The US beverage industry is approximately allotted into alcoholic and non-alcoholic segments. The alcoholic sector includes beer, wine, and spirits. The non-alcoholic sector includes carbonated soft drinks (CSDs), fruit beverages, bottled water, milk, sports drinks, energy drinks, and ready-to-drink (RTD) coffee.
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The industry has around 4000 manufactures and distributors creating upwards of $140 billion in annual revenue. The industry is highly competitive on pricing, packaging, marketing, and developing new products. The two leading players are Coca-Cola (KO) and PepsiCo (PEP), which composed hold more than 50% of the market. The non-alcoholic beverage sector represents 60% of the market. Premium wineries revenue has registered annual growth of 8% over recent years and energy drink volume continues to surge. Challenged with limited volume growth in developed markets, high-growth developing markets are increasingly important to the bottom line.
Mergers, acquisitions, and partnerships are on the rise as food and drink brands look to inaugurate or multiply their presence in international markets.
PepsiCo and Pepsi Bottling Group Inc. acquired a 75% stake in Russia’s Lebedyansky JSC for around $2.0 billion in March 2008 and Coca-Cola bid $2.3 billion for China Huiyuan Juice Group Ltd. in September 2008. Health and convenience remain major challenges and play a significant role in modeling product strategies. Beverages have been a huge focus attention over the last five years because of research that links ingredients, such as sugars and acids, with prevalent chronic diseases, such as obesity, diabetes, and dental decay. Rising environmental concerns also present a challenge. The production,
distribution, and sale of beverages in the United States are subject to the Federal Food, Drug, and Cosmetic Act, the Dietary Supplement Health and Education Act of 1994, and the Occupational Safety and Health Act.
These acts, various environmental statutes, and numerous other federal, state, and local statutes are pertinent to the production, transportation, sale, safety, advertisement, and ingredients. Industry fragmentation also poses a major threat. To overcome this, companies are acquiring smaller players or developing independent plants. Coca-Cola’s Monster distribution will help bottlers understand economies of hierarchy in their direct store distribution system.
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