The general environment of the energy drink industry (PESTEL analysis)

The PESTEL analysis describes the environment of a specific market by defining the influence factors at the political, economical, social, technological, ecological and legal levels.

PESTEL

Applied to the energy drinks market, we identified 2 main influences: the social and ecological factors.

FACTORS WITH HIGH IMPACT

Social environment:

  • Unemployment (workplace is one of the most important place where people consume energy drinks)
  • Demography : ageing population in Europe
  • Health concerns of consumers:  they have doubts about the health dimension of energy drinks
  • The fashionable dimension of energy drinks

Energy drinks can take advantage of the current consumption trend (energy drinks with alcohol for instance).

But the market has to face some threats: the health concerns of the consumers and the ageing population phenomenon can question the future of the energy drinks market.

Ecological environment:

  • Increase in the need of natural ingredients

More and more people want to consume natural food. This ecological trend can affect the energy drinks market by threatening the image of the products (too much “industrial”).

FACTORS WITH MODERATE IMPACT

Economic environment:

  • Recession, loss of purchasing power
  • Relative high price of energy drinks, comparing to traditional beverage
  • Market maturity for carbonated soft drinks (soda)
  • Increasing demand for alternative beverage

Energy drinks are premium products with a relative high price. Consequently, this market is sensitive to the economic conditions which impact purchasing power of consumers. The risk is that people can switch from an energy drink to a traditional drink, less expensive.

Legal and political environment:

  • Pressure on caffeine and taurine rates
  • Health concerns of governments
  • Implementation of restrictive laws

More and more governments have concerns about the energy drinks industry and the impact of the products on health. But brands don’t really react to this new legislation because they don’t see it as a real threat. Maybe it can even be a force for the market: what is forbidden is attractive…

(for more information, see our article “Health concerns about energy drinks”)

FACTORS WITH LOW IMPACT

Technological environment:

  • Internet, social media era
  • Technological development can impact the production and distribution

The current technological innovations are not important enough to impact the energy drinks industry. However, this sector requires that the brands have a real presence in social media because of the youngness of the consumers: this is a “must-have” in this market

C.P.

Sources: http://fr.slideshare.net/derurindika/1-energy-drinks-14612036 / http://adamlmarketing.wordpress.com/2013/05/24/the-launch-of-a-new-energy-drink-brand/

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