The Functional Beverages market is competitive with major market players operating at the global level. The key industry players in the functional beverages market have adopted the strategies such as geographic expansion, new product launch, acquisitions, partnership, joint-venture & R&D to strengthen their business portfolio. Most of the companies operating in this market are focusing on expanding their operations across the geographies, augmenting their capabilities and investing in research and development to offer products with better functionality
This graph indicates the percentage wise business strategies taken by key manufacturers of functional beverages who have their presence globally. Danone accounted for the highest market share in terms of development and is projected to constitute 19% of the developmental share in the global functional beverages market. The company is majorly focusing on new product launches which are more healthy and nutritious for the consumers. Moreover, the company is also undergoing geographical expansion to make their presence prominent. Acquisition and joint-ventures are also witnessed to be a part of their strategic development in past few years. Then after, The Coca Cola Company is anticipated to account for a share of 17% of the overall development in the global functional beverages market. This company is highly involved into diversified strategic developments. The company is focusing into new product launches offering a wide range of products to the consumers and is also undergoing strategic acquisitions in order to have a sustainable growth. R&D and launch of new products widening their product portfolio. Moreover, PepsiCo Inc. also holds a prominent place in the market with strong focus on product launch followed by expansion of their production capacity and geographical reach.
Major manufacturers also are found to have high focus on strategic product launch in order to seek consumers’ attention towards their product range. They are also involved in the strategic distribution agreement which will further support the company to expand and reach out to consumers across the regions. Promotional activities and high investment in advertising is also witnessed in this market through which the companies are trying to have high impact on the consumer’s mind than that of their competitors.
This graph indicates the percentage wise business strategies taken by functional beverages manufacturers at a global level. In the strategy analysis, product launch dominated the market accounting for a share of 45%. Product innovations and introduction of new flavors is what the players are focusing upon. They tend to increase their product offerings in the market to compete against their competitors. They are also inclined towards expanding their geographical presence and expanding their production capacity to fulfil the growing consumer demands. Moreover, acquisition is holding 21% of share in strategy market for functional beverages.
Additionally, the companies are inclined towards product promotions and strengthening their marketing base. The promotional strategy aids in retaining the existing customers and also to regenerate new customer base.
Threat of New Entrants
Availability of Raw Material: Raw material for functional beverages are dependent on the type of end-product to be produced. However, to produce highly demanded common functional beverages, the raw materials are present in abundance across the globe.
Additionally, functional beverages market is dominated by established players and to enter the market, new players need to invest enormously to create their brand identity through strategies such as high R&D investments and by producing quality products with the help of advanced technology. Also, functional beverages business is highly competitive and huge. Major players have their prominent presence across the globe.
The market is identified to witness high threat of new entrants based on high revenue generated through the region and high scope of this market. Existing players, to survive in the market, must focus on new product development, improvisations, and strategic product formulations keeping in check the changing trends to create product differentiation and outperform their competitors.
Overall, the threat of new entrants to the market is moderate-high.
Bargaining Power of Suppliers
Uniqueness of Suppliers: Bargaining power of suppliers is a crucial factor in functional beverages market and determines the strength of the company. Key players who are the suppliers (majorly) maintain a strong relationship with consumers due to the buying power of the latter, also they focus more on strong business relations to maintain the end-product quality. The suppliers are unique in terms of sourcing, supplier relationship, and product functionality; continuously focusing on creating product differentiation and uniqueness of suppliers.
For an instance, there are number of suppliers of raw material used in functional beverages in the market, but they do not determine the price of the end-products. Manufacturers of functional beverages have the liberty to shift between suppliers as they are not dependent on a single supplier, which reduce their operational risks. Hence, the bargaining power of suppliers is moderate.
Supplier Concentration: Functional beverages have high demand in all the regions. Each region is dominated by either the internal players or the local suppliers. Suppliers are not concentrated only in one region by have their cross-regional presence. Established suppliers are identified to have moderate bargaining power in each region.
Suppliers Control Over Prices: The bargaining power of suppliers is high since the supplier’s group is specific for product (raw material), thus it makes it difficult to bargain in terms of value.
Therefore, the bargaining power of suppliers is moderate-high.
Threat of Substitutes
Availability of Substitutes & Ease of Substitution: Functional beverages market is facing intense internal competition at ingredient level from other sources such as plants, nuts, and dairy substitutes. In case of domestic applications, consumers opt for conventional beverages instead of functional beverages. For an instance, the functional beverages market is facing intense competition from other non-alcoholic beverages. Additionally, presence of ingredients which may have adverse health effects may hamper the overall demand of functional beverages owing to the increasing consumer’s awareness towards the adverse effects of synthetic ingredients. Analyzing various factors, it is identified that there are chances of product substitutes at internal level.
The threat of substitute in functional beverages market is high.
Bargaining Power of Buyers
Number of Customers: The demand for functional beverages products is high owing to high application of the product. Buyers of functional beverages are health conscious consumers including athletes, sports person, gym going people and many others. During the forecast period, the bargaining power of buyers is projected to escalate owing to increasing demand for functional beverages.
Switching Cost of Consumers: The presence of large industrial players in the functional beverages products market has attracted a huge consumer base. Due to a large number of existing manufacturers in the market, the switching cost of consumer falls. The consumers are well-educated about the product, and the consumers no longer have brand loyalty which determines the bargaining power of buyers. But, the cross contamination of the products at the manufacturing process and product loss due to microbial activity restricts the consumers to hold back themselves to established brands. Hence, the bargaining power of consumers for the functional beverages is found to be high.
The bargaining power of buyers is high in the functional beverages market.
Competitive Rivalry
Number of Competitors: The functional beverages market is marked by high rivalry. The established players in the functional beverages products market indulge in a rivalry where the market players are targeting its competitors in terms of quality and price, thus, making the industry competitive and reducing profit potential for the existing firms. Additionally, the players operating in the market are competing based on new products, flavors, and also quality of the products. Consumer’s substitution ease is also high due to a wide number of choices available for the consumers.
The Capacity of Competitors: Market players in the functional beverages industry have high production capacity and focus on strategic investments in R&D. Players in this market have more focus on the supply of quality product to increase the longevity of the products to create product differentiation further. They invest highly in R&D sector and continuous product development with changing consumer preferences. Major brands are identified to have strong relationships with retailers.
Hence, the competitive rivalry in the functional beverages market is high.
