The soft drinks market in the UK has been growing fast over the past years. Beverage companies are moving away from alcoholic drinks to curve niche in soft drinks markets. Furthermore, new companies being established to cater for this unexploited market. The increasing growth can in part, be attributed to today’s busy lifestyles, convenience and variety that the soft drink market has to offer. In addition, an emerging trend among young adults health conscious hence shun alcoholic drinks. According to Mintel report, the adult soft drink market is one of the fastest growing markets in UK reporting an 84% growth rate in terms of volume and 118% terms of value since 2000. An estimated 608 million liters of soft drinks were sold in 2005. (Mintel group 2006). Another reason pinned in the high growth rate of this market is that consumer’s ability to buy has increased owing to the increase in economic growth.
Perhaps the most consumed soft drink currently is the flavored water followed by fresh juices (vegetable and fruit) and then energy drinks. Our team conducted a market research on the adult soft drinks market and this paper is a report on the findings. It focuses on identifying key success factors, situational analysis using different models and the implications of the consumer behaviour theories and concepts.
Situational analysis (Porters 5 forces and PEST analysis)
The influences of social and cultural factors in the adult soft drink market are profound. The culture of incorporating healthy diets into people’s lifestyle has encouraged intakes of fruit juice and water. Similarly, more people are hitting the gym in order to stay in shape and look trendier. This has had an impact on increasing consumption of energy drinks among gym goers. In addition, the adverse weather condition especially during summer time forces people to consume cool soft drinks in larger quantities to stay hydrated.
Another reason for the increase in soft drinks consumption is today’s busy lifestyles. While in the past, it was possible to take some time off to blend a glass of mango juice or fix a glass of lemonade, these days time is never enough and consumers find it easier to just pop in a store and pick a can of soft drink. It seems that the ‘instant’ culture has favoured this market and hence the growth. Furthermore, the powerful marketing employed by companies has appealed to the young adults to consume soft drinks as opposed to alcohol.
Economic conditions and Demographics have a hand in the increase adult market. The flourishing economy in the UK translates to higher disposable incomes among consumers hence; they are more willing to purchase soft drinks at higher value and in more quantities. In addition, increase of immigrants hence greater population of working class translated to more sales volumes in soft drinks.
Political, legal environment involves government legislation on beverage companies. Businesses in the soft drink market must operate within the law. For instance the food safety Act 1990 guards against selling food or drinks, which is not of the quality or nature demanded, and falsely describing or presenting food, selling drinks that are injurious to health or that do not comply with food safety requirements and so on. The law has the mandate to input and seize any suspected foods. (Office of public sector information).
Other laws that impact directly on marketing of soft drinks weights and measures Act 1951, consumer protection Act 1987 and so on. Similarly, the law regulates competition, environment protection among manufactures. In the UK, the manufacturing companies of soft drinks have to make sure that their bottles or containers do not litter the place. They are in charge of recycling or disposing their packs, (Business studies online 2004). Although in UK soft drinks are related to causing obesity, the industry has bounced back in face of adversity with new innovations such a low sugar or sugar free carbonated drinks, smoothies flavored water and so on to supplement the collapsing market for carbonated drinks (Annette Farr, 2006).
The competitive environment in the UK adult soft drink market is stiff. This is due to the new players in the industry who are coming up with innovative products to beat competition from industry giants. At the same time, alcoholic beverage companies have intensified their competitive pressure to incorporate low calorie low alcohol drinks and lagers, which are fast curving a niche in consumers shopping list. Similarly, consumers are becoming more health aware thus shunning highly carbonated and sugared drinks. Thus, soft drinks companies are forced to give alternative drinks in order to stay in competition. Further, the work force has become highly knowledgeable hence powerful marketing strategies such as promotions; advertisements and powerful brand names used to market soft drinks. In a way, this has contributed to the intense competition as old brands have been given new life cycles, repositioning of products target other market segments such as the young adults, the elderly the athletic and so on. Technology also contributes to the intense competition in the soft drink market. This is due to the capacity it has to allow companies engage in mass production and marketing at a low cost.
The main competitors in the adult soft drinks markets are the companies producing carbonated and concentrate drinks e.g. Coca-Cola, Pepsi, Ribena and such like and those companies producing energy drinks and Health drinks. For instance, Red bull and Lucozade energy drinks have depicted strong presence in the soft drink market as many adult factor them into a case in point. Most adults think of energy drinks as functional drinks. The Health and Fresh fruit companies are not left behind either. These companies have penetrated the industry strongly over the past 5 years recording an estimated £2.77 billion of retail selling prices since 2002. In 2006 fruit juices and health drinks accounted for 40.6%of the total soft drinks market in sales volume, which is a commendable increase. This has given its competitors in carbonated drinks anxiety as it is expected to double in the future. This growth has been credited to the pursuit of healthier lifestyle among adults hence the switch from carbonated to fresh drinks.
