Abstract
The American Beverage Association was established with the intention of protecting all players in the soft drink industry. This report will provide knowledge on the history of the association and its roles in the industry. It will also highlight factors that influence business and the financial outlay both in the present and in future. A market demographic trend and ethical issues in the industry are also explored. The purpose of this report is to equip the accounts department with necessary background knowledge on the industry.
Problem/Background
The American Beverage Association is currently seeking to enlist the services of a new advertisement agency in light of its dissatisfaction with its current agency. One Way Advertising Agency is looking towards applying for the bid and therefore gave its marketing department the mandate to research on the American soft drink industry and compile a report to be used in preparation for launching the bid.
The purpose of this report is to provide basic information to the accounts department on the soft drink industry to help it launch a successful bid that would eventually culminate in its winning of the advertising tender successfully.
The American Beverage Association
The American beverage Association was established in 1919 and over the years, the company has represented various stakeholders in the soft drink industry such as franchise owners, suppliers and industry support organizations. In 1966, The American beverage Association changed its name to National Soft Drink Association.
The American beverage Association is one of the greatest contributors to the American economy. The American Beverage Association acts as the representative of hundreds of distributors, franchise companies, producers, and support industries (ABA, 2011). The direct economic impact of the beverage industry is huge, and is estimated to be approximately $178.5 billion.
Moreover, member companies of the ABA are thought to employ over 208,000 employees. These member countries are actively involved in the marketing of various flavors, packages, and brands. These also include diet and regular soft drinks, water beverages, and bottled water. Other products marketed by ABA affiliate companies include energy drinks, juice drinks, sports drinks, as well as the ready-to-drinks teas.
The American Beverage Association helps its members market all categories of soft drinks including, fresh juice, carbonated drinks, bottled water, sport drinks, juice concentrated syrups, among others.
The American Beverage Association plays the role of a neutral forum whereby it allows the affiliate member companies to assemble and brainstorm on some of the common issues facing them, even as they endeavor to uphold their spirited competition tradition (ABA, 2011. In addition, the ABA also plays the role of liaising between the government, the beverage industry, as well as the public.
Moreover, the Association is also actively involved in the regulatory and legislative matter involving the beverage industry. To oversee its work effectively, its It has employed professionals in all fields ranging from legal, information technology, technical and scientific research (ABA, 2011; Source Watch, 2011).
Factors affecting American soft drink industry
Over the year’s trends in the American soft drink industry has been affected by several factors. There are several social indicators that drive the trends in this industry. The industry is conscious of people’s health needs, and thus is moving towards manufacturing drinks that contain low levels of calories age especially for its adult consumers.
Young adults are shoeing more preference to decaffeinated drinks and tea that is laced with healthy additives. A majority of consumers are also showing preference to products that have limited amount of both natural and artificial sugars for health reasons (Farlex, 2011).
The American working class is a unique social group that has unique needs. It wants soft drinks that do not betray their professional look. Thus canning of soft drinks is intended to appeal to this class of consumers. Economic indicators show that the American soft drink industry in one of the most solid in the economy. The industry commands a 46.77% share of the soft drink market, which is $407.2 billion in market value.
As a result of its impressive market capitalization the soft drink industry has experienced an influx in of soft drink brands in the last few years and the future outlook is solid. The leading player in the market have also registered commendable profits despite a stagnation due to an influx of other brands in the market (Deihert , Ellenbecker , Klehr, Leslie & Zilegeler , 2006 ).
Technological advances have also affected the industry positively. The innovation of vending machines has taken the product loser to the customers (Bellis 2011). Technological innovation in the manufacturing segments has also helped the growth of this industry. HighBeam Business, (2011) explains that automated production increases production efficiency and thus lowers the cost of production. The ability to produce carbonated drink extends the shelf life of soft drinks thus increasing marketability of these drinks.
Using technology, it is possible to monitor the process of production and ensure that the correct ingredients rations are observed. The same technology helps to extract unhealthy elements such as extra calories therefore making healthy drinks that appeal to the increasingly health conscious American population.
Major players in the American soft drink by market share are: Coca-Cola, Pepsi and Cadburys Schweppes. Coca-Cola is the leading position controlling more than half that market. Its profits in 2004 increased by 1.5% to 22.1% in 2004 as a result of increasing its soft drinks brands Pepsi cola comes second holding a solid third of the market. it has consistently registerd an increase in profits and volumes of its of drinks the for last few years.
