Softdrinks History free essay sample

Agri-Food Trade Service Softdrinks Industry: Another Side of a Filipinos Beverage Life1 2009 Ditas R. Macabasco Agribusiness Specialist Center for Food and Agri Business University of Asia and the Pacific Softdrinks, also known as carbonated drinks, cola, soda or pop, is one of the most consumed beverages in the country. Prior to the introduction of bottled water, ready-to-drink teas, ready-to-drink fruit juices, and other functional drinks, it was the usual choice of Filipino consumers in many parts of the country. Industry Definition A pending bill in Congress (House Bill 5039) defined carbonated drinks as â€Å"aerated potable water, whether or not it contains added sugar or other flavor sweeteners, and non-alcoholic beverages which are charged under pressure with carbon dioxide gas and are sold in bottles and other air-tight containers. † Just like other beverages, softdrinks are a popular thirst quencher in the country. Market Total household spending on non-alcoholic beverages reached P33. 3 billion in 2006 based on the latest Family Income and Expenditure Survey of the National Statistics Office. We will write a custom essay sample on Softdrinks History or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The figure was higher by 2. 9% per year from P30. 6 billion in 2003. In inflation-adjusted terms, expenditure grew by 7. 4% per annum during the period. The bulk of the spending may be attributed to softdrinks. Meanwhile, the total size of the softdrinks market in the country was estimated at 8,591 million liters in 2007, with projected growth of 7. 6% in 2008 to 9,241 million liters (www. euromonitor. com). The Players The softdrinks industry in the country consists of a handful of players. The market leader is Coca Cola, followed by Pepsi. The other smaller players include Virgin Cola, Zesto, and RC Cola. Coca Cola Bottlers Philippines Inc. (CCBPI) is now 100%-owned by The Coca Cola Company. The latter bought the entire 65% stake of San Miguel Corporation (SMC) in CCBPI in 2007 for US$590 million. The acquisition includes low-end softdrinks manufacturer Cosmos Bottling Corporation (CBC), which was acquired by SMC back in 2002, as well as Philippine Beverage Partners, Inc. , the company which distributes the products. Today, the companys carbonated brands in the market include Coke, Diet Coke, Coke Zero, Sprite, Sprite Light, and Royal, and CBC brands Pop Cola, Sarsi, Cheers, Lift, Jaz Cola, and Sparkle. Another player is Pepsi Cola Products Philippines, Inc. (PCPPI) which is 32. 9% owned by PepsiCo. PCPPIs brands in the market include Pepsi, Diet Pepsi, Pepsi Light, Pepsi Max, 7Up, Diet 7Up, Mountain Dew, Jazz, Mirinda, and Mug. The company went public early this year, the proceeds from which are intended mainly for expansion of its carbonated and non-carbonated beverages. Also in the softdrinks business is Interbev Corporation, a subsidiary of beer company Asia Brewery Inc. , which managed to secure a licensing agreement for Virgin Cola, a popular British brand, in 2004. Virgin Cola comes in four variants: regular, diet, lemon and lime. It competes with lower-priced brands in the market like Pop Cola, RC Cola and Jazz. Juice company Zesto Corporation has also entered the softdrinks market via Zesto Cola in 1994. Its product â€Å"challenged the market leaders in terms of taste, refreshing qualities and price. Zesto has since diversified its carbonated drinks line to include Zesto Cola Zero Cal, Rootbeer, Rootbeer Light, Twist, Squiz Orange, Squiz Grape, Dalandan Fruit Soda, Calamansi Fruit Soda, and Pomelo Fruit Soda. Yet another player is Asiawide Refreshments Corporation, which is the Philippines licensed bottling manufacturer and distributor of US brand RC Cola. The product is among the relatively low-priced brands in the local market. |Table 1. SOFTDRINKS: Key Industry Players | |Company |Brands |Coca Cola |Coke, Diet Coke, Coke Zero, Sprite, Sprite Light, Royal, Pop, Sarsi, Diet Sarsi, Lift, Cheers, | | |Jaz Cola, Sparkle | |Pepsi Cola |Pepsi, Diet Pepsi, Pepsi Light, Pepsi Max, 7Up, Diet 7Up, Mountain