The presence of influential groups within a market plays a significant role in establishing a product or influencing consumption of a product by consumers. Health practitioners and nutritionist have played a significant role in promoting consumption of soft drinks as opposed to alcoholic drinks. This is inline with promoting health among UK citizens through healthy lifestyles and diets. This has caused the switch from alcoholic drinks to soft drinks especially health drinks. The other influential group is the trade customers particularly the grocery retailers. They influence the growth of this market by reflecting consumers concern back to the manufactures of drinks hence enabling companies modify products to match customers’ expectations and needs. These concerns encompass calorie control, avoidance of sugar, disposable packaging and pricing. (Kotler & Dubois 2004).
The adult soft drink market targets different consumers markets that have different characteristics and varying sizes. The major target markets currently are the young adult market, senior market, female market, gay market and ethnic market. Although all these market comprise of adults their characteristics vary in terms of preferences, attitudes, expectations and tastes. The young female adults prefer drinks that are low in calories yet make them prettier and trendier when they consume. Thus, beauty drinks, detox drinks are positioned for this kind of consumer. Also the sports and energy drinks that cater for the athletic gym goers in a senior market and the young adults. In addition, older consumers expect to consume well being drinks, Herbal teas and fruit juices which boost their health. The sizes of market vary with the young adult market making up the biggest followed by the senior. The gay and ethnic markets are just coming up and so they are small.
SWOT analysis
The UK adult soft drink market presents opportunities presented are due to market drivers such as the health proposition, market trends toward healthy image, busy lifestyle, and economic improvements. There is opportunity in manufacturing healthier soft drinks, which have high content of vitamins, and minerals low sugar. (Bridgewater & Doyles1998) Similarly, drinks that are fresh and preservative free are demanded more hence lots of opportunity to be exploited. In addition, in today’s lifestyle people are leaning more on products that offer convenience and quality hence companies should realize this and capitalize on soft drinks that offer satisfaction and convenience. The water consumption among people in the UK is increasing by the day owing to the adverse temperature and dehydration in hot weather.
Companies have opportunity to exploit by increasing production of mineral, sparkling and flavored water. Lastly, the trickle down effect of the increased GDP in the UK means consumers have higher disposable incomes to spend on soft drinks and are willing to pay more. This is an opportunity to expand growth. The greatest threat in the soft drink market is the trend towards consuming purely organic live juices, which would render manufacturing companies jobless. Companies producing carbonated drinks have already started feeling the pinch.
Consumer decision-making process
Behind the act of purchasing a product from a store or supermarket, there are five stages of decision making precede this action. These are the five stages of consumer behavior. They include problem recognition, information search, alternative evaluation, purchase decision and post purchase decision respectively. Companies in the soft drinks market need to have an intricate understanding of this process in order to market their product effectively. This process tells a company why consumers chose an e product over the other hence manufactures a product that appeals to the needs of the consumer. (Minor and Mowen 1997).
The problem recognition stage is whereby the consumer establishes a gap between his/her ideal situation and current situation. In this case, of soft drinks it may be after watching on appealing advertisement of a soft drink or an empty fridge or simply feeling thirsty. This triggers a perceived need that needs to be fulfilled. As a result, the consumer starts an information search about the products. The information gathering process seeks to clarify perceptions or seek value in information gotten from the source it can be simple as asking friends and relatives about the product, memory recall of previous experiences with product as a similar product, browsing product consumer report or marketer dominated source, e.g. A company’s website, advertising agency or a sale person (Mort, 2000).
The adult soft drink industry is vibrant with new products being launched day and the old ones being improved. The consumers get bomb order with different messages from different companies about similar products. Thus before a consumer goes to buy a soft drink s/he has gathered information about the various brands and decided options considering its ability to meet the need and expectation of the customer. However, consumers believe in getting the best value for their money hence the third stage, which is doing alternative evaluation. At this stage, the customer tries to narrow down the options to one brand.
This is done by assessing the objective attribute of a brand say quenching thirst, hydration, boosting energy, detoxing and the subjective factors such as image gotten by consuming a product consuming a product my be associated with prestige or trendy image and this influences purchase decision. After assessing the attributes of the various products then the decision to purchase the best brand out of the various products is the next step. The purchase decision is affected by three variables i.e. from whom to buy from when to buy or not to buy. (Evans & Berman 1990) of course this depends on terms of sale, past experience at a point of purchase, return policy, shopping experience, time available and so on.
