The competitive environment of the energy drink market (Porter’s 5 forces)

The Porter’s analysis describes the competitive environment of a market at 5 levels : the bargaining power of suppliers and customers, the competitive rivalry, the threat of new entrants and the threat of substitute products.

Porter

The bargaining power of suppliers

  • Large number of suppliers: ingredient makers, manufacturers of cans, packaging suppliers…

Because they are numerous on this market, suppliers don’t have power on the energy drinks industry.

The bargaining power of customers

  • Decrease in purchasing power

Customers have a high power on the energy drinks market because they can choose to switch from a product to another one, particularly for economical reasons.

Competitive rivalry

  • A large numbers of brands on the market
  • Three brands share the majority of the market. These brands operate globally (CocaCola Company, PepsiCo, Red Bull GmbH)
  • The other brands operate regionally

The energy drinks is a very competitive market but very concentrated : 3 companies share the majority of the global market, while hundreds of other little brands are fighting in a local level.

(for more information about competition, see our article “What about the competitors of Red Bull, Monsters and Burn?”)

Threat of new entrants

  • Very attractive market because of the important growth of the sector
  • Premium price of the products
  • National and local opportunities

It is relatively easy to enter in this market because of the low investment that the production requires. Even if the market is leaded by 3 brands (Red Bull, Monster and Burn), there are lot of opportunities in national and local markets.

(for more information about competition, see our article “What about the competitors of Red Bull, Monsters and Burn?”)

Threat of substitute products

  • Sports drinks
  • Soft drinks

Substitution products are a real threat in this market, particularly concerning the sports drinks which offer similar benefits to the consumers at a lower price.

C.P.

Sources: http://fr.slideshare.net/derurindika/1-energy-drinks-14612036 / http://fr.scribd.com/doc/51059810/12/Porter%E2%80%99s-Five-Forces-Analysis