Dew, Jazz, Mirinda, Mug | |Interbev Corporation |Virgin Cola | |Zesto Corporation |Zesto Cola, Zesto Cola Zero Cal, Rootbeer, Rootbeer Light, Twist, Squiz Orange, Squiz Grape, | | |Dalandan Fruit Soda, Calamansi Fruit Soda, Pomelo Fruit Soda | |Asiawide Refreshments |RC Cola | |Corporation | | According to an industry report, CCBPI controls about 50% of the market for carbonated softdrinks in the country, followed by CBC with 23%, PCPPI with 17%, and the remaining 10% is shared by the other small players. Figure 1. Market shares of key players [pic] Source: AC Nielsen as cited by 2TradeAsia, January 2008 Distribution, Packaging and Pricing The softdrinks industry enjoys extensive distribution. The companies have manufacturing plants, warehouses, and sales offices located in various parts of the country. The distribution outlets include sari-sari stores, grocery stores, supermarkets, convenience stores, restaurants, hotels, resorts, canteens, movie theaters, amusement parks, and vending machines, among others. The products are sold in three types of packaging: returnable glass bottles, lift ring aluminum can, and polyethylene terephthalate (PET) bottles. In the past, most softdrinks are packaged in glass bottles. Today, however, more and more companies are using PET bottles. The usual packaging sizes are 2 liters (li), 1. 5 li, 1 li, and 500 milliliters (ml) for PET; 8 ounces (237 ml), 12 ounces (355 ml), and 1 li for glass bottles; and 330 ml for aluminum cans. The usual packaging available in supermarkets, groceries and convenience stores are PET and aluminum cans. Those in glass bottles are usually sold in sari-sari stores. There are also institutional packs and dispensers for the food service industry. Prices vary depending on the brand, the variant, the type of packaging, the size, the type of outlet, the location, among others. In some supermarkets and sari-sari stores, retail prices ranged from P36. 00 – 49. 50 for a 2 li PET bottles, P29. 00 – 39. 50 for 1. 5 li PET bottles, P17. 50 – 21. 00 for 500 ml PET bottles, and P15. 95 – 22. 50 for 330 ml aluminum cans. |Table 2. Indicative Prices of Selected Softdrink Products, September 2008 | |Company |Brand |Packaging / Retail Price (P) | | | |2 li PET |1. li PET |500 ml PET |330 ml can | |Coca Cola |Coke | |34. 00 |21. 00 | | | |Coke Light |49. 50 |36. 75 | |20. 00 | | |Coke Zero |44. 95 |33. 50 | |22. 50 | | |Sprite | |35. 25 | |18. 50 | | |Sprite Ice | | | |18. 0 | | |Sprite Light | | | |21. 00 | | |Royal | |34. 50 |21. 00 |18. 50 | |CBC |Sarsi | |36. 00 | |21. 00 | | |Sarsi Light | |39. 50 | | | | |Sarsi Rootbeer Light | | |21. 0 | | |PCPPI |Pepsi | |34. 00 | |17. 50 | | |Pepsi Light | |34. 00 | | | | |Pepsi Max |36. 00 |29. 00 | |17. 50 | | |7Up | |33. 25 |20. 00 |17. 50 | | |Mountain Dew | |33. 25 |20. 0 |17. 50 | | |Mirinda | |33. 25 |20. 00 |17. 50 | | |Mug Rootbeer | |33. 50 | |17. 50 | |Zesto Corp. |Cola | |31. 00 |18. 50 | | | |Cola Zero | | | |14. 50 | | |Dalandan Soda | |30. 75 |17. 00 |17. 0 | | |Calamansi Soda |30. 75 |18. 25 | | | | |Diet | | | |17. 00 | | |Squiz | |29. 25 |17. 50 |14. 50 | | |Rootbeer | |31. 00 |17. 50 |15. 95 | |Asiawide Refreshments Corp. |RC Cola |   |31. 50 |   |15. 95 | Source: Selected supermarkets in Metro Manila SWOT Analysis The success of the softdrinks industry in the country hinges on several strengths (S). For one, many of the brands are well-established and have been in the market for several decades now. The local licensees also enjoy strong support from their mother companies abroad. The brands have also developed a loyal customer base. The companies have established manufacturing facilities and extensive distribution network all over the country. Further, the companies spend heavily on marketing and multi-media advertising. They also continuously pursue product innovations to cater to changing demands and lifestyles of the market. The products are also priced reasonably and there is a wide array of choices for the consumers. In terms of weaknesses (W), sales have been declining in recent years due to the growing health and wellness concerns among consumers, which lead them