Industry General Description
The Coca-Cola Company - American multinational corporation operates in a nonalcoholic segment of Beverage Industry. The history of the industry goes back to the 17th century, when the first marketed soft drink came to the Western Market.
The Beverage Industry product portfolio consists of soft drinks, carbonated beverages, and alcoholic beverages. Kinds of drinks in a non-alcoholic segment varies a lot and includes such beverages as tea, coffee, juices, carbonated drinks, water.
The Beverage Industry is a highly competitive one and tends to be dominated by a few major actors. The two biggest worldwide known and most influential companies are Coca-Cola and Pepsi. The limited growth opportunities make this competition very intense, requiring companies to follow the trends and be always aware of the competitors' progress. However, the demand for the products depends a lot on the economic conditions within the society. Those few big players enjoy the benefits of the strong loyal customer base during the growth and stability stage in the economy, whereas in times of economic difficulties customers turn to cheaper substitutes. Thus, although the key feature of the industry is that it is very difficult for a new unknown company to enter the market and compete with well-known long-established businesses, the companies should pay significant attention to the new entrants, especially in times of economic instability. Consumer tastes are also seasonal, meaning that the demand for the carbonated beverages is higher during the hot months of the year. Shifting consumer preferences bring the concern of operating uncertainty, which greatly affects pricing strategies. The large companies pay reliable dividends, with regular increases, and above-average Stock Price Stability. Lately, population has become more concerned with a healthy lifestyle, thus another switch in consumer preferences can be noticed: people tend to drink more water and less sweetened drinks. This trend puts the producers of carbonated drinks in the risky position, at the same time giving them new opportunities for development by diversifying their portfolio.
Industry Today (Problems, Challenges and impacting factors)
Analyzing the above-mentioned information, the following conclusion can be made: the industry performs steady throughout the business cycle, however placed in unstable economic conditions it might experience difficulties.
“Coca Cola reported only 2% beverage volume increase for the year, explaining that it was caused by the challenging economic conditions”. In the beginning of 2014 the earning stock of Coca Cola fell 4%. This can be explained with the fact that Coca Cola company concentrates mainly on beverages production and sales, whereas Pepsi tries to diversify its portfolio entering the snacks segments of food industry.
The financial analysts comment that although Coca Cola Enterprises will manage to overcome its vulnerabilities...