With society becoming more health conscious, consumers have been looking for an alternative to soft drinks. One might think that juice is a healthy alternative to satisfy consumer’s thirst. However, the high sugar content of most processed juices has led these health conscious consumers to find a healthier alternative. The two largest soft drink companies, Coca-Cola and Pepsi, are surprisingly the producers of the processed juices. After soft drink sales started to decline, they were able to to use their existing facilities to bottle and distribute the “healthier” processed juices. Premium juices are a product whose demand is increasing. These products are deemed as being higher quality than other processed juices due to their ingredients being organic. Odwalla and Naked Juice are the two brands of premium juices produced by Coca Cola and Pepsi. Since these are considered “premium” brands, they are priced much higher relative to other processed juices. This allows the sale of these products to be sold profitably even if their sales volume is low. Another strategy of the beverage companies is to move to other healthy products like ready to drink tea. Overall, beverage companies are being forced to move from their traditional soft drinks to healthier options for a more health conscious society.
The beverage industry acts an an oligopoly due to its high barriers of entry. The bottling operations are a very expensive initial cost for a new firm to incur. The amount of bottling plants and their expansive geographic locations are also factors that prevent other companies from entering into the market. Small regional brands have arisen, such as Faygo and Cheerwine, but are unable to compete with the popularity of Coke and Pepsi nationally. Another interesting aspect is the introduction of a new product: premium juices. Both Coca Cola and Pepsi believe entering into this part of the market is profitable. It will be interesting to see if the premium juice brand will stay as a part of the portfolio of drinks offered by both Coca Cola and Pepsi or of it is just a fad. Another question that arises is whether “traditional” processed juices will still remain a major product or if the premium juices will replace them.
4 Comments
Coca Cola and Pepsi also are producing low calorie vitamin waters to please their new health concious consumers. Coca Cola produces Vitamin Water and Pepsico procudes Sobe Life Water. Do you think that these alternatives could potentially push the premium juices off of the shelves?
Pepsi produces softdrinks, juices, and several types of snack foods. FritoLay, SunChips, and Multigrain snacks just to name a few brands. I would view SunChips and Pepsi as compliments especially during a football game while I might view Pepsi and a juice as substitutes or not depending on my preferences.
It seems to me that high priced premium juices fill a rather specific niche, and therefore lack the ability to replace traditional juices. I do agree though, that as society moves into a more health conscious direction, the market for soda will continue to shrink.
A transition into organic “premium” drinks seems like a logical move. Potential barriers to entry like distribution costs and production facilities are reduced because of the similarities between soda and juice.
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