to shy away from sugar-loaded softdrinks. In addition, rising costs of ingredients, packaging materials and energy exert pressure on the companies bottomlines. Meanwhile, an opportunity (O) for growth is the development of new variants of carbonated drinks to take advantage of the growing trend on health consciousness. These could include low calorie, low sugar, no sugar and fruit-flavored variants. In addition, the increasing incidence of eating out among Filipino families also presents an opportunity as it may translate to more orders of carbonated drinks. There are also threats (T) brought about by intensifying competition in the market, not only within the industry itself but also coming from other non-carbonated beverages such as bottled water, ready-to-drink teas, fruit juices, fitness waters, sports drinks, among others. The shift in consumer preferences towards beverages tied to health and wellness also pose a threat. Scarcity and quality of water, which is a vital input in the manufacturing process, are also key concerns to watch out for. Rising consumer prices is also a threat in that it could lead consumers to cut back on â€Å"unnecessary† expenses. |Table 3. SWOT Analysis of the Philippine Softdrinks Industry | |Strengths |Weaknesses | |Established brands |Declining sales | |Strong relationship with mother companies abroad |Rising costs of ingredients and packaging materials | |Highly loyal consumers |Increasing energy costs | |Established manufacturing platform | | |Extensive distribution network | | |Heavy marketing and advertising expenditure | | |Continuous product nnovations | | |Affordable | | |Wide variety of products | | |Opportunities |Threats | |Introduction of new variants (low calorie, low sugar, zero|Intense competition within the industry itself and from other | |sugar) |non-carbonated beverages | |Increasing incidence of eating-out |Shift in consumer preferences towards beverages tied to health and | |   |wellness | | |Scarcity and quality of water (a key ingredient in manufacturing) | | |Rising consumer prices | Prospects The softdrinks industry is faced with challenging times. According to industry reports, sales have not been as brisk as in the past as consumers shift to healthier (less sugar-laden) alternatives like bottled water, fruit juices and teas. Rising food and fuel prices have also weakened consumer demand. Recently, a bill was filed in Congress for the imposition of a 20% excise tax on soft drinks, energy drinks and non-carbonated beverages. House Bill 5039 actually seeks to amend Section 150 of the National Internal Revenue Code of 1997 by expanding the coverage of goods levied with a 20% excise tax to include the said beverages. It seeks to curb the excessive intake of such beverages, and at the same time, generate about P5 billion a year in added revenues for the government. If this bill is passed, it will be another setback for the industry which is still grappling with difficult market conditions. Inspite of these, the outlook for the industry remains optimistic. Softdrinks have managed to survive tougher times in the past. And they will continue to be a popular segment of the beverage industry since they have become a part of the diet of many Filipinos. Nonetheless, to enhance consumer demand, players are actively pursuing promotional activities such as tie-ups with value meals of popular fastfood chains, restaurants as well as pizza chains, sponsorship of events, setting up of booths in schools/club fairs, conduct of contests, provision of free softdrinks in some events, among others. They are also conducting massive multi-media advertising campaigns and price cuts, as well as continuous research and development, and product introductions. Their aggressive efforts in reviving interest in the product are slowly paying off. According to reports, while sales of the regular softdrink products have been broadly flat, the demand for the new variants (e. g. sugar free, low sugar, zero sugar, fruit-flavored) have been posting good growth. And it is likely that these new variants will continue to drive growth in the coming years.