After purchase and consumption, the consumer evaluates the value gained from the product. If s/he is satisfied, there is likelihood of the making a repeat purchase and establishing brand loyalty. The implication of the consumer buying process to soft drink companies is that they market their products in such a way that it arouses customers interests in buying a product, ensuring that stores don’t run out of their products so that customers have chances to switch to other brands. In addition, soft drinks should establish websites where customers can get right information regarding a brand especially if it is new in the market, advertising message reinforce positive perception regarding a product, making use of marketer dominated sources and influential groups to boost trust in the product. Pepsi has often used athletes such as David Beckham to promote Pepsi cola.
He is on influential person who influences customers’ decision to purchase the product. Soft drink companies understand customers decision to buy a product is influenced by how much they feel they get value for money. Hence, variety and more attributes in their products for instance sugar-free, low calorie, preservative free, fortified fruit juice give four different attributed in one product.
Similarly, creating a prestigious trendy image to its consumers in order to achieve this attractive packaging has played a major role. Moreover, soft drinks sold in grocery stores and leisure venues sell impulse out lets such as grocery stores, gas stations and fast food chains to boost sale and give the consumer pleasant convenient shopping experience. Finally yet importantly is the fact that soft drinks companies work hard to produce positive post purchase attitude in order to increase repeat purchase and dispel cognitive dissonance in customers about their brand. This is achieved using the many advertisements seen on television or papers.
Types of purchases
Different commodities in the market have different purchase decisions depending on the customer’s view of product in terms of need, money, and confidence reason and on. The 4 major types are the minor new purchase, impulse purchase major new purchase, minor repurchase and major repurchase (Knowthis.com 1998). Perhaps the category in which soft drinks fall is in the minor new purchases and minor repurchases categories. This is because the minor mew purchase category a purchase represents something new to the customers but is not a very important purchase in terms of need, money or status. (Knowthis.com). For instance, buying a fruit juice because you felt thirsty on your way to the gym. In this case, the juice was bought on impulse to quench thirst. It had little effect on financial status yet satisfied thirst. Soft drinks purchases are mostly repetitive and routine. They enjoy brand loyalty are bought without much thought. For instance, customers who buy coca cola during their lunchtime break do it without much thought and are loyal to the brand. This pattern is similar to other soft drink brands hence a minor repurchase type.
Consumer motivation and attitudes
Underlying issues such as perception, values, lifestyles, which motivate a consumer to buy certain brands and not others, influence the buying process and firms should understand these issues in order to direct their marketing efforts to tapping into these issues in their favor. According to Maslow’s theory, needs are motivational and as soon as one level of need is satisfied it ceases to be a motivator. Attitudes are learned predisposition, to react to a given object or stimuli in a certain way either positively or negatively. The marketing implication of motivation and attitudes is that firms need to change negative attitudes about certain attributes in their products or reinforce positive ones by giving more convincing and persuasive messages in their adverts. In addition, changing the perceived importance of attributes or adding new attributes to products (Mowen & Minor, 1997).
In addition, motivation is closely tied to involvement and depending on customers characteristics in a market group, their level of involvement in decision-making process should vary. Highly motivated customers want to be physically involved in purchase process while others do not. Companies should host website or issue pamphlets to cater for highly motivated customers or give free trial products and concise, information to less motivated customers about their products.
Customer perceptions
Perception is the process which individual interpret information to make sense of the world around him. This is by selecting organizing and interpreting. Perceptions affect how people see risks. Customers selectively perceive what they want, and what they retain. Messages that are close to their beliefs and perceptions are better received than those that are far-fetched and inconsistent. Customers’ perceptions also distort information to fit one’s own beliefs and retain little of the information they hear.
Perceptions also affect the perceived risk in a product purchase hence make customers anxious and fearful of negative outcomes of consuming a product. The implication is that marketers should channel their efforts to reducing customers’ perceived risks by using influential people, giving guarantees or free trial products. It is important to avoid advertising clutter, encourage customers to voice their beliefs and respond to distorted perception.
Self-concept
It refers to totality of individuals thought and feelings towards oneself. In consumer behavior, customers purchase products that define their personality. The image that a customer has about him/herself is the image looked for in Brand in terms of packaging, advertising and price. Marketing should give brand images that compliment consumer self-concept in a target market.
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