Energy Drink Industry Analysis

894 Words 4 Pages
The energy drink industry is a rapidly growing industry that grew 60% from 2008 to 2012 in a market worth more than 12.5 billion dollars (Heckman). Due to the popularity of energy drinks, it is predicted to grow even more in the future. The strengths of the industry are the premium prices and high supplier power. The premium prices are a strong plus to the industry because it creates a high profit margin. Consumers are willing to pay more for an energy drink than they would for alternatives such as soda. Consumers are willing to pay more because energy drinks are often marketed as a “high performance” drink. Supplier power is another strength of the energy drink industry because it gives producers a surplus of buying options when it comes to …show more content…
Most drinks are marketed toward athletes and teenagers; however, they are not the only group that can benefit from “high performance” drinks. The industry also has the opportunity to expand their technological impact on society especially with the use of social media. This is necessary if they want to keep their already prominent target audience, young adults, engaged with the product on a daily basis. The threats to this industry are alternatives and government regulation on ingredients in the energy drinks. Alternatives to energy drinks are Powerade and Gatorade, which are also “high performance drinks” with electrolytes, and are targeted to the same audience: athletes. Another threat to the industry is a possible move toward government regulation. Because energy drinks are closely related to hospital visits and even death, concerned people are asking the FDA to regulate the caffeine used in energy drinks. The FDA regulates the amount of caffeine in soft drinks, but energy drinks are considered dietary supplements so they are not. Negative attention like this can definitely harm sales, as many consumers are concerned with their …show more content…
In 2004, Red Bull had 70% of the market share worldwide. It’s been able to keep a comparative advantage for several reasons. Red Bull’s key success factors are their marketing strategy and distribution techniques. Red Bull has a buzz-marketing strategy so it targets mainly athletes and college students. Red Bull’s promotional team goes to exclusive events that have media coverage in relation to their target audience. These events occur in places such as beaches, college campuses, and sporting events, which are heavily populated by athletes and young adults. When they hand out their product for free, it creates a word of mouth buzz, rather than hearing testimonials from commercials or seeing it on billboards like other products tend to use. Also, their logo “Red Bull gives you wings” is a marketable brand that promises its customer that they will feel “self confident, unpredictable, edgy, and non-conforming.” Red Bull uses two out of the Porter’s three strategies, which is differentiation and focus. These success factors and strategies keep Red Bull competitive, however, I suggest that Red Bull utilizes the cost leadership strategy in order to remain competitive. Buying power is very high in the industry so having the lowest cost will definitely increase sales for Red

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