressed both of these major shortcomings (that the bill originally only covered workers in the production of goods not services and that it focused primarily onof the program and updated it in many small but important ways. Though it did not receive the attention it deserved, the 2009 TAA bill was one of the most important revisions of US worker adjustment legislation in decades219. Obama Administration extension of the TAA (Trade Adjustment Assistance) program due to a largely eclipsed debt-limit rancor. TAA provides training and other assistance to workers who lose their jobs due to foreign competition220.

Virgin Australia: The Virgin Cola Company was a joint venture with the Canadian soft drink company Cott & Company, the world’s largest supplier of retailer own-brand soda drinks. Virgin Cola was introduced in the UK in 1994 and achieved318GCT15 10/26/2004 4:34 PM Page 318RICHARD BRANSON AND THE VIRGIN GROUP OF COMPANIES IN 2004initial success in the pub and restaurant trade. The drink was packaged in a “Pammy” bottle based upon the body of Pamela Anderson. After gaining a peak of 8 percent share of the UK market, sales declined. In 1997, Virgin Cola lost about £5 million on revenues of £30 million. In 1998, Virgin acquired Cott’s share of the business and launched

216 Policy Brief 08-1"Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Servicesby J. Bradford Jensen, Peterson Institute for International Economicsand Lori G. Kletzer, Peterson Institute for International Economics, January 2008. P.3217 Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics Testimony before the Subcommittee on Investigation and Oversight House Science and Technology CommitteeJune 24, 2008 218 Designing a National Strategy for Responding to Economic Dislocation by Howard F. Rosen, Peterson Institute for International Economics Testimony before the Subcommittee on Investigation and Oversight House Science and Technology CommitteeJune 24, 2008 219 Op-ed, Trade Adjustment Assistance: Lost in the Shuffle by Greg Mastel, Dutko Worldwideand Howard F. Rosen, Peterson Institute for International Economics, Op-ed in the HillNovember 5, 2010

220 TAA Reauthorization: Necessary and Appropriate by Greg Mastel, Dutko Worldwideand Howard F. Rosen, (Peterson Institute for International Economics) Op-ed in the HillJuly 21, 2011

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Virgin Cola with a $25 million investment and the goal, according to Branson, of “driving Coke out of the States.”11 Despite gaining massive publicity, there was little evidence of Virgin being able to convert media coverage into sales. By 2002, Virgin Drinks Company was still marketing Virgin Cola in the UK, Continental Europe, and Asia, but no sales figures were available.https://www.blackwellpublishers.co.uk/grant/docs/15Virgin.pdf

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