SWOT Analysis for Non-Alcoholic Beverage

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SWOT Analysis

1. Describe the trends in the non-alcoholic beverage industry, especially the specific type of beverage category you have chosen. Justify at least three (3) reasons why you have chosen this type of non-alcoholic beverage.

Also known as ‘virgin drinks’, non-alcoholic drinks refer to beverages with less than 0.5% alcoholic content by volume. Globally, the most consumed non-alcoholic drinks are soft drinks, juices, ready-to-drink tea and coffee, bottled water, and energy drinks. Other non-alcoholic beverages include dairy drinks, non-alcoholic beer and wine. The sales for these drinks have had a steady increase over the years driven by changing customer needs and introduction of new flavors and product variants.

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Grayom Natural Drinks is started along these lines. It is offering a variety of non-alcoholic drinks from natural flavours and with low sugar content to customers with discretionary incomes.

The largest market for non-alcoholic drinks globally is North America closely followed by Asia Pacific. The United States is one of the major markets for non-alcoholic drinks. Nevertheless, increasing health awareness especially among the youthful population has derailed demand for certain non-alcoholic beverages with the North America and Europe non-alcoholic drinks markets expected to have stable growths between 2014-2020. The continuously increasing discretionary incomes and changing lifestyles in emerging economies will nonetheless increase global demand for non-alcoholic drinks in the long run. Brazil, India, China, South Africa and Saudi Arabia are some major growing markets for non-alcoholic drinks.

In an attempt to up the ante, some major manufacturers of non-alcoholic drinks have introduced zero-sugar and diet drinks to meet consumer demand for healthy drinks. Today’s non-alcoholic beverages industry caters for complex consumer demands for healthy, fresh products that also taste good and contain ever-more exotic flavors or functional ingredients.  Grayom Natural Drinks has identified a niche for exotic flavoured drinks that target customers whom price is not an issue.

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2. Choose one strategic position that you believe is the best strategic position for your company. Explain the approach you will use to implement this strategic position in order to distinguish your beverage from other non-alcoholic beverages.

Strategic positioning is outward-focused, more fully recognizing the competitive and market environment within which an organization operates. Positioning defines an organization’s specific niche within its sphere of influence.

Grazom Natural Drinks will segment the market and target customers who are able and willing to spend for high quality drinks. Therefore the company will initially target the high end customers in the country. This will ensure that the company is able to focus on a small customer base which it can develop relations and loyalty. There will also be room for growth because gradually the company can target other international high end markets.

Market segmentation will also ensure that the company does not have to directly compete with the big multinationals. Big multinationals can easily strangle a start-up which it views as a threat. Grazom Natural Drinks will avoid this confrontation by catering for a market that the big companies hardly cater for.

By segmenting and targeting the high end market, Grazom Natural Drinks ensures that it has leeway in the production costs of the drinks. Since it is targeting customers whom price is not the major determinant means that within reasonable boundaries, the company can spend a lot on the production of the drinks and still mark them up to make a profit.

This leeway ensures that the customers can have very unique products. It can search for the most exotic fruits and use them to make non-alcoholic drinks that stand out in the marketplace.

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With the market segmentation to identify and develop a suitable market niche, Grazom Natural Drinks will have a distinct competitive advantage that ensures it not only survives but also thrives in the non-alcoholic drinks market.


3. Provide an overview of your company’s distribution channels. Explain the manner in which your product will reach end users. Provide a rationale for your chosen method.

The channels of distribution to be used by Grazom Natural Drinks will ensure the company’s drinks are at the right place, at the right time and in the right quantities. These channels are illustrated below.

Manufacturer

Consumer

                                                                          

Manufacturer

Retailer

Consumer








The main distribution channel will be through hotels that will then etail the products to the consumers. In addition, targeted promotional activities by Grazom Natural Drinks will directly target the consumers of the various drinks it produces.

The company will be strategically located in a town where it can reach most of its stakeholders which include big hotels and such business associates as courier companies. The premises will consist of offices and a manufacturing plant. There will be no need for elaborate warehousing facilities since the production will be regulated to satisfy the demand. This is because one of the competitive advantages will be the ability to offer the drinks fresh, with their natural flavors. However, the manufacturing plant will contain storage facilities for the fruits as well as for sample products.

On production, the drinks will immediately be shipped to the customer hotels in the US. Continuous direct promotion to major high end hotels and their customers (the consumers) will ensure brand awareness and development. Grazom Natural Drinks will handle the promotion logistics, contracting a distribution agency when carrying out elaborate promotion activities.

