INNOCENT(SMOOTIES) AND BOOST (ENERGY DRINKS)

Innocent(smooties) and Boost (energy drinks)



Innocent(smooties) and Boost (energy drinks)

PORTER'S FIVE FORCES ANALYSIS ON THE BREWING INDUSTRY

Porter's five forces analysis ''is a means of identifying the forces which affect the level of competition in an industry''(Johnson & Scholes).

 

Threat of potential new entrants

·                     The threat to entry is low due to moderate entry barriers. This depends on the country, but includes the following:

·                     Large capital requirements needed to set up and expand as well as high economies of scale, forcing entrants to come in at large scale or to accept cost disadvantages.

·                     Access to distribution channels between different countries may make entry difficult with established brewers controlling a large part of retail outlets.

·                     Fairly strong brand identification supported by heavy advertising and marketing campaigns, together with rising sponsorship. Guinness, for example, “signed £10m deal to become the first worldwide sponsor, and official beer supplier of the 1999 Rugby World Cup tournament”(Marketing, 24th July 1997). This results to customer loyalty.

·                     The greater emphasis on the promotion of leading brands was also considered likely to raise barriers to entry and expansion and lead to brand rationalisation and so less consumer choice (Competition Commission report May 2000). It was found that any new entry would be on a fair large scale to be cost competitive, with a nation-wide distribution system if wishing to compete on national basis.

 

Intensity of rivalry

·                     High intensity of rivalry

·                     A few big breweries dominate the European brewing industry. The industry is in the maturity decline stage. High competitive market, which has reached over capacity. Profitability and sales are falling, making it hard for firms to gain market share.

·                     Innocent(smooties) are increasingly under pressure in seeking competitive advantage. Slow industry growth, therefore only way for firms to gain market share is to take it from other breweries.

·                     Innocent(smooties) adopt differentiation strategies, such as, investing heavily in improving their public houses to attract consumers. They compete through non-price competition, such as, extensive advertising of brand names targeted at different buyer profiles. Image building is vital among consumers as they stick to favourite beer. For example, brewers, sponsor several clubs.

·                     Rivalry is heightened for firms when operating within the individual markets. There are full of local brewers, and have brand loyalty and strong market for its brands. Occurs in Northern Europe, where traditional barriers are hard to break down.

·                     Mergers have led to increase in concentration levels in this market. This makes it difficult for new entry to occur since larger firms have a lot of capital at their disposal.

 

Bargaining power of suppliers

·                     The bargaining power of suppliers is low in the brewing industry.

·                     Some of the breweries have contracts with hops and yeast farms. These small suppliers do not have much control.

·                     The degree of threat of forward integration by suppliers, wishing more closely to control their own market outlets. Ownership and control of retail outlets by UK brewers has, in particular, been the subject of significant government intervention seeking to reduce the market power of brewing companies and ...