Cadburys Schweppes is third averaging $12 billion of total sales. This three control about 91% of the market. There are more than 500 soft drinks company’s in America. The government has very stiff regulation that govern the production of soft drinks to ensure consumer safety is not threatened (Govt notice, 1985; Deihert et al, 2006)
Consumer psychographic and demographics
The largest consumers of American soft drinks are American males aged between 12 – 29 years with each estimated to consume 2 quarts per day. There is also a significant market for school going children in America with manufacturers packaging drinks to suit this category. The adult market is however considerably stable but stagnant.
Each American consumes at least 12 oz every year. Consumption of soft drinks has increased three times for boys and two times for girls in the last few years. Movie goers have are also another category consumers who partake a considerable amount of soft drinks. Some companies like Coca-Cola are targeting student in and have even managed to involve them in their marketing campaigns. This is a proof that American students offer a lucrative market for soft drinks (valentine, 2011).
History, American soft drink industry
The history of the American soft drink industry can be traced from earliest human activities before the advent of modern technology. People were fond of bathing in natural springs, which were believed to have curative powers. With time scientist discovered that a carbon based gas could be infused in water for drinking for healthy purposes. Carbonated bottled water was first manufactured in the 19th century. Carn in soft drink may result in very high pressure and thus scientists invented the cork to tap bottles.
Earlier on in the in nineteenth century, lemon and honey were used to flavor drinking water. This is the earliest known form of soft drink. This followed the bottling of drinking water and later soda water in 1850s. Coca-Cola was the first patented soda invented in the late 19th century. Coca colas major competitor Pepsi was among the first soft drink companies to be established in America by a famous chemist, who saved it to the clients who visited chemist.
Pepsi Cola was initially made of soda water mixed with sugar and pepsin. In 1930s Pepsi went down as a result of the effect of the world war one on sugar prices. Pepsi even tried to sell itself to Coca-Cola who refused the offer. However, Pepsi was revived and has emerged as Coca Cola’s worthy competitor.
Tremendous growth continued to be experienced in this industry and such as dispensing machines and home packs were unveiled in the early 20th century. In the early 1900s, vending machines were invented. These were robot like machines, which released a certain drink if prompted through a program. “HomPak”, the famous pack of six soft dinks packed into a carton were also invented to cater for families.
The number of manufacturer have grown tremendously that the American Beverage Company was formed in 1919 and still exists today. There are more than 7000 bottlers that exist in the US soft drink industry today (Riley, 1972). The industry is grossly dominated by the Coca-Cola Company, which controls about 50% of the market share and unveils product after product to counter its rival and competitors. (Pendergrast, 1994).
Financial outlook
The future of the soft drink industry is great because of the factors mentioned in this report. Currently the American soft drink industry has an annual turnover of $127965.4 billion (market publishers, 2010).
Ethical issues
There are several ethical considerations in the soft drink industry, which are related to manufacturers cooperate social responsibility and the aspect of soft drink makers marketing their products under fair trade policy to increase profits and improve corporate image. Some makers such as Coca-Cola have expanded their social responsibility activities to help fruit farmers in East Africa increase their productions.
All these efforts are geared towards improving companies image in the cooperate world (Farr, 2010). Coca-Cola has been known to use schoolchildren in its marketing campaigns. It has also paid colossal amounts of money to school going children who have helped market it to their friends (valentine, 2011). While this is creative marketing idea, it should be queried effectively as the company can be seen to prey on minors innocence for profits gain.
The size of the American soft drink industry is significant enough to encourage further business growth. The future outlook is bright and the ABA has made tremendous work in ensuring that the industry is one of the most vibrant in the American economy. Technological advancements have ensured that the industry registers efficiency and improved quality products.
Conclusion
This report therefore recommends to One Way Advertising agency to proceed with its planned bid to ABA. This is because of the nature of competition amongst players and thus it is a lucrative field. The outlook especially in the healthy soft drinks market looks bright.
American are increasingly becoming aware of their health requirements and the need to adapt health dietary habits. Any company that ventures into this market will definitely reap handsome rewards. Lastly, previous experience in advertising together knowledge provide in this report will be useful to the agency should it win the bid.