Indeed, the company will outsource delivery of raw materials and the selective distribution of its various non-alcoholic drinks to a distribution agency. The agency will have national and international airplane delivery services and capability to handle fresh fruits and liquids for quick delivery  of the perishable products. Outsourcing of these services will ensure Grazom Natural Drinks focuses on its core competencies and that there is efficiency in the distribution logistics.

Online ordering to the customers will be encouraged, with the internet being widely used to market the non-alcoholic beverages. Follow ups will be constantly made via phone. Accounting and management will be done in-house.

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4. Outline at least three (3) types of risks that your business faces. Describe your company’s plan to mitigate such risks.

One of the risks the company faces is sourcing its raw materials, the various exotic fruits. These will be sourced throughout the world. Bad weather and or inaccessibility to the farms may occasionally hamper access to the sources.

Grazom Natural Drinks will mitigate this risk by having diverse source countries for the fruits. Weather and political instability in one country or region is therefore unlikely to affect the overall supply of raw materials to the company.

Provenance in sourcing will also be practised. Ethics regarding growing the fruits, fair pricing to the farmers and adherence to health regulations will ensure satisfied sources and end users. Consequently, the business model will sustain the supply chain.

Quick growth may pose a risk to the sustenance of the company. The company’s brands are likely to be well-taken by the consumers with consequent huge demand nationally and internationally; demand that may outstrip the company’s resources.

The company may hence be forced to seek strategic partners through mergers and acquisitions. Further, it may have to float in the stock exchange to raise the required extra capital.

Another risk the company faces is emergence of competition. Since it is an open market without a lot of government regulation, good margins will attract other players into the industry offering similar products.

Brand differentiation will ensure that Grazom Natural Drinks retains and attracts various stakeholders including end users, farmers, hotels and investors.

Moreover, the company will team up with the new competition to further improve the industry for the benefit of all. As an industry, the stakeholders can better lobby and negotiate with the government and supporting industries. This will increase the overall customer base.

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5. A SWOT analysis for Grazom Natural Drinks using SWOT matrix worksheet

Strengths
·         Strong brand differentiation from unhealthy and or unethical drinks.
·         Variety of products from different fruits.
·         Targeting a niche with discretionary incomes so pricing and profit margins unlikely to be under much pressure.
·         Not many raw materials required hence production efficiency.
Weaknesses
·         Not enough resources to compete with the multinationals if they venture into the niche.
·         The raw materials (fresh fruit) and products have a short shelf life, hence need to optimise production and distribution.
·         Outsourcing of sourcing and distribution logistics makes company cede some operational control.
Opportunities
·         Drop in alcoholic drinks intake offers a chance for more sales of non-alcoholic beverages.
·         Many of the fresh juices in the market cited as low quality by most of the customers so a chance to build good customer perception and satisfaction.
·         Not many non-alcoholic beverages adopted as meal accompaniments and hence opportunity to fill this gap.
·         Many existing non-alcoholic beverages cited as unhealthy including soda and energy drinks.
·         Increased taxes on sugary drinks and other unhealthy substitutes to boost competitiveness of low sugar drinks.
·         Emerging economies offer new marketing frontiers.
·         Demand for the company’s products may lead to the company merging or acquiring complementary businesses e.g. a distribution agency.
Threats
·         Change in consumer tastes e.g. for new substitute products.
·         Many substitute products already in the market with many being by big multinationals able to undercut new start-ups or small companies.
·         Government policy e.g. increased taxes in the industry and regulation.
·         Quick growth of the company may lead to cash flow issues and becoming the target of a takeover bid or undercutting by big players in the non-alcoholic beverage industry.
·         Adverse weather may affect growing of the fruits or negatively impact demand.
·         Low entry barrier into the industry may lead to many new entrants causing stiff competition.


References

1.       Bowman, D, and Gatignon, H, 2010. Market Response and Marketing Mix Models. Boston: Now Publishers.

2.       Hooley, G J, et al., 2008. Marketing Strategy and Competitive Positioning. New York: Prentice Hall.


3.       Sorger, S, 2013. Marketing Analytics: Strategic Models and Metrics. Internet: CreateSpace Independent Publishing Platform.

4.       Trout, J. 2009. Repositioning: Marketing in an Era of Competition, Change and Crisis. New York: McGraw-Hill.

5.       Venkatesan, R, et al., 2014. Cutting Edge Marketing Analytics: Real World Cases and Data Sets for Hands On Learning. New Jersey: Pearson FT Press.

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