This is Olivia. In this presentation we
will cover the energy drink industry in
the US. We opted for a geographic
segmentation because of the fact that
the US covers the biggest part of the
total market in the world. The size of
the industry has made a huge expansion the
last 20 years due to its a relatively
new market. It's operate on an
international scale although it's
existing of only a few key players.
The major top three firms controls 92 %
of the industry worldwide. The
biggest brand in the industry is Red bull.
Started selling in Europe in 1987
although it had a slow start but got
much more successful in the US when it
was released in 1997. Red Bull controls 40%
of the industry. The second
player in the industry is Monster by
39 % of global market. This
American brand was introduced to market
in 2002. Third leading firm is Rockstar
introduced to the market in 2001,  stands
for 10 % of the market share. The
geographic area where the energy drink
market has it's dominated market is in
the US. A superior part of the sale takes
place in the US which stands for 38%.
Only in this region it's estimated to be
valued to 44 billion US dollar in year
2019. This is a sales growth of 5,000 % of energy drink in America since 1999. My name is Cecilie. In the following
will use Porter's five forces to analyze
the energy drink industry. The analysis
will provide knowledge about the
competition in the industry to examine
how attractive it is. To do so we will
examine the following;
threat of new entrants, bargaining power
of buyers, bargaining power suppliers,
threat of the substitute products,
rivalry among existing competitors.
Cecilie: The fitness trend has made the
health industry grow but at the same
time the grow seems to decrease compared
to previous years. It is the brand value
that gives the opportunity to
differentiate in the energy drink
industry. The market leaders Red Bull,
Monster and Rockstar have about 90% of
the market share in the US and spent a
huge amount of their capacity on brand
value by advertising and doing promotion
and they're profiting from economies of
scale. The entry cost will therefore be -
new entrants with a total of three big
companies for strong brand values and
only a few
smaller ones in the industry it seems
saturated. It will therefore be difficult
for new entrants to build up the same
strength without getting beaten by the
existing companies. Cecilie: Looking at
the industry in the US the producers of
the energy drinks sell their products to
retailers and convenience stores. These
stores acts as the buyers of the
producers and afterwards they sell to
the consumers. In the American market
there are many big buyers like Amazon,
Costco, Kroger, Walmart etc. These
stores will buy in big bulks which we
normally give them a big bargaining power
as buyers but since there are many of
them and only a few producers the
bargaining power lowers for the buyers.
At the same time the stores are
dependent on the consumers demand. The
big energy drink producers spent a big
amount of their capacitive on the brand
value which makes them stronger and
which also lowers buyers bargaining power.
The switch costs can be high for the
stores since they can lose revenue if
changing to another brand. Another factor
is the price sensitivity. Consumers do
not seem very price sensitive compared
to other caffeine drinks like Coca Cola
which makes it easier for the producers
to raise prices and strengthen
themselves.
All in all buyers do have some
bargaining power especially the big
retail stores, though the bargaining
power of the buyers are mainly low
because of the few numbers of producers
and the very high brand value and market
share they got. My name is Andreas Lund Nørholt.
The bargaing power of suppliers is mainly
determined by the uniqueness of the raw
materials, labor, components, and services they supply. In the energy drink industry
the key input is raw materials. The most
important ingredients in an energy drink like
Red Bull is caffeine, sugar, taurine, B-group vitamins, and water. There's a large
number of suppliers of these ingredients
which give the suppliers low bargaining power.
If one of Red Bull's suppliers of sugar
decides to raise the price of the
product Red Bull can easily substitute
the old supplier with another, cheaper on.
The switching cost of this substitution
would be very low for Red Bull. The same
applies for the can manufacturers. Another
reason why the bargaining power og suppliers
is low is that the price of the raw
materials is only a fraction of the
production cost. Selling more
than 6 billion cans of Red Bull yearly
requires raw materials in massive quantities which make it attractive for
suppliers to become a Red Bull supplier.
Instead of suppliers influencing prices Red Bull has the bargaining power to negotiate a low price.
Now I would like to talk about the threat of
substitutes. There could be many possible
reasons for the consumers to buy energy drinks. Consumers might buy energy drinks
because they're thirsty, tired, low
on sugar, liking the taste, or simply
because they want to associate
themselves for the brand. If they're just
thirsty then a lot of available
substitutes is almost perfect
substitutes, you can buy soda
or simply drink tap water. If you are
tired then substitutes could be coffee
or tea. If you're feeling low in sugar a
lot of drinks includes sugar like soda,
juice, or you can even eat candy. If you simply
like the taste then there's not many
other substitutes
and if you like the brand value there's
no substitutes at all. To conclude, the threat
of substitutes seems immense but because of strong brand value and a high
perceived level og product differentiation
the threat could be lower than first
assumed. Most often the competitiveness in an industry is primarily determined by
the rivalry among existing companies.
When the firm concentration ratio is high
the competition tend to be relatively
low but in the energy drink industry it
is not necessarily the case since more
than a hundred smaller companies is
fighting for share of the growing
industry. The qualities of popular
products as Red Bull and Monster can
easily be replicated by the small
companies. That makes the industry very
competitive. To deal with this the big
players in the market have developed
powerful competitive strategies, Red Bull
for instance use sponsorship activation, branden content, and endorsement to build
a unique brand. This marketing strategy
is very expensive and can hardly be
replicated by the smaller competitors. The
rivalry among existing companies is
fierce but Red Bull and Monster profit
from economies of scale when doing
advertising which give the companies
huge competitiveness advantage in a
market where brand equity plays a major
role on the level of popularity of the
products. This is Felix and I would stand
for pest analysis in which Sophie and I
will talk about political economic
social cultural and technological
influences in the energy drink market in
this market the political environment is
characterized by many laws and
regulations concerning health issues due
to these health concerns France for
example bends the red bull drink
containing terrine a couple of years ago
however because the real consequences
were unknown France was forced to
reintroduce the red bull by
the European Union in the United States
the use of caffeine has already been
regulated since the 60s unlike in Europe
the Food and Drug Administration does
not require companies to list the amount
of caffeine on the cans but most energy
drink companies deliberately list them
under drinks salt in the USA
usually brands do not undertake a lot of
action in regards to these regulations
however back in 2012 both Red Bull and
monster hired lobbyists for the first
time ever because at that moment the FDA
announced it was going to investigate
the effects of caffeine on health to see
if the energy drinks should be more
heavily regulated.
This is Sophie speaking.
Energy drink businesses are strongly dependent
on the power of
Internet and social media.
How they advertise is not the 
everyday way of marketing.
Through online media channels 
they try to reach,
with their flamboyant stunts,
thousands of followers.
For example the Red Bull Stratos project
in 2012, was mentioned 2.6 million times
throughout all social media platforms.
And also 8 million people watched 
the jump live on YouTube
Red Bull Media House was
launched in 2007 in Salzburg, Austria.
It is a multi-platform media company
under the wings of Red Bull,
with a focus on sports culture and lifestyle.
They integrate social media
 marketing in every project.
The company says that
these efforts results into
"a high impact messaging, that is
both authentic and personal".
Monster, as well, is a highly popular 
brand on social media.
With over 4 million
followers on Instagram and
over 26 million followers on Facebook,
they attract young people with their
posts about extreme sports. Due to their
unique social marketing strategy
they became market leader in the US market.
Instead of investing in traditional
advertising they created a network of
members who attract new members.
There are several economic factors that
influence the performance of businesses
in the energy drink industry.
One of these factors 
is the macroeconomic stability.
The graph shows the sales volume of liquid
refreshment beverages in the United States
from 2006 to 2016.
There is a significant 
decrease in sales around 2009
which indicates the impact
of the global economic crisis.
After the crisis sales
have increased again.
Between 2015 and 2016
the energy drink volume grew with
5.13%, which corresponds
with a sales amount of 2.8 billion 
U.S. dollars in 2016.
The eurozone crisis which arose after 2009
has led to a decline in the value
 of the euro vs. the US dollar.
The weak value has both positive 
and negative impacts on business.
Importing European commodities
has become cheaper. This leads to a
higher profit margin for American
companies and for consumers,
imported goods have become more affordable as well.
On the other hand, sales may 
decline for exporters to Europe
as their products become more expensive.
Also inflation rate and interest rates
may have an impact on businesses 
in the energy drink industry.
This is Felix. The
social cultural environment has a big
influence on the energy drinks industry
people are increasingly in need for an
energy boost because of the increased
workload traffic jams and stress this
remains a primary reason for drinking
energy drinks however to differentiate
from the competition companies need to
pay close attention to secondary reasons
such as mood and taste this is why
Monster offers rehab drinks to recover
from the night before and right Red Bull
launched eight new tastes due to the
increased health awareness the energy
drink companies had to expand her offer
and change their marketing strategies
Rockstar launched a new product line of
organic energy drinks made of green
coffee beans they also introduced a zero
carb chain containing no calories no
sugar and no carbs there is also a
social desire to drink energy drinks
energy drinks are related to a cool
image because of its sponsorship of
extreme sports and teams
Red Bull for example launched the can
you make it challenge to attract college
students who had to travel 600 mass
without money and only redbull cans as a
currency another example is Rockstar who
sponsors many motocross competitions
This is Olivia.
After Michael Porters and the PEST
analysis we gained some very interesting
insights into the successful energy drink
industry. The market leaders owningy 92% make them have
a very strong position and thanks to their
brand value. This will make it very tough
for small companies to stay alive.
This not only reduces the threat of
new entrants but also increases the
existing competition among those firms.
This strong position of the market leaders
is also reflected by the low
bargaining power of both buyers and
suppliers. We can conclude that energy
drink industry is still on the phase of
developing. The health trend has rapidly
been growing and be fit and healthy
has become a trend among American
population. It is unknown what will happen
when the industry gets heavily regulated
after having identified the real impact on
the health. Therefore, it's important for the
existing to keep on evolving by offering
products with low-carb
sugar-free and organic options. To
conclude the market it has been very profitable
for the three major players that keep on
expanding their product lines and keep
on increasing their sales. However, it's
very likely that they will face some 
challenges in the future concerning the
health issues and the fact that the
market is highly saturated.
